(Bloomberg View) Jeffrey Fear–The Long Shadow of German Hyperinflation

Hyperinflation didn’t lead to the rise of Hitler, but it undermined the legitimacy of the democratic Weimar Republic.

Millions of disaffected middle-class voters soon drifted to various splinter parties on the right. The center hollowed out, and subsequent coalition governments ruled on a tolerated-minority basis. German politics never really regained its balance in the mid-1920s, a time of relative economic stabilization — and then came the Great Depression, government austerity packages and, ultimately, the rise of the Nazis.

Never again, the thinking goes today. And rightly so. But the fate of the euro zone depends on which historical lesson one draws from this episode. Are there circumstances in which monetizing government debt is appropriate — or not?

Read it all.


Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, Currency Markets, Economy, Euro, Europe, European Central Bank, Germany, History, Politics in General

3 comments on “(Bloomberg View) Jeffrey Fear–The Long Shadow of German Hyperinflation

  1. Ad Orientem says:

    This is an excellent and very sobering reminder of the dangers that come with excessive sovereign debt, and then trying to use the printing press to get out from under it. That said, while I do expect severe inflation in the future I doubt it will be anything on the level of what was seen in Germany in the 1920’s. That would require the FED to acquiesce to continually adding zeros to our paper money, and I don’t see that happening. What will happen is the slow but deliberate debasement of our money to keep bond rates low and inflation high (but not hyperinflation). What I anticipate is something significantly worse than the 1970’s but not quite Argentine in nature.

    Forewarned is forearmed.

  2. Br. Michael says:

    Debasement of currency leads to the fall of nations.

  3. Capt. Father Warren says:

    The Fed does not run printing presses. It’s all electrons. We are creating “money” on a spreadsheet. Treasury creates new electronic bonds, the Fed “buys” those “bonds” electronically, and Federal departments are now given new spending authority via the Treasury who electronically books the new “money” received from the Fed. This is even beyond fiat currency. It is beyond Monopoly money, it only exists to the extent that people continue to honor the charade. One day (as we saw in the housing bubble) someone may say “wait a minute”. I don’t want a 2 trillion direct deposit, I want 2 trillion dollars on the table. And then a bureaucrat says “we don’t have it”. Or an oil trader wants gold for his supertanker of oil and a buyer says “I can’t get it” and the trader won’t accept mere electrons from the Fed, via Treasury, to a buyer procuring for the military. It will all fall faster than you can say “Obama”.