The Weimar Republic Thread
jmski52
Posts: 22,856 ✭✭✭✭✭
Got any interesting stuff on Weimar? Anyone who digs up some interesting data on Weimar debt, or Weimar money creation, or Weimar economic policies - post it here.
After reading some of this, I get the distinct impression that the authors of the 2nd exerpt (below) have an elitist academic orientation and believe in nothing less than another big government "solution". Lots of disagreement on economics out there, and anti-gold sentiment as well (even though they acknowledge the damage from going off the gold standard.)
Here's an interesting one.
Some exerpts:
"Germany tried to recover from the war by way of social spending. Germany began creating transportation projects, modernization of power plants and gas works. These were all used to battle the increasing unemployment rate. Social spending was rising at an unbelievable rate. In 1913 the government was spending approximately 20.5 per resident; by 1925 it had risen to almost 65 marks per resident and finally in 1929 it reached over one hundred marks per resident."
"The elevating amounts of money which were used for social spending combined with plummeting revenues caused continuing deficits. Eventually the municipal finance collapsed in 1930. Although it seemed as if the collapse was due to debt, in actuality ordinary budgets were the reason for the initial collapse. Municipal officials and politicians were unable to restore order to the budgets."
"Further adding to Germany's economic problems, the revenue from income tax began to fall. In 1913, over fifty three percent of all tax revenues was from income, but in 1925, it dropped down to 28%. As the returns on income taxes decreased, the government began to depend much more on state trade and property tax. The government also became highly dependent on the profits made from municipal utilities, such as electric power plants."
Another interesting article...
Excerpts:
"In the mid-1920s, after an initially untenable schedule of war reparations payments was revised, French and American creditors struck by the possibility of rapid growth in the battered German economy began to pile in. The massive flow of capital helped fund Germany's sovereign obligations and led to soaring wages. Germany underwent a credit-driven boom like those seen on the European periphery in the mid-2000s."
"In 1928 and 1929 the party ended and the flow of capital reversed. First, investors sent their money to America to bet on its soaring market. Then they yanked it out of Germany in response to financial panic. To defend its gold reserves, Germany's Reichsbank was forced to raise interest rates. Suddenly deprived of foreign money, and unable to rely on exports for growth as the earlier boom generated an unsustainable rise in wages, Germany turned to austerity to meet its obligations, as Ireland, Portugal, Greece and Spain have done. A country with a floating currency could expect a silver lining to capital outflows: the exchange rate would fall, boosting exports. But Germany's exchange rate was fixed by the gold standard. Competitiveness could only be restored through a slow decline in wages, which occurred even as unemployment rose."
"As the screws tightened, banks came under pressure. The Austrian economy faced troubles like those in Germany, and in 1931 the failure of Austria's largest bank, Credit Anstalt, triggered a loss of confidence in the banks that quickly spread. As pressure built in Germany, the leaders of the largest economies repeatedly met to discuss the possibility of assistance for the flailing economy. But the French, in particular, would brook no reduction in Germany's debt and reparations payments."
"Recognising that the absence of a lender of last resort was fuelling panic, the governor of the Bank of England, Montagu Norman, proposed the creation of an international lender. He recommended a fund be set up and capitalised with $250m, to be leveraged up by an additional $750m and empowered to lend to governments and banks in need of capital. The plan, probably too modest, went nowhere because France and America, owners of the gold needed for the leveraging, didn't like it."
"So the dominoes fell. Just two months after the Credit Anstalt bankruptcy a big German bank, Danatbank, failed. The government was forced to introduce capital controls and suspend gold payments, in effect unpegging its currency. Germany's economy collapsed, and the horrors of the 1930s began."
Exerpt:
"As panic built in 1931, country after country faced capital flight. The effort to defend against bank and currency runs prompted rounds of austerity and plummeting money supplies in pressured economies, helping generate the collapse in output and employment that turned a nasty downturn into a Depression."
Interesting Exerpt promoting monetary manipulation by the ECB:
"It took the end of the gold standard, which freed central banks to expand the money supply and reflate their economies, to spark recovery. Today the ECB has the tools needed to salvage the situation without breaking up the euro. But the fact that the ECB and euro-zone governments have options does not mean that they will take them."
Exerpt (note the acknowledgement of damage from "recovery" due to trade barriers. WTF? That's not a recovery.:
"The collapse of the gold standard led to recovery, but caused terrible economic damage as countries erected trade barriers to stem the flood of imports from those that had devalued their currencies."
"Governments elected to fight unemployment experimented with wage and price controls, cartelisation of industry and other interventions that often impeded the recovery enabled by expansionary monetary and fiscal policies. In the worst-hit countries long-suffering citizens turned to fascism in the false hope of relief."
"The world today is better placed to cope with disaster than it was in the 1930s. Then, most large economies were on the gold standard. "
After reading some of this, I get the distinct impression that the authors of the 2nd exerpt (below) have an elitist academic orientation and believe in nothing less than another big government "solution". Lots of disagreement on economics out there, and anti-gold sentiment as well (even though they acknowledge the damage from going off the gold standard.)
Here's an interesting one.
Some exerpts:
"Germany tried to recover from the war by way of social spending. Germany began creating transportation projects, modernization of power plants and gas works. These were all used to battle the increasing unemployment rate. Social spending was rising at an unbelievable rate. In 1913 the government was spending approximately 20.5 per resident; by 1925 it had risen to almost 65 marks per resident and finally in 1929 it reached over one hundred marks per resident."
"The elevating amounts of money which were used for social spending combined with plummeting revenues caused continuing deficits. Eventually the municipal finance collapsed in 1930. Although it seemed as if the collapse was due to debt, in actuality ordinary budgets were the reason for the initial collapse. Municipal officials and politicians were unable to restore order to the budgets."
"Further adding to Germany's economic problems, the revenue from income tax began to fall. In 1913, over fifty three percent of all tax revenues was from income, but in 1925, it dropped down to 28%. As the returns on income taxes decreased, the government began to depend much more on state trade and property tax. The government also became highly dependent on the profits made from municipal utilities, such as electric power plants."
Another interesting article...
Excerpts:
"In the mid-1920s, after an initially untenable schedule of war reparations payments was revised, French and American creditors struck by the possibility of rapid growth in the battered German economy began to pile in. The massive flow of capital helped fund Germany's sovereign obligations and led to soaring wages. Germany underwent a credit-driven boom like those seen on the European periphery in the mid-2000s."
"In 1928 and 1929 the party ended and the flow of capital reversed. First, investors sent their money to America to bet on its soaring market. Then they yanked it out of Germany in response to financial panic. To defend its gold reserves, Germany's Reichsbank was forced to raise interest rates. Suddenly deprived of foreign money, and unable to rely on exports for growth as the earlier boom generated an unsustainable rise in wages, Germany turned to austerity to meet its obligations, as Ireland, Portugal, Greece and Spain have done. A country with a floating currency could expect a silver lining to capital outflows: the exchange rate would fall, boosting exports. But Germany's exchange rate was fixed by the gold standard. Competitiveness could only be restored through a slow decline in wages, which occurred even as unemployment rose."
"As the screws tightened, banks came under pressure. The Austrian economy faced troubles like those in Germany, and in 1931 the failure of Austria's largest bank, Credit Anstalt, triggered a loss of confidence in the banks that quickly spread. As pressure built in Germany, the leaders of the largest economies repeatedly met to discuss the possibility of assistance for the flailing economy. But the French, in particular, would brook no reduction in Germany's debt and reparations payments."
"Recognising that the absence of a lender of last resort was fuelling panic, the governor of the Bank of England, Montagu Norman, proposed the creation of an international lender. He recommended a fund be set up and capitalised with $250m, to be leveraged up by an additional $750m and empowered to lend to governments and banks in need of capital. The plan, probably too modest, went nowhere because France and America, owners of the gold needed for the leveraging, didn't like it."
"So the dominoes fell. Just two months after the Credit Anstalt bankruptcy a big German bank, Danatbank, failed. The government was forced to introduce capital controls and suspend gold payments, in effect unpegging its currency. Germany's economy collapsed, and the horrors of the 1930s began."
Exerpt:
"As panic built in 1931, country after country faced capital flight. The effort to defend against bank and currency runs prompted rounds of austerity and plummeting money supplies in pressured economies, helping generate the collapse in output and employment that turned a nasty downturn into a Depression."
Interesting Exerpt promoting monetary manipulation by the ECB:
"It took the end of the gold standard, which freed central banks to expand the money supply and reflate their economies, to spark recovery. Today the ECB has the tools needed to salvage the situation without breaking up the euro. But the fact that the ECB and euro-zone governments have options does not mean that they will take them."
Exerpt (note the acknowledgement of damage from "recovery" due to trade barriers. WTF? That's not a recovery.:
"The collapse of the gold standard led to recovery, but caused terrible economic damage as countries erected trade barriers to stem the flood of imports from those that had devalued their currencies."
"Governments elected to fight unemployment experimented with wage and price controls, cartelisation of industry and other interventions that often impeded the recovery enabled by expansionary monetary and fiscal policies. In the worst-hit countries long-suffering citizens turned to fascism in the false hope of relief."
"The world today is better placed to cope with disaster than it was in the 1930s. Then, most large economies were on the gold standard. "
Q: Are You Printing Money? Bernanke: Not Literally
I knew it would happen.
I knew it would happen.
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Comments
If one reads Dr. Fekete he has a different view on the gold standard of the post WW1 era. He states that the real bills doctrine was not re-instated making the post WW1 gold standard a shell of the one in effect from 1900-1913. In particular he mentions the additional hardships this placed on Weimar by eliminating unilateral trade. Whatever gold standard was in play from 1920-1930's it was not the same one of 2 decades earlier. The gold standard was effectively already collapsed by the early 1920's.