Charles Moore: A timely recounting of the Weimar disaster that aided Hitler's rise to power
[Charles Moore is a columnist at The Daily Telegraph.]
This book, first published in 1975, has just been republished as a warning. It was spotted by Warren Buffett and printed on the internet. Now an enterprising publisher has rushed it out. Concerned citizens have sent copies to central bankers to remind them of what was once, and could be again.
In fact, though, its report of the German hyperinflation is so extreme that it has the perverse effect of making the modern reader feel almost cosy. If the cost-of-living index in Germany stood at one in 1914, it was 15 million in September 1923, 3,657 million in October and, on November 12 1923, 218,000 million. In the 10 days to November 13, government expenditure exceeded revenue by 1,000 times. If you found a case full of banknotes, the sensible thing was to steal the case and leave the money.
Farmers withheld food in order to get higher prices for it, or refused to be paid in what was known as "Jew-confetti". Desperate townspeople went marauding through villages. The value of pensions and savings was utterly wiped out. Some people were murdered; others starved. Even Gordon Brown never got close to this achievement. The Western world today has not suffered total defeat in total war, is not facing strong revolutionary movements from Right and Left, and is not paying crippling reparations (though government debt almost amounts to the same thing). Things aren't that bad, we comfort ourselves.
But the Weimar story does contain plenty of relevant lessons. One is the power of the wrong economic doctrine. In Germany at that time, economic experts simply had no idea of the quantity theory of money. Havenstein, the president of the Reichsbank, believed that the incredible inflation of the mark had nothing to do with the fact that he was printing ever more notes. In fact, he turned his job into that of a demented printer, churning out notes which, as Adam Fergusson well puts it, were "far too many yet far too few". His disastrous sway is a cautionary tale for those of us who tend to believe that the independence of the central bank from government is invariably a good thing. Some claim that Alan Greenspan was the modern Havenstein, doing everything he could to ignore basic financial truth and keep asset prices rising...
Read entire article at Telegraph (UK)
This book, first published in 1975, has just been republished as a warning. It was spotted by Warren Buffett and printed on the internet. Now an enterprising publisher has rushed it out. Concerned citizens have sent copies to central bankers to remind them of what was once, and could be again.
In fact, though, its report of the German hyperinflation is so extreme that it has the perverse effect of making the modern reader feel almost cosy. If the cost-of-living index in Germany stood at one in 1914, it was 15 million in September 1923, 3,657 million in October and, on November 12 1923, 218,000 million. In the 10 days to November 13, government expenditure exceeded revenue by 1,000 times. If you found a case full of banknotes, the sensible thing was to steal the case and leave the money.
Farmers withheld food in order to get higher prices for it, or refused to be paid in what was known as "Jew-confetti". Desperate townspeople went marauding through villages. The value of pensions and savings was utterly wiped out. Some people were murdered; others starved. Even Gordon Brown never got close to this achievement. The Western world today has not suffered total defeat in total war, is not facing strong revolutionary movements from Right and Left, and is not paying crippling reparations (though government debt almost amounts to the same thing). Things aren't that bad, we comfort ourselves.
But the Weimar story does contain plenty of relevant lessons. One is the power of the wrong economic doctrine. In Germany at that time, economic experts simply had no idea of the quantity theory of money. Havenstein, the president of the Reichsbank, believed that the incredible inflation of the mark had nothing to do with the fact that he was printing ever more notes. In fact, he turned his job into that of a demented printer, churning out notes which, as Adam Fergusson well puts it, were "far too many yet far too few". His disastrous sway is a cautionary tale for those of us who tend to believe that the independence of the central bank from government is invariably a good thing. Some claim that Alan Greenspan was the modern Havenstein, doing everything he could to ignore basic financial truth and keep asset prices rising...