Comments (12)

• Ohhh Henry

  Did the German inflation start in early 1914, that is before WWI started?

  If the inflation started in early 1914 (or before 1914) then it could have been used by the German government to recruit more soldiers and buy more war materiel. Perhaps they had only a year or so in which to exploit this policy, before the sellers could detect the inflation and raise their prices or demand payment in coin or bullion. And if the Germans were doing it, one might suspect that the British, French and Russians were also doing it.

  If my suspicions are correct then I think that you could lay a big part of the blame for WWI on the governments and their central banks.

  There was a BBC documentary about the Third Reich which aired several years ago, which included some opinions that Hitler's economic "miracle" of the mid- to late-1930s was really nothing but an inflationary boom which was created and exploited by the Nazis in order to build a war machine. There was an interesting anecdote: one of the chief Nazi economists (perhaps the head of the Reichsbank) begged Hitler to stop the inflationary policy in 1938, because he could see that a crash was looming. So Hitler dismissed him, and shortly afterwards outlawed Jewry and confiscated their property and most importantly, their bank accounts. I don't think that the Beeb connected the dots, but to me it is clear that the particulars of the Nuremburg laws and their timing had more to do with the German government's pressing need for hard cash, than they had to do with racial ideology.

  I also recall reading years ago that in most cases of pogroms against Jews in medieval Europe, the true cause was that the townsfolk had become deeply indebted to Jewish moneylenders, and hit on the solution of killing and expelling them as a way of cancelling their debt. I wonder - could the conditions preceding a typical medieval (or for that matter modern) pogrom be fairly described as a credit bubble?

  Published: April 18, 2006 11:06 PM

• M E Hoffer

  "If my suspicions are correct then I think that you could lay a big part of the blame for WWI on the governments and their central banks."

  Henry, Who contests this seemingly tautological statement?

  Published: April 19, 2006 6:43 AM

• David C

  I think there are some big differences today. First there is technology deflation, while the industrial revolution had technology deflation too, today's technology deflation has driven a $1000000 hard drive in 1980 to a $100 one today. Once new investment slows and that technology delfation starts to hit the rest of the economy, all hell will break loose. Technology deflation is very very bad for debt holders because it tends to drive down pay and margins - even if industrual activity remains in tact. I don't need to tell people how much debt the US has.

  Unfortunately, knowing our stupid fed, they will probably try to deal with this by printing money. Because of suply and demand, that will drive up prices, but because it's technology deflation it will not drive up pay and profit. All those Americans already maxed out on debt are not only going to find no relief - things will actually get worse as their costs go up several orders of magnitude, but their pay does not go up at all, and their debt does not go down at all. So go figure - pring up money will actually cause credit deflation too.

  But once again, knowing our stupid fed, they will probably try to deal with this by insanely LARGE and QUICK injections of cash. That's nice, but all that will sevre to do is guarantee that by time the huge amount of printed money eventually does make it to peoples paychecks and profit margins - hyper inflation will be beyond controll even if they outlaw debt and shut down every bank in the country (which will probably happen anyhow)

  Add to that the fact that foriegn labor can work for much less than US labor, and it is a nice formula to guarantee starvation and unemployment across the USA. It will be interesting to see what happens when masses of starving people start to realise that they can't turn to their government for freebies. New Orleans was a cake walk, people should be thankfull for the practice run. With information technology making it so that trillions can change hands within minutes, and wal-mart can adjust prices in all stores within 4 hours, the end-game will probably happen nearly as quick. Got Gold?

  Published: April 19, 2006 10:06 AM

• billwald

  >LARGE and QUICK injections of cash.

  Read similar phrases and don't understand them. The Fed controls the bank's interest rate. It doesn't inject cash. But say that the Fed printed tons of cash and trucked it to the Federal Reserve Banks. Then what? This theoretically lowers interest rates and the people borrow more money? Most people are tapped out and have no collateral to borrow on. Best they can do is roll over old loans.

  But if this happens then the foreigners will stop buying govt paper because the interest is to low. Bottom line is that the international value of the dollar is controlled by the international money market and our govt can only mess with the working class - nothing will ever touch the rich class and the poor class is . . . poor.

  Published: April 19, 2006 11:42 AM

• Reactionary

  I think monetary inflation is incredibly destructive. It drives a whole different aesthetic of quantity over quality. Our entire political and economic model is based on endless growth on a finite planet.

  Published: April 19, 2006 12:25 PM

• ted roberts

  You gotta be careful discussing German inflation of the post WWI period. Remember that because of heavy and unjust reparations the Germans had a great incentive to inflate their currency, ie, so they could pay off that burdensome debt with cheap paper. their tradeoff was the balance between negating their debt and ruining their middle class. It was a tough choice - they chose to print billionmark notes and destabilize their society. Keynes understood this trade-off and ranted about the Versailles treaty. Fascinating period in central European period. Led to Hitler of course. ted roberts

  Published: April 19, 2006 5:08 PM

• Ohhh Henry

  ted roberts, the anonymous authors at Wikipedia begs to differ.

  A major historical fallacy is that the reparations were the source of the economic condition in Germany from 1919 to 1939. Germany paid very little of the reparations and the hyper-inflation of the early 1920s was because of the political and economic instability of post-Kaiserreich Germany. In fact, the occupation of the Ruhr by the French because the Germans did not pay the reparations did more damage to the economy than if the Germans had actually paid it. Another fallacy is that these reparations caused the economic condition that saw Hitler's rise to power. Germany was in fact doing remarkably well after its hyper-inflation of 1923, and was once more one of the world's largest economies, until the foreign investment funding the economy was suddenly withdrawn with the Stock Market Crash of 1929. Link
  

  Published: April 19, 2006 6:44 PM

• Dennis Sperduto

  The other major defeated central power of WWI, Austria, was arguably more dismembered and in worse economic and financial condition than Germany. And while Austria had considerable inflation after the war, the country managed to stabilize its currency and avoid hyperinflation because the political authorities eventually followed the advice of Ludwig von Mises. I do not believe Germany possessed an economist even close to the knowledge and competency of Mises. Even if Germany had, whether or not its political authorities would have listened remains an open question.

  Published: April 20, 2006 8:07 AM

• billwald

  "I think monetary inflation is incredibly destructive."

  Monetary inflation is a mental construct of no consequence. Only thing matters is the consumer goods that a worker can purchase with a day's work. 100 years ago a worker had to spend half a day to obtain enough food to stay alive. Now days a person should be able to feed his family on an hour's wage.

  Published: April 20, 2006 11:03 AM

• Artisan

  German Inflation Post WWI
  “In fact, the occupation of the Ruhr by the French because the Germans did not pay the reparations did more damage to the economy than if the Germans had actually paid it.�?

  I don’t understand that sentence… I suppose the author means humiliation. I’m not quite convinced Germans were so well off after WWI though, because WWI had been costly. I know we all have pictures in mind about the roaring twenties in Berlin, still I’m more inclined to believe Ted Roberts here.

  It is most probably true though, that the burden but more so, the political humiliation that the Versailles treaties imposed on Germany in 1918 was able to split the nation over one major question: Was it right to surrender? It seems that the military, led by the old aristocracy and the emperor couldn’t accept the defeat. Parliament and the republicans had pleaded for an early surrender in order to eventually avoid harsh reparation conditions, as they saw the war turned bad for Germany. Unfortunately, the French Daladier, and his allies choose humiliation as a “lesson�? for Germany. Hence, German hardliners started to question the whole surrender, pretending there was an “enemy within�?, which destroyed the moral integrity of the Nation. War could have been won! That enemy was the Republican and very close to him … the Jewish trader! Indeed, I don’t think you can say at this point though, economy or money played an important role in the fact that anti-Semitism started to dramatically develop on this basis. Later of course it did.

  Even today, the most heard excuse for 9/11 is the fact that the towers were full of Jewish finance exploiters, destroying the moral integrity of the hard working classes … One has to be very careful now, since the socialist parties across the world often use similar arguments against the finance sector too… (German socialists 2005 : “ Hedge fund managers = locust feeding on Germany�?)
  

  Published: April 21, 2006 3:39 AM

• Susanna K. Hutcheson

  Interesting I came across this. Actually I found it via my own online magazine. I just happened to write a post in my magazine this morning on this very subject.

  I put some figures together and, while I'm no expert, I found that there is a major sameness to now and just prior to The Great Depression.

  I will probably get ahold of this book. Thank you for the great posts.

  Susanna
  

  Published: April 22, 2006 12:54 PM

• Worried American

  Don’t believe one optimistic word from any public figure about the economy or humanity in general. They are all part of the problem. Its like a game of Monopoly. In America, the richest 1% now hold 1/2 OF ALL UNITED STATES WEALTH. Unlike 'lesser' estimates, this includes all stocks, bonds, cash, and material assets held by America's richest 1%. Even that filthy pig Oprah acknowledged that it was at about 50% in 2006. Naturally, she put her own 'humanitarian' spin on it. Calling attention to her own 'good will'. WHAT A DISGUSTING HYPOCRITE SLOB. THE RICHEST 1% HAVE LITERALLY MADE WORLD PROSPERITY ABSOLUTELY IMPOSSIBLE. Don't fall for all of their 'humanitarian' CRAP. ITS A SHAM. THESE PEOPLE ARE CAUSING THE SAME PROBLEMS THEY PRETEND TO CARE ABOUT. Ask any professor of economics. Money does not grow on trees. The government can't just print up more on a whim. At any given time, there is a relative limit to the wealth within ANY economy of ANY size. So when too much wealth accumulates at the top, the middle class slip further into debt and the lower class further into poverty. A similar rule applies worldwide. The world's richest 1% now own over 40% of ALL WORLD WEALTH. This is EVEN AFTER you account for all of this ‘good will’ ‘humanitarian’ BS from celebrities and executives. ITS A SHAM. As they get richer and richer, less wealth is left circulating beneath them. This is the single greatest underlying cause for the current US recession. The middle class can no longer afford to sustain their share of the economy. Their wealth has been gradually transfered to the richest 1%. One way or another, we suffer because of their incredible greed. We are talking about TRILLIONS of dollars. Transfered FROM US TO THEM. Over a period of about 27 years. Thats Reaganomics for you. The wealth does not 'trickle down' as we were told it would. It just accumulates at the top. Shrinking the middle class and expanding the lower class. Causing a domino effect of socio-economic problems. But the rich will never stop. They will never settle for a reasonable share of ANYTHING. They will do whatever it takes to get even richer. Leaving even less of the pie for the other 99% of us to share. At the same time, they throw back a few tax deductable crumbs and call themselves 'humanitarians'. IT CAN'T WORK THIS WAY. This is going to end just like a game of Monopoly. The current US depression will drag on for years and lead into the worst US depression of all time. The richest 1% will live like royalty while the rest of us fight over jobs, food, and gasoline. Crime, poverty, and suicide will skyrocket. So don’t fall for all of this PR CRAP from Hollywood, Pro Sports, and Wall Street PIGS. ITS A SHAM. Remember: They are filthy rich EVEN AFTER their tax deductable contributions. Greedy pigs. Now, we are headed for the worst economic and cultural crisis of all time. SEND A “THANK YOU” NOTE TO YOUR FAVORITE MILLIONAIRE. ITS THEIR FAULT. I’m not discounting other factors like China, sub-prime, or gas prices. But all of those factors combined still pale in comparison to that HUGE transfer of wealth to the rich. Anyway, those other factors are all related and further aggrivated because of GREED. If it weren’t for the OBSCENE distribution of wealth within our country, there never would have been such a market for sub-prime to begin with. Which by the way, was another trick whipped up by greedy bankers and executives. IT MAKES THEM RICHER. The credit industry has been ENDORSED by people like Oprah, Ellen, Dr Phil, and many other celebrities. IT MAKES THEM RICHER. So don’t fall for their ‘humanitarian’ BS. ITS A SHAM. NOTHING BUT TAX DEDUCTABLE PR CRAP. Bottom line: The richest 1% will soon tank the largest economy in the world. It will be like nothing we’ve ever seen before. and thats just the beginning. Greed will eventually tank every major economy in the world. Causing millions to suffer and die. Oprah, Angelina, Brad, Bono, and Bill are not part of the solution. They are part of the problem. EXTREME WEALTH HAS MADE WORLD PROSPERITY ABSOLUTELY IMPOSSIBLE. WITHOUT WORLD PROSPERITY, THERE WILL NEVER BE WORLD PEACE OR ANYTHING EVEN CLOSE. GREED KILLS. IT WILL BE OUR DOWNFALL. Of course, the rich will throw a fit and call me a madman. Of course, their ignorant fans will do the same. You have to expect that. But I speak the truth. If you don't believe me, then copy this entry and run it by any professor of economics or socio-economics. Then tell a friend. Call the local radio station. Re-post this entry or put it in your own words. Be one of the first to predict the worst economic and cultural crisis of all time and explain its cause. WE ARE IN BIG TROUBLE.

  Published: February 25, 2008 1:41 PM