Weimar Republic Hyperinflation

EagleEye

Here is an interesting article on the Weimar republic.

Weimar Germany, Hyperinflation and the rise of Hitler.

Justacommeman

Very choppy but a decent primer on the subject. Thanks for posting. MJ

trozau

One of my alternate pocket pieces (and a strong favorite at that) is a 1923 500 Million Mark notgeld by Karl Goetz (image from the world wide web)

rpw

Interesting article. I was recently reading an article titled The Death of Paper Money that presented, to me at least, some novel facts about the Weimar inflation and compares it to today. Here's a taste:

People’s willingness to hold money can change suddenly for a "psychological and spontaneous reason" , causing a spike in the velocity of money. It can occur at lightning speed, over a few weeks. The shift invariably catches economists by surprise. They wait too long to drain the excess money.

"Velocity took an almost right-angle turn upward in the summer of 1922," said Mr O Parsson. Reichsbank officials were baffled. They could not fathom why the German people had started to behave differently almost two years after the bank had already boosted the money supply. He contends that public patience snapped abruptly once people lost trust and began to "smell a government rat".

Kip

I've been smelling a Rat for some time and it got stronger just after the elections

HonoluluDude

Another good read on the Weimar Hyperinflation is
"When Money Dies -- The Nightmare of the Weimar Collapse"
by Adam Fergusson. The book is out of print, but one of the best
on the subject.

roadrunner

People’s willingness to hold money can change suddenly for a "psychological and spontaneous reason" , causing a spike in the velocity of money. It can occur at lightning speed, over a few weeks. The shift invariably catches economists by surprise. They wait too long to drain the excess money.

"Velocity took an almost right-angle turn upward in the summer of 1922," said Mr O Parsson. Reichsbank officials were baffled. They could not fathom why the German people had started to behave differently almost two years after the bank had already boosted the money supply. He contends that public patience snapped abruptly once people lost trust and began to "smell a government rat".

This is the scenario that the deflationists don't consider while they keep on looking for non-existant demand induced inflation.

roadrunner

EagleEye

Must be a popular book. I wonder if it is on Googlebooks

Dying of Money: Lessons of the Great German and American Inflations

sbeverly

The dying of money is free here

The dying of money


When money dies was re-released and is available on Amazon U.K.

When money dies

BTW...I have a EINHUNDERT (100) Million Mark note from August of 1923, as well as a FIINFTHUNDERT (500)
Million Mark note from September of 1923 from Wiemar Germany hanging on the wall in my office to remind me
of the ravages of inflation.

EagleEye

My one take on the psychology of paper money is that if people feel it will be accepted in the future at par they will accept it as a convenience. In a stable atmosphere, it makes no difference what is backing it, just that it will again be accepted by the next person (only in a stable atmosphere, though).

When mistrust breeds in the community against the issuing authority, then that trust breaks down and more people are wary of accepting a paper currency. This is the first stage of hyperinflation. A flight to gold or another stable currency is a good course of action. Of course, if you are a fixed wage earner, you are screwed. I don't think we as a nation are anywhere near there. A personal or politically motivated mistrust of the FED is not what I'm talking about. If we defaulted on loans to China, we'd be there.

In Weimar Germany there was a large segment of the population that mistrusted the Government because it sold out to the Allies and they felt they were being unduly punished by the reparations that had to be paid. This mistrust went to work on the faith in the money.

After you see large spikes in the inflation rate people panic and do things that further worsen the trust in the currency. The local butcher refiuses to accept paper, for instance. Soon there is no trust and things fall apart.

As an aside, my grandparents on my mothers side came from Germany in 1925. They had a large can full of aluminum notgeld coins. We used them as poker chips. I later learned some were rare and got $80 a piece for a few of them in the 1970's.

Bear

Somehow, in this time of the crushing of the human spirit and of hope, I am reminded

of a classic poem by Dylan Thomas , which goes in part;

"Though wise men at their end know dark is right
Because their words had forked no lightning they
Do not go gently into that good night...............

.....Rage, rage against the dying of the light.......".

EagleEye

in this time of the crushing of the human spirit and of hope

Sorry, Bear, I view the glass half full.

Bear

But what if one has gots a dribble glass?

EagleEye

If it were Renman's vodka, yes it's half empty.

PerryHall

<< <i>in this time of the crushing of the human spirit and of hope

Sorry, Bear, I view the glass half full. >>



An optimist says a glass is half full.
A pessimist says a glass is half empty.
An engineer says the glass is twice as big as it needs to be.

KUCH

"If we defaulted on loans to China, we'd be there" (inflation)

Some say we owe China 14 Trillion. I think we're there.

InYHWHWeTrust

I'm betting against our elected officials getting religion and stopping the spending spree and balancing budget, come up with some sort of repayment program.
There also will be no outright default or honorable declaration of insolvency/bankruptcy.
The not-so-sneaky way of default, ie stealing, is to inflate the currency into oblivion.
Uncle Sam is tar baby and China (rest of the world?) cannot unstick herself from him without shedding much skin, much pain or loss of vital organs at this point in history.
just my inflated 2 x 1/100.

jmski52

In Weimar Germany there was a large segment of the population that mistrusted the Government because it sold out to the Allies and they felt they were being unduly punished by the reparations that had to be paid. This mistrust went to work on the faith in the money.

In Modern day USA there is a large segment of the population that mistrusts the government because it has sold out to political expediency and feels that they are being unduly punished by the huge debt being generated on behalf of illegal aliens, a burgeoning federal bureaucracy, a huge percentage of non-producers on the public dole, unread 2000 page laws being passed in cynical disregard of public opinion, and the prospect of working longer and harder for less and less. This mistrust will eventually result in system breakdowns, and the currency will be but one of the casualties.

mrearlygold

<< <i>In Weimar Germany there was a large segment of the population that mistrusted the Government because it sold out to the Allies and they felt they were being unduly punished by the reparations that had to be paid. This mistrust went to work on the faith in the money.

In Modern day USA there is a large segment of the population that mistrusts the government because it has sold out to political expediency and feels that they are being unduly punished by the huge debt being generated on behalf of illegal aliens, a burgeoning federal bureaucracy, a huge percentage of non-producers on the public dole, unread 2000 page laws being passed in cynical disregard of public opinion, and the prospect of working longer and harder for less and less. This mistrust will eventually result in system breakdowns, and the currency will be but one of the casualties. >>



Let's not forget what appears to be an endless string of wars, quasi-wars, police actions, etc etc etc which have bankrupted the country, has helped pervert the morals of the society and alienated us around the world while leaving open huge areas of if not financial reparations that need to be done in the best case to the need to at least be willing to make ammends where needed or else repeat the same thing over and over again.

yellowkid

I did a paper on it for an independent study in college, I'm afraid that that was a long time ago and I had forgotten most of it.

jmski52

Let's not forget what appears to be an endless string of wars, quasi-wars, police actions, etc etc etc which have bankrupted the country, has helped pervert the morals of the society and alienated us around the world while leaving open huge areas of if not financial reparations that need to be done in the best case to the need to at least be willing to make ammends where needed or else repeat the same thing over and over again.

Duly noted. What we may intend as "help" is often interpreted as meddling. However, without our involvement many parts of the world would doubtless implode and maybe that's what needs to happen. As the same time, we must face the fact that our enemies need to see some serious examples of our intentions to be free and strong. The language of political correctness has got to go. Europe has always been a basket case and cannot be held up as any kind of an example. We were given a gift of evolution and it's called the US Constitution. We should be holding it high.

Bear

I would indeed hold it high, but the Government

has it locked up under security glass.

EagleEye

"If we defaulted on loans to China, we'd be there" (inflation)

Some say we owe China 14 Trillion. I think we're there.

Actually that not what I meant, I meant we (the global "we") would no longer have faith in the US ability to pay its debts, then we'd see hyperinflation. $14 Trillion is close to the $12 Trillion US debt held by the ENTIRE public (worldwide). But way more than China's slice, which is under $1 Trillion.

Leading Foreign owners of US Treasury Securities (May 2010)

People's Republic of China (mainland) $867.7 Billion 21.9% of GDP.


If we did away with the Bush tax cut we'd be able to call in our debt to China.