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Lessons From The German Hyperinflation Of The 1920s
Submitted by Erico Matias Tavares of Sinclair & Co.
Lessons from the German Hyperinflation of the 1920s
The German hyperinflation episode in the early 1920s is often quoted as an example of the dire consequences of excessive money printing – a leading industrial economy succumbing to the dangers of currency debasement promoted by incompetent central bankers.
Alas, the reality is more complex than that, particularly when certain geopolitical and economic constraints of that time are taken into consideration. And as we shall see, we can draw some important lessons from that episode that can help us gauge the effectiveness of our very own currency debasement in the 21st century.
Setting the Stage
Europe radically changed in the aftermath of World War I. Gone were the big empires of Central Europe, and the fragmented states that emerged from them had to cope with a much more modest and uncertain modus operandi. There was a new power emerging farther out in the East, after the Bolsheviks took over Russia, boldly proclaiming that they would not stop there. On the other side of the Atlantic, America demonstrated that it could muster the necessary resources to prevail in a major world conflagration, and that it could become a power to be reckoned with.
Great Britain retained its dominant superpower status, no longer challenged by the once mighty German forces. Because it had security, its major concern henceforth was economic, especially as a countermeasure to the rising Bolshevik threat. France, on the other hand, remained exposed to a resurgent Germany, particularly because the latter had come out of the war with its industrial capability largely intact. Consequently, its concerns were mainly political.
The French believed that the peace of Eastern Europe was a primary concern of the states of Western Europe and that Germany should never be allowed to reassert itself eastwards; the British saw the two sides of Europe as separated, particularly because the eternal squabbles of Eastern Europeans could drag yet again the major Western powers into another regional conflict, very much like 1914. France believed that Germany could only be made to keep the peace by duress; Britain believed that Germany could be persuaded to keep the peace by concessions.
While it was not known then, these divergent views would eventually set the stage for Germany’s hyperinflation episode.
German Reparations
War reparations became a major factor of contention between Western European countries. The French in particular were quite unhappy with results of the Treaty of Versailles, and sought redress at every opportunity.
The preliminary payments were supposed to amount to a total of 20 billion marks by May 1921, but the recipients contended that only about 8 billion of this had been paid. As a result, Germany received a number of demands and ultimatums from the victors, including the threat of occupation of the Ruhr earlier that year.
Under significant pressure, the Germans eventually agreed to issue bonds totaling 132 billion marks as the total reparation bill. Of these, 82 billion were set aside and forgotten. The remaining 50 billion would be paid in annual installments of 2 billion marks plus a share of German exports.
However, Germany would only be required to pay these obligations if two conditions prevailed: first, that it had a fiscal surplus, so that the government had additional resources beyond what was required to meet its current obligations; second, that it had a positive foreign trade balance, enabling the country to accumulate enough gold or foreign currencies to settle the reparations.
As it turned out, neither of these conditions existed throughout the entire 1920s, and as such Germany was never in a position to pay any reparations. Money printing ended being the result, although the real drivers of that policy did not lay in the reparations alone.
Inflation Breaks Out
Far from it in fact. The failure to obtain a fiscal surplus was solely the responsibility of the German government, which refused to reduce its own expenditures and the standards of living of its people, or to tax them enough to yield such a surplus.
Germany’s creditors shared the blame for its failure to obtain a favorable balance of trade. While the Germans made little or no effort to reduce their purchases abroad, which would have also curtailed their standard of living, they adamantly refused to allow a free flow of German goods into their countries on the premise that this would undermine their own industries.
Once again, the interpretation of these failures was colored by the geopolitical inclination of the creditor in question. The British saw them as evidence of Germany’s inability to pay, while the French believed that they simply did not want to pay. Actually, both were correct.
Had Germany been allowed to export freely, it probably could have produced enough goods and services to service a meaningful portion of the reparations, as indicated by its comparatively higher per capita income levels as the decade progressed. With this option not on the table, the German government ran successive budget deficits, instead of implementing painful tax increases and budget cuts (“austerity” in today’s lingo). The funding vehicle: central bank lending (the equivalent of our “quantitative easing”).
Therefore, it was not necessarily the reparations per se that sparked a significant rise in the inflation rate, but rather the policies of the German government intended to circumvent them. The restriction to the free flow of German goods to creditors’ markets substantially compounded the problem – a point which is often underappreciated in understanding the reasons behind the acceleration of inflation during that initial phase.
And accelerated it did. While the par value of the German mark to the British pound was at around 20, it fell from 305 in August 1921 and then to 1,020 by November that year.
But the worst was yet to come.
Germany Loses the Ruhr
The effects of inflation were felt very unequally across German society. Those whose property was in real wealth, either in land or industrial plants, gained from the inflation as it increased the value of their properties and wiped away their debts. It was the middle class (as always) that was getting ruined.
In July 1922, Germany demanded a moratorium on all cash payments of reparations for the next thirty months. Although the British were willing to yield at least to part of this, the French argued that the Germans had made no real effort to pay their debts and that, accordingly, such moratorium would only be acceptable to them if accompanied by adequate guarantees.
This meant that the creditors should take possession of various forests, mines and factories of western Germany, as well as the German customs, to obtain incomes which could be applied to reparations. As such, in January 1923, the Reparations Commission voted 3 to 1 (with Britain opposing France, Belgium, and Italy) that Germany was in default of its payments. Armed forces of the three nations began to occupy the Ruhr two days later.
This area was vitally important for the German economy. With 10% of the population, it produced 80% of the country’s coal, iron and steel and generated 70% of its freight traffic. As a result, Germany retaliated, declaring a general strike in the area, ceasing all reparations payments and adopting a program of passive resistance. As a result, more paper money had to be printed to support the strikers.
By the end of 1923, the output of the area was brought down to one-third its capacity. At this point the German mark had all but collapsed, going from 80,000 marks to the pound in January 1923 to 20 billion by December 1923.
And here’s another important point to bear in mind: it was the curtailment of Germany’s productive capacity, sustained with even more money printing, which sealed the demise of its currency.
Resolution
Resistance in the Ruhr put a great strain on Germany, both economically and financially, and a great psychological strain on the French and Belgians. At the same time that the German mark was being ruined, the occupying countries were not obtaining the reparations they desired.
Accordingly, a compromise was reached by which Germany accepted another plan for reparations (the Dawes Plan) and the Ruhr was evacuated.
The victors in this episode were the British, who had demonstrated that the French could not use force successfully without British approval. This would have important geopolitical consequences in the years that followed.
But there were other victors as well: the radical political parties in Germany, feeding on the resulting humiliation and frustration felt by large parts of the population. The most radical of them would rise to power within a decade.
Lessons for Today
This episode illustrates less obvious yet crucially important points on the dynamics of money printing, particularly when interplayed with productive capacity and free markets. Abundant paper credit might be a necessary condition to generate high inflation rates, but in today’s world it is far from being a sufficient condition.
In an open economy, inflation can manifest itself as a sustained increase in prices and/or a deterioration in the balance of trade. Regarding the latter, in the days of the gold standard, the resulting outflows of gold would function as a self-correcting mechanism: the central bank would have to raise rates to reverse those outflows and cool off the internal demand which created the imbalance in the first place.
Today we have fiat currencies, driven by differentials in interest rates, inflation expectations, risk premiums, credit creation and so forth, so those imbalances can persist for longer. And there’s one vital improvement relative to the 1920s (in fact all the way up to the late 1970s): virtually limitless production capacity.
Over the past few decades capitalism and globalization made possible the rapid assembly of production capacity anywhere in the world – by entrepreneurs and, in some very important cases, central planners (read: China). Supply can thus rapidly rise to absorb increases in demand, dampening any lasting effects on price.
Global markets have become very efficient in spotting price arbitrage opportunities and eliminating them through the free movement of capital and goods. The result: an inherently deflationary system for Western economies, particularly when coupled with high debt loads that can curtail the sustainability of pickups in demand.
Don’t believe us? Just look at the evolution of China’s foreign exchange reserves during the last quantitative easing program by the US Federal Reserve.
Monthly Foreign Exchange Reserves in China (USD bn (LHS), yoy% (RHS)): Sep 12-Dec 14
Source: PBOC, J Capital.
Those newly minted US dollars went to China in search of yield and cheaper goods and services, as evidenced by the rise and fall of the latter’s growth in foreign exchange reserves almost in sync with the Fed’s money printing. Any wonder why inflation remains subdued in the US?
As long as global markets remain open and free, Western policymakers will have a hard time creating lasting inflation. Of course there is a number that might do it. But some developments could make this a near certainty, as we have seen from Germany’s episode: a big deflationary shock could bankrupt and take out large portions of industrial capacity; water constraints and evolving weather patterns could limit food production; energy might become much more expensive at some point; capitalism can be dismantled; free trade could be severely restricted (more Russian sanctions anyone?).
And if we get there under these circumstances, our central bankers may discover that they have as many unpalatable choices as their German peers in the early 1920s.
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This reminds me, I need to make sure I have enough wheelbarrows.......
Key omitted fact: Was it not for Rudolf Havenstein, the jew responsible for running the German money printing policy in Weimar, the hyperinflation would never have happened.
But we are certain they can choke down another cheese dog by the end of the day.
Do not disparage the chief Amurican contribution to the culinary arts.
If it weren't for the cheese dog, Amuricans might be eating Eisbein.
Their hyperinflation wasn't really because of money printing. It had more to do with the commies (weimar republic) who replaced the old imperial gov of Germany in 1919 and freaked out the german capitalists.
A few flaws, but an attempt at a balanced piece. The Tylers are trying, but Mom's basement is a rough audience;)
Depression first, then hyperinflation.
As much an average ZHer despises bitcoin it will be one of the best buys once hyperinflation strikes.
It will be the only wayout, gld is being manipulated proactively for the last 5 years. Since market cicruit breakers were introduced.
Right, let's assume it was all inevitable and ignore the fact that it was Havenstein who ran the entire operation with hundreds of actual physicall printers. This was not a decision made by the German public.
I challenge you to find who else was in charge of monetary policy at the tIme.
And most of the "communists" and "Bolsheviks" were...?
The Germans saw what the commies did in the Russian revolution of 1917. They were rightfully freaked out by the Weimar republic.
Are you one of those who seriously thinks that Nicholas II was innocent of the robbery of the people? The Revolution of February 1917 led to the creation of a democratically elected, national unity government constituted of socialists, communists, and centrists; Lenin's idiotic Bolshevik band could not accept the result and dissolved the body. The October Revolution was what put paid to democracy not the February one.
You're getting a little too excited there, comrade. Yes democratically elected is the link here.
Most of the "communists" and "Bolsheviks" were opposed to the illegitimate reparations payments. Although they maintained a strong presence in Parliament, they were never represented in government.
Blaming the Jews, as Hitler did, will get us nowhere. Hitler's "solution" to German economic problems was as best a means of masking the underlying debt-based monetary system that persisted throughout his tenure. The Nazi regime, furthermore, used ordinary Jews as patsies and failed to go after those truly at fault, the rich capitalists who owned everything and were responsible for pushing through the hyperinflation: anyone wealthy enough moved to London or New York to wait out the war and was not affected by Hitler's purges.
The first driver was the declining exchange rate, the second was the issuance of Weimar debt, the third was the discounting of that debt by the Reichsbank, and only fourth was the printing of money to buy the discounted debt. The Reichsbank tried to support the exchange rate for about 12 weeks in early 1921 but the first reprerations payment of 250 million equivalent US dollars in August of 1921 killed that and only during the very brief period in early 1923 could the Reichsbank prevent the exchange rate from falling. It was the exchange rate that speculators correctly assesed was the doom of the Reichsmark. Havenstein was more of a doofus than a criminal. Schecht was able to stabilize the currency with no more tools than Havenstein other than intelligence.
The hyperinflation was because the privately owned Reichsbank made Reichsmarks available for short selling, i. e. allowing them to be borrowed into existence and sold later. The system functions exactly the same way it does now although the effects played out at a much, much higher speed. "Money printing", although it would have to be checked, would not have caused hyperinflation, since it is not a self-perpetuating process. Money emitted debt-free does not have to be paid off with more money that in the meantime circulates and causes hyperinflation.
The "Lessons" given here are in many respects inaccurate. Shame that Tyler Durden does not support a sovereign money system in which money need not be based off of debt, in which inflation is not a fundamental requirement for the system to barely function at all.
Sovereign money is still debt-based. What do you think gives it its value? The fact that you'll get chucked into a cage if you don't pay it back to 'your' government in the form of taxes... after having earned it through the sweat of your brow.
The Greenbacks of Abraham Lincoln were not debt-based and gained their value, yes, from their use in paying taxes and their ability thereby to purchase goods and services. This is a system far preferable to what we have now since it does not incur debt in its creation.
Really20 The Greenbacks of Abraham Lincoln were not debt-based and gained their value, yes, from their use in paying taxes and their ability thereby to purchase goods and services. This is a system far preferable to what we have now since it does not incur debt in its creation.
----
I want what your smoking. The Federal government was basically debt free prior to the Civil War. But debt surged from $65 million to over $2.5 Billion by 1866. And that is also when Lincoln signed into law the first income tax (1862)
I see the haters are already out in force. The comment section would be so much more useful if one wouldn't have to wade through the antisemitism.
Really?
Wait. You're saying the Khazars are semites?
Please cite that because it seems to contradict all scientific knowledge on the subject.
The burden of proof rests on you.
Not going to happen. It's all digital now, there's very little physical cash around. You'll have to buy what you can with gov credits.
It'll start after QE18
Sure, like we stupid human beings EVER learn from the past. If it was so, would we be 18 trillion in debt? Would we be printing without abandon, would we have a nigah in the Blackhouse with a bald headed wife on Jeopardy selling lunches. Uh....I could go on...ok, I will
would we have barney, maxine, who's that other curly headed bitch? Her name escapes me, you know who she is...Hairy REED...even cruz is a clown...and NOW go figure Terry whats his name...email servers...this sheeit is getting real, real quick...I feel sorry for Banzai with the overload of parodies
... the fudgepacker disgraces the n word.... the fudgepacker has about as much in common with American black people as white people do with polar bears...
:) Did you know polar bears have black skin under their white fur?
Here's a youtube link for the low information freaks.
Polar Bears Are ACTUALLY Black!https://www.youtube.com/watch?v=L8u8ta1gdgU
Capt. Ramsey: Speaking of horses did you ever see those Lipizzaner stallions.
Hunter: What?
Capt. Ramsey: From Portugal. The Lipizzaner stallions. The most highly trained horses in the world. They're all white?
Hunter: Yes, sir.
Capt. Ramsey: "Yes, sir" you're aware they're all white or "Yes, sir" you've seen them?
Hunter: Yes, sir I've seen them. Yes, sir I was aware that they're are all white. They are not from Portugal; they're from Spain and at birth, they're not white; they're black. Sir.
Capt. Ramsey: I didn't know that. But they are from Portugal.
Yellow is the new white, white is the new brown, black remains unchanged.
You spend too much time in political circles, sounds like you need a real job.
printing is not a problem until there
is an alternative that appears less
fraudulent. then, you are fucked.
Printing won't happen until governments cannot borrow anymore and that won't happen conclusively until the bond markets collapse. Some countries are approaching that point, I believe.
As long as the money supply is tethered to debt, as it currently is, you are talking about some serious liquidity problems and (probably) a great deal more deflation first.
The tricky part will be figuring out when the old debt model becomes impossible and the genuine "Weimar" style moment enters. The transition is not going to be announced from the rooftops, that much is for sure.
Note: It is also not going to affect all countries/regions at once. Such events are typically always staggered in time. People are betting pretty heavily on a Eurozone collapse, but I maintain that the Eurozone could well be restructured and persist much longer than people believe. Europe, Japan, the UK and the US all seem to have their fates entangled right now, on the opposite we have the BRICS (and future pals, the MAVINS?) the world seems to be polarizing between two competing blocs in a battle of economic attrition. To the winning bloc goes the spoils. The US and China are the dominant powers in each group respectively.
If I can just get through this tax season, i'll be golden.
https://www.youtube.com/watch?v=F3FlW5R2GL4
Steely Dan - Can't Buy a Thrill (1972) - Full Album
.
minute 5:57
you puttin; me on but hell
, i bite.
@.."Printing won't happen until governments cannot borrow anymore and that won't happen conclusively until the bond markets collapse. " ...
.
you said that, not me.
and it is hilarious, a good one.
.
incredible, are you suggesting or stating "printing" is dependent
on bond markets? as if sovereign central banks have no capacity
or tools to fuck your self?
hilARIOUS.
.
Steely Dan - Can't Buy a Thrill (1972) - Full Album
https://www.youtube.com/watch?v=F3FlW5R2GL4
minute 16:57
This only matters if your country's currency is not the GRC (Global Reserve Currency), or loses that status.
Until then, it's "Damn the torpedoes..."
Plan, live and drink accordingly.
People are in denial for a year before they admit it, remember the recession? It was a nasty one, but it's over now, so all is good.
Did Lloyd or Jamie write this peice of garbage?
The Weimar republic didn't have the advantage of being the world's reserve currency and they didn't have the advantage of digital fiat. We won't see any hyper-inflation until the time comes when the world rejects the dollar en masse and Old Yeller has to start up the Bernank's helicopters and dropping fiat all over the proles.
But perhaps they could have traded their technology for the reserve currency, which they rejected leaving the dollar and it's qualitative expansion to rule (or rue) the day. Today we know which.
Actually, what is going to happen is that trillion of the TPs, dollars, that are reclining overseas will come flooding back into the DC US. Those TPs will snap up any and everything that isn't nailed down pushing up the prices of all things to the rafters. Overseas producers will stop accepting the TPs, and therefore the shelves at Walmart, Kohl's, Harbor Freight, etc. will become bare.
Then the Zionist banksters will begin to demand that all supposedly devalued debts be serviced in gold, and/or SDRs. Their friends and friendly hen judges will see to it that it is all "legal," and Kosher.
Then come the foreign powers...(see France during their revolution)
The banksters need to repay us.
The guillotine is a Liberty Restoration machine: Banksters, pols, crats, and funcs go in, Liberty comes out.
Then the Zionist banksters will begin to demand that all supposedly devalued debts be serviced in gold, and/or SDRs.
It is their tried and true farming operation. It has been going on for centuries.
Centuries? Try millennia.
Jesus threw the Jewish Rabbis, aka "moneychangers" out of the temple. Not the Roman banksters out of the Senate, the Jews were the Roman's banksters by that point.
The Rabbis, and their led by fear of the eternal flocks, are the ones that demanded his death.
Jesus was sent here to awaken man to THAT, we, even the Christians, missed the message, hence, the past 2000+ years, and today.
We humans are pretty stupid. My guess is the original sin wasn't sex, but believing we were as smart as our creator. Pretty damned obvious we aren't....
Peace to you
Yup, one can see Zion in the story of Jesus' trial and conviction.
The Jews lied and levied false charges when their racket was threatened. They controlled and manipulated the court politically, and then had the governmnet do their dirty work.
Sound familiar?
The only difference is that back then they were plundering their own land, not other people's.
The banksters need to repay us.
Yeah, I said it, but did you get it?
Didn't Bernanke say "we have printed all this money and no inflation".
Guess the Federal Reserve will keep printing until they see out of control inflation.
Then they will be afraid to raise rates until there is a full blown currency crisis.
Didn't Bernanke say "we have printed all this money and no inflation".
The man clearly doesn't do his own shopping. Maybe he should ask the wife, see if she thinks there's 'no' inflation.
I've found that those that haven't been dramatically effected by Obamacare aren't noticing it as much.
Funny how the luxury policies are still in place, but my crappy policy tripled in price and doubled in deductible.
No inflation? Yeah, if you are stinking, filthy, rich.
For the rest of us it is just more of the same.
QE4....... all the way to QE 20?
We'll see Japan blow up first. Maybe Europe.
Sometime afterwards the US.
Jews really did a number on Germany, twice! Americans were warned many times, by many people what would happen, and it's happening now.
Good luck goy.
The hens must leave.
The banksters need to repay us.
I'm a thief and I'm a liar..I go synagogue and sing in the choir.
Those whose property was in real wealth, either in land or industrial plants, gained from the inflation as it increased the value of their properties and wiped away their debts.
Inflation does not increase the value of properties!!!
It does allow payment of debts with cheaper exchange media. In fact that's how governments everywhere finance themselves ... their subjects balking at higher taxes for services they don't want or need or get. It's kind of an ugly realization isn't it ... the people are the "subjects" of the governments they supposedly enable.
In the face of inflation, one would think they should be a debtor ... but always hold the amount owed in cash in case their loan gets unexpectedly called and the collateral is threatened. But of course cash loses value with inflation so it's a push.
The only "right" value for inflation is zero.
When inflation hit in Germany merchants who had tangible assets for sale on their shevles put them away because they would not accept paper for real goods with value. As such, items came back on the shelf at a later time when the currency was stable and it can be argued that this was an inventory price uplift.
"In the face of inflation, one would think they should be a debtor .."
In the 1970s in the US interest rates on homes were low and inflation started to ramp up so those holding 7% mortgages had only wait for a few years and hang on and endure double digit inflation for a while as the mortgage payments fell as a percentage of disposable income if you kept you job. Many such houses were purchased at $50,000 or less and are now worth $350,000 or more so the 'cost' of borrowing for the mortgage was very small after being adjusted for inflation of 30 years or more.
In deflation debtors get crushed; in inflation, debtors get a break.
Many such houses were purchased at $50,000 or less and are now worth $350,000 or more so the 'cost' of borrowing for the mortgage was very small after being adjusted for inflation of 30 years or more.
In deflation debtors get crushed; in inflation, debtors get a break.
One advantage of being old is you experience these things first hand. I did purchase one of those $50,000 houses in 1975. That same year I sold a 1 year old $38,000 house in another city for $33,000. 20 years later I sold the $50,000 house for $100,000 and was happy to get it. To get $350,000 for a $50K house you had to be in San Francisco or Portland or maybe Seattle.
But it makes no difference. You can't immediately go out and buy that very same house for the $350,000 you just sold it for. Your 700% appreciation is pure illusion. In the mean time, you actually paid for that house 3 times if you went the full 30 year term of the mortgage.
Inflation only benefits the printer of the money (a counterfeiting government ... a trader who never completes trading promises but just rolls them over).
The only good value for INFLATION is zero.
You guys are discussing slightly different things. House prices went up faster than other goods because of low interest rates and various government incentives that lowered the cost of financing them. This created a house price bubble; that's not really the same thing as generalised inflation.
And you can benefit from it, the gains are not necessarily pure illusion. Imagine you buy a 5 bedroom house for 50k back in 1975, raise your 2.2 kids and then sell the house for 400k now to downsize to a 2 bedroom retirement bungalow which costs you 100k. You've just made $300k.
Of course if you buy near the top, and then are obliged to sell for some reason after the bubble pops and before the Fed has managed to reinflate it, you'll be hurting.
Yes, and they want to tax those nominal/non-real gains, just like stock market non-real gains. The gains are an illusion.
The primary effect of hyperinflations manifests as a very short term focus of the victimized society's people.
Eventually the people are not able to look or feel beyond today, or even the hour. As a result society becomes more brutish, and civilization suffers.
Contrast that with the same effects that are manifesting themselves, but much slower, in our society due to the incessant printing and theft by the FedRes and their violence-puppets, government.
The banksters need to repay us.
Guillotine the Fed. Audit the heads.
http://www.amazon.com/Great-Inflation-Germany-William-Guttman/dp/0860330...
http://www.amazon.com/Economics-Inflation-Currency-Depreciation-1914-192...
It is the government who pushed US debt to $18T with $4T more on the Fed books.
The governmet needs to repay us. Cut taxes and fire 1/2 of the government employees and restrict perks, pensions and travel.
Germany during the 1930s, had little way to produce much of anything. That is the biggest reason for the inflation. When poductivity of labor is high deflation is good for all but a few billionaires. Look at the period in the U.S. from 1866 throuth 1900.
Normally labor is rewarded with lower prices when when productvity increases. Economic stimulus keeps higher profit margins for business in place and works to the disadvantages of labor. Don't worry about hyper inflation here,
James, Quillian
Common Sense Economics, Quillian.net
Germany during the 1930s, had little way to produce much of anything. That is the biggest reason for the inflation.
Either you or Adam Fergusson ("When Money Dies") is very wrong about this. Fergusson talks of the remarkable production of the Ruhr valley and of the great shortage of labor ... thus, everyone wanting to work was working ... really long hours ... but receiving more and more worthless money. From my read of Fergusson, paying government suppliers, workers, dependents, and debt were the principle problems ... just like in the good ole' USA today ... except the USA doesn't enjoy the full employment part.
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I have not read the book you mentioned. Productivity is not the same as working hard or having a good attitude. When the productivity of labor is high more is produced with less effort. That is why prices come down naturally. When tools improve, it is natural for prices to fall.If one of us is wrong. I am sure it is Ferguson.
Usually mainstream economists have little understanding of incentives and they make no allowances for them changing when government policy changes. This is why their models have little utility to society. You may have noticed with QE, that one common incentive of smart people is to game Fed policy.
Economists almost always value numbers as having predictive value. In the real world, one number doesn't cause another. Principles are all that matter and principles are not reducible to numbers.
A Phd from an Ivy League school is more of a degree in accounting than anything else. The members of the open market committee are really celebrated book keepers. Don't take my word for it. Study the forecasts they make. Truck drivers would do better just guessing.
This area was vitally important for the German economy. With 10% of the population, it produced 80% of the country’s coal, iron and steel and generated 70% of its freight traffic. As a result, Germany retaliated, declaring a general strike in the area, ceasing all reparations payments and adopting a program of passive resistance. As a result, more paper money had to be printed to support the strikers.
This article doesn't even mention Hugh Stinnis. He owned most of this production. He bought it by borrowing exchange media and paying back with devalued exchange media. INFLATION was his friend. But he demanded payment for the goods he produced in commodities. He died in April of 1924 .... and it all fell down.
I'd continue splitting hairs about our past but I'd rather face the truth and move on a.s.a.p.
Two words: FORTRESS ALPS!
Here's the shortcut: o4:48 https://www.youtube.com/watch?v=K2C8Eq11UjA
Don't "like" me, thank him. Balls to the wall!
"Western policymakers will have a hard time creating lasting inflation"
This article is bull sh.t.
Negative bond interest rates ARE a sign of inflation.
Stocks P/E ratios in the "stratosphere" ARE a sign of inflation.
Real CPI ratios ARE a sign of inflation.
Government lies, lies and more lies about everything ARE a sign of inflation.
Pension funding deficits ARE a sign of inflation.
Federal Government corruption at every level IS a sign inflation.
The whole fu.king thing is a LIE.
And the root cause is:
We spend more than we produce and the Federal Reserve covers it up by counterfeiting US Dollars.
John Williams of Shadowstats was quoted on another article as setting the inflation rate at about 7%. That's actually believable. All that printed money in the US is not going away. It's out there, ready to come back around. Right now, in my opinion, it's badly misallocated. I can't see that the bankers can maintain this false stability forever, if even much longer.
And if we get there under these circumstances, our central bankers may discover that they have as many unpalatable choices as their German peers in the early 1920s.
And if you were in control, what would you do?
overlooked here is the collapse in the multiplier that collapsed velocity leaving way too much cash for what little goods were around.
it is true the usd has a lot of room to print. the exportation of inflatiion could conceivably work for another generation before the world will approach economic parity globally(what will the world do with a real economy without barriers?). the problem in the meantime is the thing all fiat money is based upon, confidence.
to complete the cycle of grisham's law of bad money, good money eventually chases out bad money when the transgressions of bad money(dollar) become so bad a replacement in the form of good money is established.
Tyler’s making errors again: Germany’s 1923 hyper-inflation was by a private central bank, not the government. In fact, it was government money and government intervention that set things right.
The background: Triangular flow of inter-ally debts via Versaille treaty, and Germany not being allowed to export goods in exchange for dollars. Germany desperately needed dollars, francs, and pounds to pay Versailles debts. The allies in turn would send the dollars to the U.S. Treasury for their “allied” war debts. America put their allies on a debt hook, for example the doughboys were paid mercenaries in France during WW1. In this way, America grabbed the gold from Europe in exchange for dollar debts.
Germany cannot export to get dollars … at least the Tylers got that part right. Congress didn’t want German imports, in effect setting up Germany for the hyperinflation.
On May 26, 1922, under Dawe’s plan, granted total private control over the German currency. The immense reparation payments put significant exchange pressure on the Mark.
VIRTUALLY ALL HYPERINFLATIONS IN HISTORY ARE CAUSED BY FOREIGN EXCHANGE RATE PRESSURES.
(Money should not trade for money…. All foreign goods exchange is really barter. But, humans are too stupid to learn this rule.)
The Mark was destroyed through speculation. The currency is shorted, otherwise known as a bear raid. All bear raids are started by some sort of systemic weakness, and then it gets piled-on, causing positive feedback of more shorting. This feedback makes a lot of new “private credit money per unit time.” IT WAS PRIVATE DEBT BASED CREDIT MONEY, NOT SOVEREIGN MONEY THAT CAUSED THE INFLATION.
In mid 1923 Hamburg, Bremen, and Kiel established more private banks to issue money backed by gold and FOREIGN EXCHANGE. Dollars were used to back up Mark creation, which is part of the Bear Raid action. OK . GET IT INTO YOUR HEADS PLEASE TYLERS.
In Schachts 1967 book, “The magic of money” he lets it slip what really happened. My avatar is of Schacht in case anybody wonders, so I’ve studied this topic more than the Tylers.
Schacht introduced currency controls and bilateral trading methods in order to stop the inflation. In addition he introduced a new currency, the Rentenmark.
Rentenmarks were issued starting in November 15, 1923, in limited quantity and NOT OVER ISSUED. Rentenmarks could not be used for international payments. Schacht also forced credit restrictions on the Mark. Schacht stopped all other money issuers and sent all Reichsbank holdings of debt instruments back to their source for immediate payment, despite howls of protest from the private moneylenders.
Schacht crushed the speculators, and they learned the Reichsbank was now able to end FX speculation and bear raids.
It was the privately owned and privately controlled central bank that made loans to private speculators, enabling them to bear raid the nation’s currency. Schacht and the “state” regained control of the money power away from private profiteers.
The corporate money trusts do NOT want government having its own money power. They will start wars and kill millions, and spew monetary lies, thus casting a pall of confusion over the minds of men.
http://www.sovereignmoney.eu/
And a commentor earlier who said that sovereign money was backed by nothing is confused. It is the flux energy and labor and wealth of a people that back it. Rentenmarks were sovereign money, Lincoln’s Greenbacks were sovereign money. Continentals were sovereign money. The U.S. would not exist if not for sovereign money.
Nice work, squire.
So when Yellen tells you that the FED wants higher inflation, do you believe her?
Neither Great Britain was widely seen as "superpower" (they depended as France to the Western alliance) after WW-I nor the theory of German exclusive responsibility is sustainable (nowadays by historians mainly seen as a relict of victors justice).
Printing money started in 1914 to fund war machinery (50% depreciation of the Mark in 1918) - in the 1920th it was in first place a politically answer to the Versailles Treaty which determinated the restitution of all financial damages to Germany. As consequence of this pay-off strategy French troups occupied the"Rheinland" for several years to exploit goods and raw-materials. The domestically atmosphere of the young Weimar Republic became disordered and let radical groups grow stronger.
After WW-II in Germany goods were detained until the currency reform in 1948.
Don't forget Germany had the first modern welfare state under Bismarck with pensions and benefits. It is theft based and needs a strong government to do the extortion. It will always loose moral authority and forget all tasks but plunder.
"Far from it in fact. The failure to obtain a fiscal surplus was solely the responsibility of the German government, which refused to reduce its own expenditures and the standards of living of its people, or to tax them enough to yield such a surplus." Hahaha... not the slightest notion of what was going on those times. Why not mention the British sanctions and blockade? Really ridiculous!
What Varoufakis proposed but got slapped down. Basically, the Germans blamed everyone but themselves. The very things they accuse Greeks of. Self projection much?
Today Germany runs 6% surpluses and says fuck your trade. They don't like austerity but sure like imposing it on everyone else.
Fuck Germany.