A remarkable Book, at times difficult, as these were confusing times for most people, and that perplexity is captured in this intersection of chaos economics and human behavior. The quotes from Erna von Pustau’s diary & Lord D’Abernon, British Ambassador to Berlin, are revelatory, as is Ernest Hemingway’s reporting for the Toronto Star of the shopping sprees and dining possible for him and his wife with an American 5 dollar bill when crossing the border from France into Germany. The book is readable precisely because the many details of everyday life woven into the narrative of rising inflation offset the sometimes incomprehensible currency numbers from QE on steroids.
Similarities between Reichsbank policies letting loose inflation and today’s USA Federal Reserve today are striking, as are the differences. In analog Germany in 1923 it took 30 paper mills, 150 printing firms, 2,000 printing presses and tens of thousands of employees, trucks and railroad cars working 24x7 (except Sundays) to distribute all the paper currency to banks and workplaces in time for payday. Still, they came up short and factories and cities had to develop their own currencies and script to survive. Whereas today, the Federal Reserve can just tap a few keys and add as many zeroes as it likes to the 1s on the computer screen and billions and trillions get distributed in minutes and hours, rather than days or weeks. Indeed, took me just 9 minutes last night on IRS web site to determine my eligibility and get my stimulus check routed to my bank account. Such speed of money distribution would not have been possible in analog Germany of 1923, though people spent shopping bags full of money as fast as they could on whatever they could. Thieves stole the suitcases and shopping baskets used to tote the currency, and dumped the paper money. Those with gold and foreign currency prospered, as did those with fixed mortgages and debts paying them off in worthless German currency.
My favorite QE money-printing quote in book, from Lord D’Abernon, British Ambassador to Berlin (p135): “Inflation is like a drug in more ways than one. It is fatal in the end, but it gets its votaries over many difficult moments.” The big question that the book answered for me was: Why did the government do it? QE money-printing to infinity seemed to work: Germany after WWI had full employment, which made the country seem prosperous despite the inflation, whereas Britain suffered a depression and massive unemployment. But all was not as it seemed on the surface. But to the victorious Allies who were suffering bad economies and high unemployment, Germany appeared wealthy and ripe to press for Versailles Treaty reparations. German stock market was skyrocketing in nominal terms, but down drastically when compared to pre-WWI or translated into foreign currencies. When the Versailles Treaty victors collecting reparation debts from Germany finally forced a stable currency and inflation died down, unemployment skyrocketed and the German economy really collapsed. QE to infinity in Germany kept people working, put off the day of reckoning for several years, which is an eternity in political time. Reichsbank in 1923 and Jerome Powell and the Fed today, same spiel about doing whatever it takes, printing as much money as needed. Even Russia agitation, and France teaming up with German communists in 1923. Worth reading the book for a fuller understanding.
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