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Art Cashin On The Most Important History Lesson Of The Last Century

Tyler Durden's picture




 

Today, instead of the traditional market observations by the Chairman of the Fermentation Committee, we share with readers a critical historical lesson from Art Cashin, focusing on an event that took place 89 years ago, which as Cashin says is "one of the most devastating economic events in recorded history and an important backdrop to Europe today. It all began with the efforts of a few, well-intentioned government officials." Many will know what we are talking about already...

An Encore Presentation

Originally, on this day (-2) in 1922, the German Central Bank and the German Treasury took an inevitable step in a process which had begun with their previous effort to "jump start" a stagnant economy. Many months earlier they had decided that what was needed was easier money. Their initial efforts brought little response. So, using the governmental "more is better" theory they simply created more and more money.

But economic stagnation continued and so did the money growth. They kept making money more available. No reaction. Then, suddenly prices began to explode unbelievably (but, perversely, not business activity).

So, on this day government officials decided to bring figures in line with market realities. They devalued the mark. The new value would be 2 billion marks to a dollar. At the start of World War I the exchange rate had been a mere 4.2 marks to the dollar. In simple terms you needed 4.2 marks in order to get one dollar. Now it was 2 billion marks to get one dollar. And thirteen months from this date (late November 1923) you would need 4.2 trillion marks to get one dollar. In ten years the amount of money had increased a trillion fold.

Numbers like billions and trillions tend to numb the mind. They are too large to grasp in any “real” sense. Thirty years ago an older member of the NYSE (there were some then) gave me a graphic and memorable (at least for me) example. “Young man,” he said, “would you like a million dollars?” “I sure would, sir!”, I replied anxiously. “Then just put aside $500 every week for the next 40 years.” I have never forgotten that a million dollars is enough to pay you $500 per week for 40 years (and that’s without benefit of interest). To get a billion dollars you would have to set aside $500,000 dollars per week for 40 years. And a…..trillion that would require $500 million every week for 40 years. Even with these examples, the enormity is difficult to grasp.

Let’s take a different tack. To understand the incomprehensible scope of the German inflation maybe it’s best to start with something basic….like a loaf of bread. (To keep things simple we’ll substitute dollars and cents in place of marks and pfennigs.  You’ll get the picture.) In the middle of 1914, just before the war, a one pound loaf of bread cost 13 cents. Two years later it was 19 cents. Two years more and it sold for 22 cents. By 1919 it was 26 cents. Now the fun begins.

In 1920, a loaf of bread soared to $1.20, and then in 1921 it hit $1.35. By the middle of 1922 it was $3.50. At the start of 1923 it rocketed to $700 a loaf. Five months later a loaf went for $1200. By September it was $2 million. A month later it was $670 million (wide spread rioting broke out). The next month it hit $3 billion. By mid month it was $100 billion. Then it all collapsed.

Let’s go back to “marks”. In 1913, the total currency of Germany was a grand total of 6 billion marks. In November of 1923 that loaf of bread we just talked about cost 428 billion marks. A kilo of fresh butter cost 6000 billion marks (as you will note that kilo of butter cost 1000 times more than the entire money supply of the nations just 10 years earlier).

How Could This All Happen? – In 1913 Germany had a solid, prosperous, advanced culture and population. Like much of Europe it was a monarchy (under the Kaiser). Then, following the assassination of the Archduke Franz Ferdinand in Sarajevo in 1914, the world moved toward war. Each side was convinced the other would not dare go to war. So, in a global game of chicken they stumbled into the Great War.

The German General Staff thought the war would be short and sweet and that they could finance the costs with the post war reparations that they, as victors, would exact. The war was long. The flower of their manhood was killed or injured. They lost and, thus, it was they who had to pay reparations rather than receive them.

Things did not go badly instantly. Yes, the deficit soared but much of it was borne by foreign and domestic bond buyers. As had been noted by scholars…..“The foreign and domestic public willingly purchased new debt issues when it believed that the government could run future surpluses to offset contemporaneous deficits.” In layman’s English that means foreign bond buyers said – “Hey this is a great nation and this is probably just a speed bump in the economy.” (Can you imagine such a thing happening again?)

When things began to disintegrate, no one dared to take away the punchbowl. They feared shutting off the monetary heroin would lead to riots, civil war, and, worst of all communism. So, realizing that what they were doing was destructive, they kept doing it out of fear that stopping would be even more destructive.

Currencies, Culture And Chaos – If it is difficult to grasp the enormity of the numbers in this tale of hyper-inflation, it is far more difficult to grasp how it destroyed a culture, a nation and, almost, the world.

People’s savings were suddenly worthless. Pensions were meaningless. If you had a 400 mark monthly pension, you went from comfortable to penniless in a matter of months. People demanded to be paid daily so they would not have their wages devalued by a few days passing. Ultimately, they demanded their pay twice daily just to cover changes in trolley fare. People heated their homes by burning money instead of coal. (It was more plentiful and cheaper to get.)

The middle class was destroyed. It was an age of renters, not of home ownership, so thousands became homeless. But the cultural collapse may have had other more pernicious effects.

Some sociologists note that it was still an era of arranged marriages. Families scrimped and saved for years to build a dowry so that their daughter might marry well. Suddenly, the dowry was worthless – wiped out. And with it was gone all hope of marriage. Girls who had stayed prim and proper awaiting some future Prince Charming now had no hope at all. Social morality began to collapse. The roar of the roaring twenties began to rumble.

All hope and belief in systems, governmental or otherwise, collapsed. With its culture and its economy disintegrating, Germany saw a guy named Hitler begin a ten year effort to come to power by trading on the chaos and street rioting. And then came World War II.

That soul-wrenching and disastrous experience with inflation is seared into the German psyche. It is why the populace is reluctant to endorse the bailout. It is also why all the German proposals have each country taking care of its own banks. (It gives them more control.) The French plans tend to socialize the bailout. There’s more disagreement in these plans than the headlines would indicate.

To celebrate have a jagermeister or two at the Pre Fuhrer Lounge and try to explain that for over half a century America's trauma has been depression-era unemployment while Germany's trauma has been runaway inflation. But drink fast, prices change radically after happy hour.

 

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Thu, 10/13/2011 - 10:11 | 1769266 Don Birnam
Thu, 10/13/2011 - 10:27 | 1769362 Clueless Economist
Clueless Economist's picture

10:23 AM

Silver $31.62

JPM $31.61

Ratio 1.0003-1

Thu, 10/13/2011 - 10:54 | 1769442 falak pema
falak pema's picture

when was the last time you wore silver slippers like in Wizard of OZ? 

god! love the lipstick!

Thu, 10/13/2011 - 10:57 | 1769501 X.inf.capt
X.inf.capt's picture

zero stroke

bitchez!

Thu, 10/13/2011 - 11:21 | 1769620 Storch
Storch's picture

To get paid twice a day people have to have jobs.

We have:
Currency manipulation
Cheap credit

We dont have:
Payroll expansion
Easy credit

That is why for people like me trying to buy a house the world is very deflationary when housing cost is factored in, but for renters commuting 60 miles the world is inflationary.

In other words, the stuff you already own is getting cheaper and the stuff you buy every day is getting more expensive. Stagflation bitchez.

Thu, 10/13/2011 - 14:13 | 1770359 ATM
ATM's picture

Why would you want to buy a depreciating asset like a home?

Rent with an option to buy! That was if the depreciation continues you aren't stuck and if things turn and inflation really jumps you ghave locked in a cheap price.

Thu, 10/13/2011 - 11:13 | 1769557 Au_Ag_CuPbCu
Au_Ag_CuPbCu's picture

Get that silver while you can, we might, maybe get one more push into the 20s and that will be the last time you will ever see silver at these prices.

Thu, 10/13/2011 - 10:40 | 1769429 AnAnonymous
AnAnonymous's picture

No.

The article is factual for this part at least.

.......................................................................
It was an age of renters, not of home ownership, so thousands became homeless.
.......................................................................

This single thing makes it different this time.

The run for increasing the housing inventory in the US was a deliberate run and done on this purpose: provide US citizens with cheap opportunities to own a house.

In this consumption race, it is all about consumption and at the end, two kinds of people, when consumption takes a hit: people who consumed and people who did not consume.

The fact that the US has accumulated so much wealth, plundering the rest of the world makes that history does not rhyme.

US citizens have learned from the past and has organized another big theft to avoid facing the bad consequences of their actions, US citizens typical style.

Thu, 10/13/2011 - 10:49 | 1769467 falak pema
falak pema's picture

You seem to be writing "the fall of the new Roman Empire", like a  modern day  Gibbons. You have the same contempt for US citizenry that he had then for Roman citizens...who were as corrupt as their leaders.

Thu, 10/13/2011 - 12:12 | 1769872 AnAnonymous
AnAnonymous's picture

You seem to be writing "the fall of the new Roman Empire", like a modern day Gibbons.

///////////////////////////////////////////////////////////////////////////

No. On the contrary.

Gibbons is an expansionist.

When expansion comes to halt, expansionists split in three categories:

-expansionists who admit that the main disruption to their system is the impossibility to keep on expanding as fast as it used to be.

-expansionists who paint that the main disruption to their system comes from a cultural change

-expansionists who paint that the main disruption to their system comes from a loss in genetic quality.

The first category numbers few people. Usually, expansionists spread over the two categories.

Gibbons is part of the second category, a guy who paints the failure to expand as a cultural mishap.
Gibbons paint it as there was a degenerescence.

How can I be similar to that person while I state over and over again that the US citizen nature is eternal? That the US has not changed one bit since its inception? That the US has no malfunction as it works as it was designed to work? That US citizens love their tales about a fabled past?

If even contempt, Gibbons did not despize what he perceived as the original roman. So if I were to despize the current US citizens, I would have to despize past US citizens.

Actually, for people who admit diversity, contrary to US citizens,those two positions would be perceived as different.

But hey, this is a US driven world. So in a manner of perception commanding reality, somebody who is as distanced from Gibbons than me, has to be like a modern day Gibbons. Even if it makes no sense at all.

After all, US citizens are used to live in a political system in which what they call the opposition holds similar views as the political party in power.

So, yep, they have to see everything similar.

Thu, 10/13/2011 - 11:18 | 1769595 Fukushima Sam
Fukushima Sam's picture

As usual, you are as clueless as someone launching a boat stern-first on a bunch of inflatable sausages.

Thu, 10/13/2011 - 11:38 | 1769716 knukles
knukles's picture

Easy....
I like my inflatable sausage.

Thu, 10/13/2011 - 12:16 | 1769888 AnAnonymous
AnAnonymous's picture

No. As usual, US citizens prefer personal attacks rather than facing facts.

Clueless about what?

That in the US this is an era of home ownership, no longer of renting?

That the US inflated their house market to increase their housing inventory, robbing the world blind?

US citizens love to depict themselves as innovative.

They would be welcomed to show their innovation in their cheap propaganda.

Thu, 10/13/2011 - 13:34 | 1770154 DeeDeeTwo
DeeDeeTwo's picture

You are trying to reason with a mob, baby.

Thu, 10/13/2011 - 14:59 | 1770546 lasvegaspersona
lasvegaspersona's picture

Ananonymous

Most of us on ZH who are Americans see our problems and are digusted by them. We look for answers, we try to figure out the perps and to protect ourselves. You just do not like America or white folks. We seek answers and plan, you spew.

Thu, 10/13/2011 - 12:28 | 1769937 buyingsterling
buyingsterling's picture

"US citizens typical style"

Try this on:

Killing millions of their fellow countrymen, Russian & Chinese citizen's typical style.

 

Sound right to you?

Thu, 10/13/2011 - 12:28 | 1769939 Oppressed In Ca...
Oppressed In California's picture

"The fact that the US has accumulated so much wealth, plundering the rest of the world"

 

You must be a college professor....

Thu, 10/13/2011 - 12:31 | 1769958 onearmedlove
onearmedlove's picture

Close, he is a freshman and wears a Chomsky shirt.

Thu, 10/13/2011 - 14:19 | 1770388 ATM
ATM's picture

I thought it was Che'? Oh well. I'm just surprised he can get internet service from Zuccotti Park

Thu, 10/13/2011 - 12:29 | 1769950 onearmedlove
onearmedlove's picture

How is a mortgage you cannot pay any different than rent you cannot pay? 

Thu, 10/13/2011 - 19:30 | 1771124 DoneThis2Long
DoneThis2Long's picture

Like so many, you have no problems in displaying your ignorance about the American peoples vs. some American politicians vs. American Corporate CEOs/structure, and separating your assessment of each group.

You clearly have no clue how many foreigners emigrated to the US in the 70's & even 80's only to return back home because they could not handle the work schedule or work load. Unlike back home where it was about punching the clock and being a fixture for a specific amount of time, whether productive or not it was an irrelevant fact, here, Americans (and willing foreigners) worked our asses off, hence we EARNED whatever the fuck we spent. Greeks are burning down the house for being asked to retire at the same age as Americans do now, so they may repay their debts, which I may add benefited just the greeks, yet Americans are facing retirement at an even older age, so to pay for two wars which Americans benefited jack-shit (yes some multinational corporations did, however, foreign corporations did, and will, benefit far more). Kindly enlighten me, just exactly WTF were the benefits from Afghanistan to Americans? Same for Iraq for that matter - keep in mind, Free Iraq's very 1st contract was signed with a fucking chinese company for oil field development and maintenance, so my being a bit dense, oh, you bright one, please point me to benefits to the American people - trillions in debt notwithstanding??? 

About the only benefit we Americans can claim from either 'adventure' is how insignificant we really are in the eyes of our fucking government (either party), for while they continue to draw benefits, we, ordinary Americans got screwed, thus hardly, the kind of benefits you blubber yap about .....

You also clearly conveniently forget billions in foreign aid be it through American gov, or private organizations - faith based, or otherwise. If you have a functioning memory, try remembering which was the country which gave the most, and was among the 1st at the scene of major disasters. Remember "Concert for Bangladesh" (among many others)? Who the fuck gave and who received, and what in the fuck did Americans plunder there?

What about Live Aid? Of course it was a Brit/American collaboration, but again, who gave, who received, what the fuck did either country stand to "plunder" from that one?

I seem to recall it was not until the bad Americans gave in and agreed to get involved by kicking ass in former Yugoslavia, that positive results begun showing up, otherwise, the europeans were happy to simply meet over tea, coffee and pastries, so to discus when & where the next meeting should take place, all the while tens of thousands of innocent men, women, children, elderly got deep-sixed for shit 'n grins and just because some criminals could. Now genius, whet exactly did America plunder from that one?

And speaking of that one, America got involved so to save Muslims from being slaughtered, yet, as best as I recall, I did not see millions of muslims worldwide, going bizerk so to thank Americans, however, I do recall millions of "peace loving" muslims celebrating a mob hanging and mutilations of FOUR Americans. Likewise, burning of the American flag and similar idiotic actions whenever something they did not like, no matter how small, did not suit their fancy. So it is ok to use double standards against Americans vs. expectations of Americans ..... Hypocritical bastards. 

I know that our medications are more expensive than most other countries because we get stuck with the R&D tab, while the rest of the world pays barely manufacturing cost plus meager sums.

Who are the most charitable individuals in the world, and for world-wide cause? Americans !!! Other nationalities either skip it all together, wasting the wealth instead, or any spending is for the benefit of their respective countries and no one else.

The world had a chance to show its resolve by taking action and saving million + innocent from being slaughtered by bad players in Rwanda, yet, once again, given the lack of American involvement, not a fucking country stepped to save the massacre. Not china, not brazil, not EU, not india, none of America's "equal" wanna-bes. They had nothing to gain so why bother. Of course, they are there in droves so to 'plunder' the country during its reconstruction ...

I could go on and on and on, but who did not get my drift by now, any more will not help anymore.

Lets be clear, America's done many idiotic deals, and frankly, for all I give a shit, I wish Afghanistan and Iraq would have been left the shit-holes they were. BTW, even there, the economic embargo against Saddam failed as most of America's "partners" were more than glad to circumvent the measures in place and sold them anything he wanted, much like with iran. Perhaps if our allays would have been less of the whores they are, and have been all along, things would have worked out better for all, including the horrible Americans.

Also, there is no denying that many conglomerates are playing the global system, however, anyone who believed that GE, or HP, or even Cisco, is screwing other countries for America(n)'s benefit, is an ignorant idiot, for Americans are getting screwed by these companies worse than any other country. They originated here, they benefited here from the American legal system, the American tax-code and all America had to offer them, yet, when it came to carrying their load, like the rest of the world, they chose to freeload on the back of American individual taxpayers. While they piss 'n moan of poor education system product, yet they refuse to pay their share so more and better could be produced, choosing instead to shift offshore where things will be better only temporarily, then, they will get their ass kicked ..... the fools.

And lastly, while America has its share if problems, other countries, and societies are just as bad, if not worse ..... much worse. Just wait until china and russia will gather a bit more leverage. russia already showed they have no problems what-so-ever letting entire countries freeze to death by simply cutting off much needed nat gas supplies just a few years back. china gives a shit less, other countries must have some of the 'rare earth' materials for their respective industrial base .... tough shit. I applaud them for it, and we Americans should learn from them.

Much more could be said but ..... Now let the red arrows fly ......

Ohhhh. one last thing: do not confuse a multinational corporation, which got its start here, but now does not contribute in (m)any way(s) to America's progress, with Americans, for said corporations benefit other countries all the while plundering America/USA and Americans!!!! Think of that one genius!!!! For I give a shit, HP under the former CEO was as much of a representative of American values, as muslims claim that bin-ladin was a representative of the muslim faith. HP (and others) gives as much shit about America and Americans, as much as binladin did of muslims!!!! I hope I am crystal clear now.

Thu, 10/13/2011 - 20:25 | 1771859 Wild tree
Wild tree's picture

DT2L,

Inconvenient truths, but well articulated. Green arrow flies.

Thu, 10/13/2011 - 22:12 | 1772069 DoneThis2Long
DoneThis2Long's picture

WT,

Kindly thank you !!!

Thu, 02/23/2012 - 19:06 | 2191026 engineertheeconomy
engineertheeconomy's picture

Actually the single most important lesson in history is that printing money is stealing money. Unless it's done by a congress that represents the wishes of it citizens. Also, no amount of interest can ever possibly be paid back since only the principle is printed, the interest payments are never printed. That means the banks will trick you out of your homes by foreclosing on them. Then, even though money is created as credit because it's a tax on existing money, they will try to convince you that  the country is in debt and the citizens must pay. This is 180 degrees backwards. If the gov prints money and spends it, they are the ones that are in debt and they should pay us back for the money they stole. They should pay taxes to us to compensate us for our paper becoming worth less and less, thus rendering most of our assets worth less and less also. Last but not least, let's remember that Gold is real money. It can not be printed and can not be used to finance endless wars and can not be used to enslave the masses in servitude for perpetual eternity. Gold = Freedom

Thu, 10/13/2011 - 10:16 | 1769281 GeneMarchbanks
GeneMarchbanks's picture

Only the banks seem to understand this history 'lesson' so now BAC just fires 10,000 employees and charges $5 for using debit. Digital, cashless society will promote the ultimate cure to fears of hyperinflation... and in the process achieve complete capitulation of the global citizenry.

Thu, 10/13/2011 - 10:23 | 1769332 Long-John-Silver
Long-John-Silver's picture

At least the Germans could burn money and not freeze to death. Burning a little plastic card full of digital dollars will only smell bad.

Thu, 10/13/2011 - 10:55 | 1769496 Problem Is
Problem Is's picture

Isn't the Louisiana Governor that nice man Bobby Dingle a conservative?

What a nice cut government, cut taxes, strengthen defense Ronald Reagan Republican that man Governor Bobby Dingle is...

Thu, 10/13/2011 - 11:12 | 1769548 DosZap
DosZap's picture

Pladizow

NEVER stand in court, if they take it there.

Fed Reserve notes are LEGAL TENDER, and any one who is offered them in payment for goods, and or services,and refuses them is guilty of a a Federal crime.

Thu, 10/13/2011 - 11:51 | 1769795 Tedster
Tedster's picture

That is a common misconception - legal tender for all debts, public and private, does not refer to goods and services per se.

As a shopkeeper I am perfectly within my rights to refuse cash. Similarly, I can specify "no checks, cash only" etc.

Debts denominated in dollars (property tax, parking fines, etc,) are payable in cash, and must be accepted. Refusal, in fact, extinguishes that debt.

Thu, 10/13/2011 - 12:33 | 1769962 buyingsterling
buyingsterling's picture

This doesn't sound right. I think they want to jail you if you run your business on barter; they want their cut. I think they'd consider anything aside from FRNs a form of barter. Can you file a tax return in Swiss Francs? In the end you have to play their game with their yardstick.

Thu, 10/13/2011 - 12:56 | 1770045 Tedster
Tedster's picture

In the end, you have to pay your taxes in dollars.

Permits, licenses, fees, etc. There isn't anything that requires me to take payment in dollars. The _seller_ sets the terms of the sale, not the buyer.
While it might be a poor business decision for me to refuse cash, or credit, etc, that's not the issue.

Let's say I want to sell my car for 100 silver dollars. You want my car, you pay me 100 silver dollars. Pretty simple, no?

Thu, 10/13/2011 - 13:32 | 1770146 DosZap
DosZap's picture

Tedster

Thanks for the clarification........never too old to learn.(<;

I knew you can refuse checks, credit cards,etc.

But I was under the understanding that our national money, must be accepted if I wanted to purchase any item.

Thu, 10/13/2011 - 14:09 | 1770340 Tedster
Tedster's picture

Nope, because no sale has occurred yet. There's no debt. Old school stores used to post "Terms of Payment" signs by the register.

Wise guys sometimes try to pay fines in pennies, probably not a good idea, generally though, they are within their rights.

The general rule, if one owes money, then a cash offer to pay or settle can't be refused. But merchandise or services offered are not necessarily able to paid with cash. For my part, cash is generally well received.

Thu, 10/13/2011 - 11:43 | 1769738 Joseph Jones
Joseph Jones's picture

Not till the last paragraph of the article did the author sneek in one business group exempt from the cash ban: pawn shops.  And who runs most of the pawn shops?  Gee, I wonder who could it be?

The rules never apply to the king!  

Thu, 10/13/2011 - 11:15 | 1769582 Syrin
Syrin's picture

I appreicate the sentiment, but if you burned a million one dollar bills, you'd be lucky to get a fire that lasts 15 minutes.

Thu, 10/13/2011 - 11:29 | 1769659 Harlequin001
Harlequin001's picture

so have some more then, they aren't exactly in short supply are they, and there's plenty more where they came from anyway?

You could have yourself a veritable bonfire if you only wait a few months...

Fri, 10/14/2011 - 15:01 | 1774788 I did it by Occident
I did it by Occident's picture

But wouldn't it be easier to stay warm longer with those one million one dollar bills by going to ahem, a 'gentlemen's establishment'

Thu, 10/13/2011 - 12:33 | 1769961 onearmedlove
onearmedlove's picture

Btw you can't even burn silver you idiot. 

Thu, 10/13/2011 - 13:36 | 1770161 EINSILVERGUY
EINSILVERGUY's picture

They did freeze to death and resorted to eating the horses. I have a 100,000 Mark note from 23 that my Grandfather left me. He was a young man in the 20's and knew this story first hand.

Thu, 10/13/2011 - 10:15 | 1769288 Concentrated po...
Concentrated power has always been the enemy of liberty.'s picture

it's a bull market in political whoredom! buy buy buy

Thu, 10/13/2011 - 10:16 | 1769289 Divided States ...
Divided States of America's picture

RIMM says there was an overload in EUROPE which spread around the entire globe like wildfire....looks like thats a precursor to what is going to happen in the financial markets soon as well?

Thu, 10/13/2011 - 10:55 | 1769497 john39
john39's picture

seems like RIMM is being destroyed from the outside.  more buyers now for apple products?  hmmm.

Thu, 10/13/2011 - 11:01 | 1769510 hedgeless_horseman
hedgeless_horseman's picture

RIMM too secure and Canadian.  Apple...not so much.

Thu, 10/13/2011 - 11:20 | 1769613 wombats
wombats's picture

Apple may as well be Chinese at this point.

Thu, 10/13/2011 - 18:06 | 1771411 AE911Truth
AE911Truth's picture

Yes, but what RIMM did not explain is the reason for the overload... It takes a lot of extra CPU to decrypt all that traffic on the fly for the government mandated spying. The government (of all nations permitting RIMM) think anyone who sends encrypted messages must have something valuable to hide, and gub wants their cut.

Thu, 10/13/2011 - 10:19 | 1769292 DormRoom
DormRoom's picture

lesson from Greece:  tax revenues will always fall faster than deficit cutting, if austerity measures are implemented.

Therefore the longer you postpone default, the longer citizens suffer.  And they will rage against the machine, whether it be Greek, or German machination.

Thu, 10/13/2011 - 10:21 | 1769321 GeneMarchbanks
GeneMarchbanks's picture

Kind of. Greece provides a subtle perhaps more important lesson: DO NOT have Goldman 'advise' your governments finance needs in order to enter horribly flawed monetary unions.

Thu, 10/13/2011 - 10:27 | 1769345 DormRoom
DormRoom's picture

or have Merril Lynch advice you, like the Irish government did, when it decided to take private debt (banks==property developers), public.  dumbest move ever.

 

http://www.vanityfair.com/online/daily/2011/02/michael-lewis-on-how-merr...

 

http://www.vanityfair.com/business/features/2011/03/michael-lewis-irelan...

Thu, 10/13/2011 - 10:59 | 1769507 Problem Is
Problem Is's picture

 

But, but, but...

Wall Street Bonuses! Bonuses! Bonuses!
That's what Crony Capitalism is all about, Charlie Brown...

Thu, 10/13/2011 - 10:17 | 1769293 Mercury
Mercury's picture

...and then came fascism and world war.

Thu, 10/13/2011 - 10:29 | 1769370 darkpool2
darkpool2's picture

You needs the future tense...." comes"
Ooooohhhhh....now its clearer......references the USA

Thu, 10/13/2011 - 10:17 | 1769302 surfersd
surfersd's picture

It could never happen here. :) 

Rioting in the streets people marching on the banks, no impossible! Our President would get on TV and tell everyone we are all in this together.

Just happy I am living in North County San Diego and not working at One Liberty Plaza anymore. 

Thu, 10/13/2011 - 11:10 | 1769534 Abiotic Oil
Abiotic Oil's picture

You do realize that when the Crunch comes that San Diego County (SoCal in general) will be the biggest foodless, gasless, parking lot in the world?  The freeways will be blocked with gasless vehicles and escape will be only possible on foot or bike.

Kalifornia is broke and all it takes is for those entitlement checks to stop rolling in and...  crunch, the stores will be looted within days.

Thu, 10/13/2011 - 11:48 | 1769778 DosZap
DosZap's picture

Abiotic Oil

the stores will be looted within days.

 

How about HOURS.

Thu, 10/13/2011 - 12:44 | 1770003 onearmedlove
onearmedlove's picture

California WILL BE SOLD TO CHINA FOR THEIR T-BILLS. (I smell a boom for Vegas).

Thu, 10/13/2011 - 10:19 | 1769309 New_Meat
Thu, 10/13/2011 - 10:49 | 1769468 s2man
Thu, 10/13/2011 - 12:46 | 1770012 Two Towers AU AG
Two Towers AU AG's picture

New_Meat This is a very nice book.. I own a copy myself and had also mentioned in some of my comments on ZH.. not sure if anyone had paid attention then.. hope they do so now..

Thu, 10/13/2011 - 15:46 | 1770810 AustriAnnie
AustriAnnie's picture

"not sure if anyone had paid attention then"

There are always some who pay attention and are protected.  But, in general, people will not pay attention.

From tulips to Weimar to now, nothing has changed.  This time is not different.  This time, as always, greed and fear back the decisions of politicians and of the masses.

"In reading the history of nations, we find that, like individuals, they have their whims and their peculiarities; their seasons of excitement and recklessness, when they care not what they do. We find that whole communities suddenly fix their minds upon one object, and go mad in its pursuit; that millions of people become simultaneously impressed with one delusion, and run after it, till their attention is caught by some new folly more captivating than the first. We see one nation suddenly seized, from its highest to its lowest members, with a fierce desire of military glory; another as suddenly becoming crazed upon a religious scruple, and neither of them recovering its senses until it has shed rivers of blood and sowed a harvest of groans and tears, to be reaped by its posterity..." - charles mackay

Thu, 10/13/2011 - 13:23 | 1770123 BigJim
BigJim's picture

Free epub download here:  http://www.epubbud.com/download.php?g=JFXLC46C

On my reading list...

Thu, 10/13/2011 - 10:19 | 1769312 DeadFred
DeadFred's picture

Sounds like a great way to get a Hilter.

Thu, 10/13/2011 - 10:27 | 1769361 Remedial
Remedial's picture

That's exactly what I said...

-Charlie Daniels

Thu, 10/13/2011 - 10:27 | 1769363 pvzh
pvzh's picture

That is the plan. "Never let a crisis go to waste."

Thu, 10/13/2011 - 10:40 | 1769431 darteaus
darteaus's picture

Who needs Hitler when you've got an Obamunist.

Thu, 02/23/2012 - 19:21 | 2191072 engineertheeconomy
engineertheeconomy's picture

Obumunist. there i fixed it

Thu, 10/13/2011 - 10:20 | 1769319 Randall Cabot
Randall Cabot's picture

"The German General Staff thought the war would be short and sweet and that they could finance the costs with the post war reparations that they, as victors, would exact."

I never heard that one before. Link?

Thu, 10/13/2011 - 10:26 | 1769352 pvzh
pvzh's picture

Because it was the only way to win the war (Schlieffen Plan: http://en.wikipedia.org/wiki/Schlieffen_Plan). There were no otherway to fight France+Britain in the West and Russia in the East.

Thu, 10/13/2011 - 10:38 | 1769423 Randall Cabot
Randall Cabot's picture

"The German General Staff thought the war would be short and sweet..."

It was a hope, not a belief. The writer of that line is full of baloney.

Thu, 10/13/2011 - 10:58 | 1769505 john39
john39's picture

the Germans probably would have won, until the international bankers lured the U.S. into the war.  remember the Balfour declaration, there was a quid pro quo here.

Thu, 10/13/2011 - 12:29 | 1769944 dhengineer
dhengineer's picture

Germany didn't even want to be involved in the war.  It was the Austria-Hungarian dual monarchy that caused the whole mess.  They had a hard-on for a war with Serbia since 1907 and goaded Serbia to just start something.  The assassination of Arch-Duke Ferdinand wasn't that big a deal, considering that he was sort of a family outcast.  When they sent his body back to Vienna, there was no state funeral, just a quick burial.  But the incident was used as an excuse to march into Seriavo to destroy the Serbs once and for all. 

The whole continent of Europe was linked by a series of defence treaties.  When Austria-Hungary declared war on Serbia, Russia was brought in to protect Serbia.  Then Germany was brought in to ally with Austria.  Then France was brought in to ally with Russia.  And then England was brought in on on the side of France.  Turkey and Bulgaria were dragged in with Austria, and Italy, which could have gone either way (no surprise) finally sided with France.  Germany really didn't have any dog in this fight, but were suckered in and were basically left holding the bag when Austria's armies were shown to be less than adequate for the job. 

The United States had no loyalty either way.  They could just as easily gone in on the side of Germany, but the Lusitania sinking and various other false flag operations finally convinced the US to aide France and England. 

It's only speculation, but can you imagine the alternative Twentieth Century history if Germany had won?  There wouldn't have been a Hitler, nor would there have been the Communist division of Europe after WWII.  Makes for a great discussion to game out the alternatives.

 

Fri, 10/14/2011 - 10:20 | 1773385 Socratic Dog
Socratic Dog's picture

"Germany didn't even want to be involved in the war"

I don't claim expertise, but I recently read Massies's book on the runup to the Great War ("Dreadnought", an absolutely fascinating read, IMO, I learnt a lot about business and political practices from it, as well as the history).  Massie puts the blame squarely on Germany, they'd been building up to it for 60 years.  Seemed like  a reasonable argument to me.

Thu, 10/13/2011 - 11:19 | 1769608 MachoMan
MachoMan's picture

They made a calculated gamble...  and, further, I'm not sure how their intentions in committing the acts would have changed anything, given they still pursued the action...

Thu, 10/13/2011 - 10:47 | 1769457 blueRidgeBoy
blueRidgeBoy's picture

Making the loser pay was common practice in those days - see the reparations imposed on France after Franco-Prussian War.

Thu, 10/13/2011 - 19:43 | 1771753 Sunshine n Lollipops
Sunshine n Lollipops's picture

"The German General Staff thought the war would be short and sweet and that they could finance the costs with the post war reparations that they, as victors, would exact."

Hmm. Rumsfeld's horseshit Iraq prognostications come to mind.

Thu, 10/13/2011 - 10:25 | 1769322 falak pema
falak pema's picture

 

...It is also why all the German proposals have each country taking care of its own banks. (It gives them more control.) The French plans tend to socialize the bailout. There’s more disagreement in these plans than the headlines would indicate....

The heart of the matter. Merkel feels that to save Germany she must save Greece and the contagion effect. But she doesn't want to write a blank check to achieve this, which obviously a financially hocked and underperforming France does. The whole trick now is to see within the scope of 'good German governance' if the piece meal EFSF construct is possible and acceptable to markets, having triggered a bail out of Greece with 60% haircuts for private banks whose performance will only be judged after the effect of write-offs. If the cookie falls badly for some countries that's too bad, if the result is systemic domino collapse, well so be it. Germany will play this cautiously but will not go all in for a 2.5 T EFSF leveraging, as that is suicidal. That will put pressure on Tim/FED as they rely on EU avoiding systemic bank failure to avoid contagion and WS meltdown. Will the creditor countries like Oil plutocracies and China join the EU support structure fire-wall. I don't think so, if Merkel is ready to pull plug at slightest signs of domino collapse. Sounds ominous, smells very bad fishy smells...Well, we'll find out soon when Merkozy expose final tattered revision of EFSF contours for bail-out and when Greek default sends first REAL shock wave through banking sector.

The final Euro countdown is now on.

 

Thu, 10/13/2011 - 10:29 | 1769372 youngman
youngman's picture

I also think the USA will be deeply involved thru the back door....we will be bailing them out big time...we will supply the big money

Thu, 10/13/2011 - 10:52 | 1769418 falak pema
falak pema's picture

If the ZH mantra that "more bad debt to save the mountains of existing bad debt doesn't work" is correct...then we are heading for the wall world-wide.

 

Roubini doesn't think so even in this 11th hour.

 

read  his proposal : (business insider)

The Way Forward

Moving From the Post-Bubble, Post-Bust Economy to Renewed Growth and Competitiveness

 

But assuming that the ZH thesis is correct, then Merkozy today are playing the roles of Chamberlain and Daladier. This is their 'Munich' moment faced with financial totalitarianism...

 

food for thought!

 

Does Merkel have an "after plan" as some think...Putin and uber-germany in a ruined west...that is deep reasoning. 

Thu, 10/13/2011 - 11:11 | 1769539 DOT
DOT's picture

"Munich moment", nicely put.

Thu, 10/13/2011 - 11:03 | 1769511 Problem Is
Problem Is's picture

+1... "I also think the USA will be deeply involved thru the back door...."

The Bernank is always hanging out around the back door...

Thu, 10/13/2011 - 11:07 | 1769522 DosZap
DosZap's picture

youngman

WE already have, and are.

Why would just the Europeans pay the PIIGS debts,nad not get us involved?.

Since the Banking system is like metastic cancer, it's pandemic.

Slap one in NYC, and one in Europe say's OWWWW!!!

Thu, 10/13/2011 - 15:58 | 1770874 AustriAnnie
AustriAnnie's picture

"Slap one in NYC, and one in Europe say's OWWWW!!!"

Damn that butterfly effect, actions-have-consequences-which-ripple-across-the-world thing!

What ever happened to "beware of entangling alliances" ?

Someone above on this thread mentioned the defense treaties that brought everyone to World War.  We have replaced that system with financial entanglements, and I fear will lead to the same result.

Tue, 10/18/2011 - 18:02 | 1787071 DrunkenMonkey
DrunkenMonkey's picture

Or as we say over here, "When the US sneezes, the rest of the world catches a cold".

Thu, 10/13/2011 - 10:47 | 1769462 Going Loco
Going Loco's picture

We usually assume our leaders have the brains of retarded rats. In the case of Merkel I think the woman gets it. And I think she is playing a mean hand of poker with the rest of the world. Of course you could say, "What does he know?" and the answer is nothing, but that's my impression.

What worries me about Merkel is her East Germany formative mindset and her close relations with Putin. Now there's a man I don't trust.

Thu, 02/23/2012 - 19:28 | 2191092 engineertheeconomy
engineertheeconomy's picture

And u trust obummer and bernanke? wtf?

Thu, 10/13/2011 - 11:23 | 1769606 Ghordius
Ghordius's picture

falak pema: "..It is also why all the German proposals have each country taking care of its own banks..."

because European Banks are still much more a national/regional affair as for example US banks - particularly the small and medium ones

of course, in Germany Deutsche is an extreme transnational universal exception and UniCredit is a perfect example why banks should be kept regional

"The final Euro countdown is now on." as usual, it's all Euro-this, Euro-that, eh? Do you mean the currency?

the big European Banks are zombies waiting to go down, the sovereign debt issue is another matter completely, but the ECB is a different beast - this "keep the USD high by giving bashing propaganda against the EUR" is starting to wear thin

We have all seen hundreds of "Euro-lalala" postings in ZH BECAUSE the ECB has not gone down the road of the FED and the BoE - have a look at the RESERVES of the bloody CBs and tell me which one looks like it can fend off super-inflation (which is part III of the currency wars, sub-titled "the other direction")

As you rightly write "we'll find out soon when Merkozy expose final tattered revision of EFSF contours for bail-out and when Greek default sends first REAL shock wave through banking sector"

Greece will default - the big banks will be hopefully broken up - and the stage will be set for Part III

Thu, 10/13/2011 - 10:22 | 1769326 prains
prains's picture

God,Budda,Mohamed,Confuscious, help us all......

Thu, 10/13/2011 - 10:35 | 1769407 GeneMarchbanks
GeneMarchbanks's picture

'no puedo' -Jesus

Thu, 10/13/2011 - 14:22 | 1770407 Shirley Wilfahrt
Shirley Wilfahrt's picture

Eli Sunday: Do you think God is going to come down here and save you for being stupid? He doesn't save stupid people, Abel. 

Thu, 10/13/2011 - 18:06 | 1771412 StychoKiller
StychoKiller's picture

"God looks after drunkards and fools -- (S)He pretty much has to."

Thu, 10/13/2011 - 10:23 | 1769328 Everybodys All ...
Everybodys All American's picture

The more things change the more things stay the same.

Thu, 10/13/2011 - 10:26 | 1769334 Seasmoke
Seasmoke's picture

i find it interesting that the rioting didnt start at $700 a loaf of bread, but 10 months later when it hit $670 million a loaf......guess people kept hoping the future things would get better......

Thu, 10/13/2011 - 13:32 | 1770149 BigJim
BigJim's picture

I guess they could still afford $700 bread when the average wage was $500 an hour.

Thu, 10/13/2011 - 10:25 | 1769341 youngman
youngman's picture

What was interesting in this history lesson was how it was stopped.....they just printed another currency..and said it was good....and lo and behold it was accepted and stopped....quite amazing really....what is the big difference now is that the US dollar is worldwide and will be accelerated as people dispose of their dollars all over the world and the only buyer will be the Fed....it could be faster and much more destructive in a shorter time...

Thu, 10/13/2011 - 11:14 | 1769564 maximin thrax
maximin thrax's picture

The World has been dumping dollars on us to the tune of $1.5 Trillion in Treasury purchases annually. That money once repatriated barely gets us a positive GDP. How do we get to Thousand dollar loaves of bread from here, much less Billion dollar loaves?

Thu, 10/13/2011 - 11:17 | 1769593 tarsubil
tarsubil's picture

If the world stops taking FRNs, how does the MIC buy gas? The fun has already started.

Thu, 10/13/2011 - 10:25 | 1769343 vegas
vegas's picture

Art Cashin - a true treasure in a sea of shit

Thu, 10/13/2011 - 10:37 | 1769415 Pladizow
Pladizow's picture

Are you calling Mr. Cashin a salty piece of corn?

Thu, 10/13/2011 - 10:55 | 1769493 vegas
vegas's picture

You understood my metaphor perfectly - you win a cookie.

Thu, 10/13/2011 - 12:08 | 1769862 americanspirit
americanspirit's picture

The Karankawa Indians on the Texas Coast would sort through their own shit, and any other shit they found, for undigested grains, seeds, etc. It was known as the 'Second Harvest'.

Oh - they also ate quite a few shipwrecked Spanish sailors. Yum.

Thu, 10/13/2011 - 13:36 | 1770162 BigJim
BigJim's picture

They were ahead of the curve, those chaps. If only they'd thought to do it with coffee:

http://most-expensive.net/coffee-in-world

Thu, 10/13/2011 - 10:25 | 1769346 web bot
web bot's picture

Just change the dates and the countries... it's about to replay all over.  The people at the top know that it's soon moving to the end-game. They know it... and can't do nothing about it, despite their smiles and assurances.

Art Cashin is a one of a kind man. They don't make them like him anymore.

Thu, 10/13/2011 - 10:27 | 1769358 Kokulakai
Kokulakai's picture

Drink Fast; happy hour draws to a close.

Thu, 10/13/2011 - 10:29 | 1769373 amanfromMars
amanfromMars's picture

The German General Staff thought the war would be short and sweet and that they could finance the costs with the post war reparations that they, as victors, would exact. The war was long. The flower of their manhood was killed or injured. They lost and, thus, it was they who had to pay reparations rather than receive them.

And what of the post war reparations for the lost wars of Vietnam, Iraq and Afghanistan. Has Uncle Sam started to pay what must be an horrendously crippling sum now in these crazy times? Is that an inconvenient truth?

Thu, 10/13/2011 - 13:43 | 1770192 viahj
viahj's picture

you're not quite there...

In Vietnam, Iraq and Afghanistan (two of which are ongoing) the US may have lost/will lose but the US was not conquered.  Only a conquered nation will be forced to pay reparations, unless you count "nation building" which is a lesson the US learned as a cause of WWII and would prevent further world wars. 

Thu, 10/13/2011 - 10:29 | 1769376 kaa1016
kaa1016's picture

There's a lesson in all of this for everyone. It's just a matter of time before one country steps up says enough of this bullshit, I'm taking care of my self, fuck everyone else and that nationalistic sentiment spreads, new alliances are made and the fuse is lit to another major conflict. That die has been cast boys and girls. Get ready for the great reset. There will be new bogeymen popping up imminently. You saw that alleged plot on Saudi Arabia...

Thu, 10/13/2011 - 10:30 | 1769379 New American Re...
New American Revolution's picture

Did my dissertation on Art's faulty and incomplete recollection of the events surrounding the hyper inflation of the Weimar Republic just get censored?   I wrote a clear piece on what actually occurred, hit the send button, and there is nothing.   Never happened before.   I'll not write it again, but suffice to say, Art's recollection is more than a bit fuzzy and convenient,... not to mention misleading and wrong.   I'lll leave it at that, and hope that this note get's through.

Thu, 10/13/2011 - 10:45 | 1769450 Tao 4 the Show
Tao 4 the Show's picture

Doubt it. Probably just computer glitch. Wouldn't surprise me if the inventor of computer backups was a guy who had just lost his dissertation a day before the due date.

Thu, 10/13/2011 - 11:36 | 1769703 New American Re...
New American Revolution's picture

Your probably right

Thu, 10/13/2011 - 12:03 | 1769837 Silver Dreamer
Silver Dreamer's picture

Never trust the Internets.  Select All and Copy before clicking!

Thu, 10/13/2011 - 11:08 | 1769528 s2man
s2man's picture

agree on the actual events.  see Dying of Money link, above.

Thu, 10/13/2011 - 11:41 | 1769737 New American Re...
New American Revolution's picture

I'll read it, because I am always open to new information, but I would suggest you read Murray Rothbard's 'History of Money and Banking in the United States", which covers Europe out of necessity, following WWI, and for that matter, touches on the world from the Span Am war forward.   Much more complete and indepth than your going to find anywhere.   Art is misinformed, and makes the events surrounding the Weimar Republic's hyper-inflation disappear to be replaced with a rather simplistic, and incorrect account of what really occurred.   Facts are facts, and Art missed them this time around.

Thu, 10/13/2011 - 10:33 | 1769383 Fíréan
Fíréan's picture

Is this Art Cashin the CNBC commentator  & Director of Floor Operations for UBS Financial Services I'm readin here ?

Thu, 10/13/2011 - 10:35 | 1769403 youngman
youngman's picture

Yes it is...burp...the happy hour man

Thu, 10/13/2011 - 10:33 | 1769394 youngman
youngman's picture

"And what of the post war reparations for the lost wars of Vietnam, Iraq and Afghanistan. Has Uncle Sam started to pay what must be an horrendously crippling sum now in these crazy times? Is that an inconvenient truth?"

 

Its called the Democratic party and they are very expensive indeed..they have bankrupted the country..

Thu, 10/13/2011 - 10:34 | 1769399 Wolferl
Wolferl's picture

As usual Cashin just sees the monetary side of the 1922/23 hyperinflation in Germany, as usual. This is wrong. The reason was not moneyprinting by the Reichbank. The reson was the occopation of the Rheinland by France and Britain and, as a result a dramatic reduction of the output of the German industry. And that´s the main difference to the situation today. Today you have an almost unlimited supply with every kind of goods on a global scale. It´s stupid to repeat this old myths again and again. 

Thu, 10/13/2011 - 10:38 | 1769419 Withdrawn Sanction
Withdrawn Sanction's picture

That explanation does not even pass the giggle test.  Even if the occupation of the Ruhr halved German output, it cannot explain multiple orders of magnitude increases in price levels.  Only excessive emission of money can explain the hyperinflation.  Are you the ghost of Havenstein?  Your rationalization sounds eerily similar to his...

Thu, 10/13/2011 - 11:03 | 1769512 Wolferl
Wolferl's picture

Go study the events in Germany in the 1920ies before you think you can make smart comments. The German Government started the printing press to pay the workers and the civil servants who went on strike or lost their jobs because of the French/Anglo occupation of the Rheinland, the main industrial center in Germany. And because of the crisis many Anglo-american companies removed even more capital from Germany. This resulted in even more inflation because the Reichsbank had to print even more money to give credit to German banks and companies. At a certain point nobody trusted anyone, so prices went up like never seen before. The reason for all this was the occupation in the first place. See, sometimes it´s not enough to think like an accountant.  

Thu, 10/13/2011 - 11:35 | 1769677 Ghordius
Ghordius's picture

exactly

a lot of the fresh money was used to keep up production, wages, credit and local government of the bloody occupied Rhineland - no taxes back!

BUT please consider that at the same time Austria and Hungary were hyperinflating, too - the events were interconnected

The point is: you start to print because everybody shouts very loudly "there is not enough money in the economy!" That's the simplified reason why you always FIRST have a deflation and THEN inflation/super-/hyper-inflation

Thu, 10/13/2011 - 11:47 | 1769766 Withdrawn Sanction
Withdrawn Sanction's picture

I have studied the issue, but thanks for your concern. 

The only way prices can go up as rapidly as they did is for buyers to have more money in their possession with which to bid.  The Weimar govt indeed increased printing in response to the French/Belgian occupation (hardly the first or last time the French would slit their own throats), but that was not the only or even first motivating force.  And indeed, the occupation did not occur until Jan 1923.  Although the most spectacular descent of the mark occurred later in 1923, the bulk of the damage had already been done between 1919 and 1922. 

You might try Bresciani-Turroni's (1937) work, or Fergusson's, or Parssons later works. 

Thu, 10/13/2011 - 12:19 | 1769861 Ghordius
Ghordius's picture

I'm not sure I follow your logic. If the government gives 100'000 Reichsmark per year per civil servant instead of 12'000 as usual last year then of course "buyers have more money in their possession" - ALL increases in gov spending give eventually people more money to spend...

You could twist the dates to argue that the occupation made a "super-inflation" go hyper

Occupation of the Ruhr: 11 January 23

German Super-Inflation phase: 1918-1922

German Hyper-Inflation phase: 1923

Parssons? Thx, never heard before

What I mean is that the Occupation could have been the straw that broke the camel's bank - I'm not that sure you really can prove it.

First government spends, then CB eases/prints, then you manage it (well or badly).

Thu, 10/13/2011 - 13:52 | 1770181 Wolferl
Wolferl's picture

I agree, there was quite some inflation in Germany between 1914 and 1922, because they had to finance the war in the first place by printing war bonds, this is nothing but money printing. As a result there was very high inflation in the years after WWI, but not what you call Hyperinflation Weimar Style. But actually this isn´t my point. My point is that hyperinflationary doomssayers always just look at the monetary side of inflation and forget to see whats going on in the real world of production. The problems in Germany were caused by a crisis of the production side of the economy and of course by politics. Today this is different, we have a monetary crisis and we are in a strong deflationary situation worldwide. So you better not compare the situation in Germany in the 1920ies to todays situation.   

Thu, 10/13/2011 - 12:37 | 1769981 pvzh
pvzh's picture

I do not think this article is about the "blame game" because the game can be continued further and further past "occupation". Besides, you admitted that "The German Government started the printing press to pay the workers and the civil servants" and "the Reichsbank had to print even more money to give credit to German banks and companies". For hyperinflation and its consequences, it does not matter why you print and whether the causes for printing are just or sinister. The only thing that matter is that you print and print "excessively" to undermine confidence in the currency (as you noted "at a certain point nobody trusted anyone, so prices went up like never seen before").

Thu, 10/13/2011 - 13:50 | 1770228 Wolferl
Wolferl's picture

1923. Tempi passati. I do not want to put blame on someone. But it´s a fact that the occupation of the Rheinland/Ruhrgebiet caused a massiv crash of the German economy. And, let me say it this way, was one of the major reasons of the German Hyperinflation of 1923.

Thu, 10/13/2011 - 11:43 | 1769746 Moe Howard
Moe Howard's picture

Reparations were the cause, or a big part of it.

Germany just finished it's WWII reparations not too long ago.

Thu, 10/13/2011 - 11:53 | 1769796 DosZap
DosZap's picture

Moe Howard

Germany just finished it's WWII reparations not too long ago.

Funny, Reparations paid back...................................

Loans to Allies....................Forgiven FREEBIES.

Wonder what 10 billion ( Russia I believe forgiven alone ) in 1945 would be today,if you just added average interest over the years since.

 

Thu, 10/13/2011 - 11:12 | 1769554 Caviar Emptor
Caviar Emptor's picture

hehe. Another inconvenient truth is what Art Cashin alludes to: Reichbank money printing was politically motivated. No accident. He mentions the threat of communism which was very very real in Germany after WW1 and the early 1920s. In fact Bavaria was officially a communist region after a revolution by former soldiers and locals took over. It happened elsewhere as well. Conditions for average workers were abominable. THere's historical evidence that as the Nazi movement gathered steam and recruited deeply into aristocratic society and was backed by rich industrialists, those in power conspired to tank the Weimar Republic by creating an economic collapse, hence allowing a Nazi takeover to make sure that the communists would not seize their wealth

Thu, 10/13/2011 - 11:44 | 1769754 New American Re...
New American Revolution's picture

Right On Wolferl.   You got it dude.   Art missed this one royally, and anyone defending Art's contention is just plain incorrect, and incorrect BIG TIME.

Thu, 10/13/2011 - 10:35 | 1769405 Withdrawn Sanction
Withdrawn Sanction's picture

From Jens O Parssons "The Dying of Money" (out of print, I believe):

"Though it was always possible to dismount the runaway inflation horse, it was never possible to dismount painlessly.  And the more inflation progressed, the more pain there would be.  Politicians prefer, like all of us, to avoid pain whenever possible.  But Reality reasserts itself through the destruction of values brought by the hyperinflation." 

Thu, 10/13/2011 - 10:35 | 1769406 maneco
maneco's picture

Well we can always count on Bernanke raising rates! Didn't he says in that interview with 60Minutes that he could do it in fifteen minutes?

Thu, 10/13/2011 - 10:44 | 1769447 Quinvarius
Quinvarius's picture

You know, that has never actually worked to stop hyper inflation, anywhere.  It is a nice central banker pipe dream.  Volcker claims to have done it.  But strangely, inflation stopped when gold rose high enough to back the dollar + credit 100%.  It didn't stop when Volcker started raising rates.

Thu, 10/13/2011 - 12:07 | 1769855 maneco
maneco's picture

Have you ever heard of sarcasm?

Thu, 10/13/2011 - 10:49 | 1769469 wisefool
wisefool's picture

Aslo didn't Timmy say there is 0% chance of a greek default?

Thu, 10/13/2011 - 11:10 | 1769529 Problem Is
Problem Is's picture

Timmah of "No risk of US Government downgrade" fame??

Timmah of "No plan B" fame??

Timmah of "Stress tests prove the US TBTF banking sector is well capitalized" fame??

Timmah of "Back door bailout to Goldman via AIG-Tax payer money at 100%" fame??

Timmah of "Turbo-Tax" fame??

THAT Timmah????

Thu, 10/13/2011 - 10:36 | 1769411 alien-IQ
alien-IQ's picture

great article. the simplicity of it is what makes it so good.

I'm sending this around to some friends who just can't seem to get their head around what's wrong with non stop money printing.

maybe now they'll get it...or maybe they'll just double up on their happy hour intake. who knows...

Thu, 10/13/2011 - 10:39 | 1769427 PianoRacer
PianoRacer's picture

I have a question: what was the specific mechanism used by the German government to get their currency into the economy?  That's never been clearly explained to me... was it just dropped off on street corners?  Spent into the economy by the government?  Lent out as "fractional reserves" (I'm pretty sure that system didn't exist back then...)?

It seems to me that even though we've been doing all this money printing, it hasn't "hit the economy" yet.  Most of it is being held at the Federal Reserve earning (illegally high?) interest.  Inflation has been bad, yes, but nothing like Germany, even when you look at the price of gold (at least not yet).

So what's it gonna take?  What did it take for Weimar?  Help me out here ZH'ers!

I also wonder whether people hoarded gold/silver/food?  How did that work out for them?  Why did they even accept the worthless currency as payment at all?  Were there legal tender laws forcing them to?  Didn't the experience of France (John Law, and post-revolution) tip off at least a few historically-minded Germans, as we are using their example to tip us off today?  Those are the stories I want to hear, dammit!

Thu, 10/13/2011 - 10:51 | 1769471 Quinvarius
Quinvarius's picture

I can't speak for the whole enchalada.  But a lot of it was printed to pay war debts to countries who realized it was now worthless.  A lot of it came from giving free money to support industry after much of it was taken by by the allies when they realized they were getting printed worthless money as war debt payments.  While wages also rose fast, they dropped in real purchasing power.

Thu, 10/13/2011 - 11:07 | 1769521 Fíréan
Fíréan's picture

Germany was not to pay the war debts, reparations, in marks but in gold or foreign currency , so  was necessary to purchase a huge amount of foreign currency or gold, so they printed marks with which to purchase.

Thu, 10/13/2011 - 11:24 | 1769644 chistletoe
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60% of american voters are net receiving money from the federal govt.

 

only 40% are net taxpayers.

 

You don't see that that has been having an impact??????????

Thu, 10/13/2011 - 12:23 | 1769756 Ghordius
Ghordius's picture

pfff, you sure do have a lot of questions... 8-)

1. money transports, physical cash. robbers had a bonanza, until they stopped bothering - Reichsbank buys straight bonds from the Finance Minister, the Government spends (aka "monetization")

2. they had fractional reserves - before 1914 based on gold-backed (marks), then fiat. Central Bank = organized fractional reserve system

"Money printing" is a political bitch. You print NOW, and it feels good. The effect? Ha! From 6 to 36 months, all is possible. That's why Chairman Bernanke is so keen on Operation Twist - he wants to spread the pain in the future (good technique, by the way, this I have to admit)

 

Thu, 10/13/2011 - 11:53 | 1769798 New American Re...
New American Revolution's picture

It was primarily issued to those workers displaced by the European Allies occupation of the Ruhr Valley, in order to collect the very unjust payments of the Versailles Treaty.   The numbers were quite large, and while there were other avenues, such as reparations to businesses, too; this was the primary conduit into the money supply.   It was done on purpose to not only help those displaced, but to create a situation that would elicit sympathy outside of Northern Europe, as in the United States.   And it worked.  Of course they destroyed themselves and set the table for the facist of Czarist Russia to make headway in Germany and bring Hitler to power, and that provides a clear insight into the psyche of the German people of that age.  The question being, has it changed?

As far as its application to America, which I believe is where your question was aimed, it would be in the issuing of money to those people living under the increasing largeness of the Federal Government in one program or another.   The rope we're on promises greater unemployment, and just what do you think the action of Congress and the Administration is going to be?   In that respect, it will be the likely conduit to inflate the dollar to dangerous levels.   The mechanism being bonds sold by the FED to the PD's, who turn them back to the FED to be repurchased within hours, not days.   That is monetization of debt.   It would likely be a duel working mechanizm of government.

Thu, 10/13/2011 - 10:45 | 1769434 mayhem_korner
mayhem_korner's picture

Germany saw a guy named Hitler begin a ten year effort to come to power by trading on the chaos and street rioting. And then came World War II.

 

This may be the most important aspect of the history lesson.  We are focused on what appears to be an unavoidable and impending collapse which bears much resemblance to the mistakes leading up to Weimar's hyperinflation.  But whatever the flavor/shape of the collapse, there is the question of who or what set of ideals will step into the post-trauma void.  The deeper the loss of hope, the more potential for something truly vile to ascend...

Thu, 10/13/2011 - 11:33 | 1769685 redcorona
redcorona's picture

What is more important to consider is that what is good for the sheep isnt good for the wolves.  Hitler was the savior of the German sheep.  Yet today it is the wolves who make our movies, textbooks and lend us Dollars at interest.

Thu, 10/13/2011 - 10:41 | 1769436 Todd Horlbeck
Todd Horlbeck's picture

One thing, the most relvant to us is that this piece failed to mention the performance of thr German stock market in 1922.  The German Stock market was at 743 Jan, 31 1922 and rose to 8981 by December 1922.  I do wonder how the bears on the stock market felt.  The stock market LOVES the printing press.

 


Thu, 10/13/2011 - 10:47 | 1769460 Withdrawn Sanction
Withdrawn Sanction's picture

Now, deflate those nominal values by the price level.  Also, why stop w/Dec 1922 when the real hell broke loose in 1923?  And then, even if you still accept the notion that the stock market is a relative preserver of wealth, can you top tick such a market b/c the price moves were violent (a lot like these days) creating and then erasing gains on an almost daily basis.  Good luck w/that.

Thu, 10/13/2011 - 11:28 | 1769663 Todd Horlbeck
Todd Horlbeck's picture

True, the stock market actually went up to 26,000 in 1923.  I actually didn't say it preserved wealth, however, what's clear - Don't short the printing press.  

 

Holding shorts when the stock market goes from 800 to 26,000 can be quite painful, despite being right about economic catastrophy.

Thu, 10/13/2011 - 10:42 | 1769438 Georgesblog
Georgesblog's picture


     Everything I wrote in “The Real Weapon of Mass Destruction: POVERTY” is taking place, right now. The borrowed debt to keep the system running, just isn’t available. Populations are being lined up to be fleeced, harvested by their own governments

http://georgesblogforum.wordpress.com/2011/10/13/the-real-weapon-of-mass-destruction-poverty-update-10132011/

Thu, 10/13/2011 - 10:43 | 1769440 Withdrawn Sanction
Withdrawn Sanction's picture

Since we're close to Halloween, here's a scary quotation about the Weimar hyperinflation:

"...once the printing presses stopped--and that is a prerequisite for the stability of the mark--the swindle would at once be brought to light...the state itself has become the biggest swindler and crook."

Who said it?

 

Yes, that's right, Hitler.  He's right of course...madly insane otherwise, but right in this instance.  The state had gone from protector of rights to usurper.   

It is no coincidence that the Beer Hall Putsch occurred in Nov 1923 at the height of the Weimar hyperinflation. 

Thu, 10/13/2011 - 10:50 | 1769476 Randall Cabot
Randall Cabot's picture

Just a historical reminder: The Bolsheviks already murdered about 20 million of their own countrymen before Hitler came to power in 1933.

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