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Thursday, June 4, 2009
Weimar Republic Hyperinflation Timeline
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Great story!
ReplyDeleteSounds like a lot of fun!
I like crazy economic moves!
Bring it on!
Eat popcorn and munchies as hyperinflation ensues. You'll have great family enjoyment!
Think of all the stuff you can buy with all of that money!
I LOVE IT!
The currency you call the Reichsmark is really the Papiermark. the Reichsmark replaced the Rentenmark in 1924
ReplyDeleteGrab your ankles folks; the obamanation will make it happen here too!
ReplyDeleteI wonder if a future new US currency might be connected to gold?
ReplyDeleteMark Herpel
editor Digital Gold Currency Magazine
WEIMAR AND HYPERINFLATION
ReplyDeleteIn Weimar, between January and November, 1923, the interest rate went from 19% to 900%.
How fast do you think that a merchant would have to raise their prices, to cover the increase in their loan payments, at that rate of increase in interest rates? Not inflation rate - interest rates charged by the banks. Who sets the interest rates? The banks.
Hyperinflation is not caused, as so many, many, falsely believe (“experts” and talking heads too) by “printing too much money”. Hyperinflation is caused by banks artificially running interest rates into triple digit, unpayable territory.
The same thing happened in Zimbabwe (800% interest rate and an overnight lending rate of 10,000 % !). The banks destroyed the entire country to gain control the gold and diamond mines. Once they collapsed the economy, passed laws that said the Reserve Bank of Zimbabwe was the only one that could buy the gold from the mines, and then refused payment, they bought the closed mines at pennies on the dollar – then let them fill with water. This controlled the market supply, causing an artificial scarcity and higher market prices. Read about it here: moneyaswealth daht bolgspot daht com.
You should ask this – why is it that 80% can’t tell you what the Second Amendment is, but 80% can tell you about a wheelbarrow full of money to buy a loaf of bread? Disinformation is a powerful force; counter it with the truth.
Money As Wealth - Thanks for the post. I think you might be making a Cause and Effect error. You might be mistaking the responses of banks to hyper-inflation as the cause. If a currency gets devalued it's in a banks best interest to raise interest rates so they will be in essence getting the same amount or more as before the currency is devalued. If your lucky enough to have a job that stays up with inflation you might go from a salary of $2000 / month to a salary of $200000 a month - but only be able to purchase the same amount of stuff or less. If the banks don't change their interest rate to stay in line with hyper-inflation then they risk losing tons of money. You'll be faced with the following choice - pay $500 for a hamburger or pay $500 on your credit card. If he interest rate is raised into extraordinary amounts then the $500 would only go to interest NOT the principal. This isn't to say a bank wouldn't take advantage of hyper-inflation and try to turn it in their favor - of course some will. The challenge for You is to try to make sure they don't take advantage of you or have the opportunity to do that.
ReplyDeleteThis is exactly why you should get out of adjustable rate debts. Refinance your house to a Fixed Mortgage, pay off credit cards, etc. You can easier pay down your debts and not continually be overwhelmed as the prices and interest rates fluctuate in obscene amounts.
Our Government and the Federal Reserve is getting used to the idea that they can buy treasuries and not have to pay for it. The things that they are doing at this time will require more shots in the arm, but at closer and closer intervals. China is a net seller of treasuries this year and for good reason. Things are going to get crazy in the USA very soon.
ReplyDelete@Money as Wealth - you are indeed a bit off in your conclusions, but your head is definitely in the right place. It is artificially LOW interest rates that encourage money creation and inflation, not HIGH interest rates. This is because a lower interest rate environment encourages borrowing for higher order investments (machinery and other capital goods). In turn, this increase in loan activity multiplies the money supply through the fractional-reserve banking system.
ReplyDeleteYou'll note that in your example when interest rates skyrocketed to 900% in November 1923, this coincides directly with the introduction of the Rentenmark and the stabilization of the German currency. For a more recent example of the same thing, you need only look back to the US in 1980 when Paul Volcker, then head of the Federal Reserve, hiked interest rates to over 20% to halt the inflation of the 70's.
@Mountain Steps - Interesting post. One small clarification though. The Rentenmark was not backed by gold, as is the common misconception. It was actually tied to industrial goods and mortgages on land. It's incredible that stabilization actually worked under this arrangement, given those things would not have been convertible on demand. The German people, so demoralized from 5 years of currency destruction, it seems were ready to believe in the imperfect solution of Schact and the Rentenbank.
HI happens neither because interest rates are high or the government is printing too much money. It happens because there is a gap between production and consumption. This gap causes inflation. The inflation affects private enterprise adversely. This reduces the consumption and the production both. The public entities are not affected by the inflation as it can print money to allow it to consume. This kills the currency, which is what causes HI.
ReplyDeleteIn the US, the production and Consumption gap exists for the last 30 years. This gap has not had any effect till now because foreigners were buying the difference as US Treasuries. Since 2008 not all of the gap was bought by foreigners, but fortunately that excess remained in the banks. Now we are at the point where the Treasuries will only be bought by the FED. The Operation Twist is a similar exercise, but it does not create new Treasuries, it just replaces the short for the long. Eventually the FED will buy all of the new Treasuries, and we will have a lot of inflation. This will affect the American Enterprises. But the American Govt will not be affected. All that deficit will become solely owned by the Govt, and will not be affected by the inflation. That is when we will have HI in USD terms. We are not yet in the phase where we get high inflation, but we are very close.