Free Republic
Browse · Search
Bloggers & Personal
Topics · Post Article

Skip to comments.

The Formula for Weimar Germany… Showing Up in the US Today?
Zero Hedge ^ | 1/17/2014

Posted on 01/18/2014 2:37:35 AM PST by markomalley

History is often written to benefit certain groups over others.

Indeed, you will often find the blame for some of the worst events in history placed on the wrong individuals or factors. Most Americans today continue to argue over liberal vs. conservative beliefs, unaware that the vast majority of economy ills plaguing the country originate in neither party but in the Federal Reserve, which has debased the US Dollar by over 95% in the 20th century alone.

With that in mind, I want to consider what actually caused the hyperinflationary period in Weimar Germany. Please consider the quote from Niall Ferguson’s book, “The Ascent of Money” regarding what really happened there:

Yet it would be wrong to see the hyperinflation of 1923 as a simple consequence of the Versailles Treaty. That was how the Germans liked to see it, of course…All of this was to overlook the domestic political roots of the monetary crisis. The Weimar tax system was feeble, not least because the new regime lacked legitimacy among higher income groups who declined to pay the taxes imposed on them.

At the same time, public money was spent recklessly, particularly on generous wage settlements for public sector unions. The combination of insufficient taxation and excessive spending created enormous deficits in 1919 and 1920 (in excess of 10 per cent of net national product), before the victors had even presented their reparations bill… Moreover, those in charge of Weimar economic policy in the early 1920s felt they had little incentive to stabilize German fiscal and monetary policy, even when an opportunity presented itself in the middle of 1920.

A common calculation among Germany’s financial elites was that runaway currency depreciation would force the Allied powers into revision the reparations settlement, since the effect would be to cheapen German exports.

What the Germans overlooked was that the inflation induced boom of 1920-22, at a time when the US and UK economies were in the depths of a post-war recession, caused an even bigger surge in imports, thus negating the economic pressure they had hoped to exert. At the heart of the German hyperinflation was a miscalculation.

You’ll note the frightening similarities to the US’s monetary policy today. We see:

1)   Reckless spending of public money, particularly in the form of entitlement spending

2)   Excessive spending resulting in massive deficits.

3)   Little incentive for political leaders to rein in said spending.

4)   Intentional currency depreciation in order to make debt payments more feasible.

This sounds like a blueprint for was US leaders (indeed most Western leaders) have engaged in post-2007. The multi-trillion Dollar question is if we’ve already crossed the line in terms of setting the stage for massive inflation down the road.

We believe that it is quite possible… for the following reasons.

·      The US now sports a Debt to GDP ratio of over 100%.

·      Every 1% rise in interest rates will result in over $100 billion more in interest payments on US debt.

·      Indications of inflation (stealth price hikes, wage protests, etc.) are showing up throughout the economy.

·      Indications that other countries are moving to abandon the US Dollar are present.

In a nutshell we are in a very dangerous position. This doesn’t mean hyperinflation HAS to occur. Indeed, history often times rhymes rather than repeats. However, the fact of the matter is that the same policies which create Weimar Germany are occurring in the US today. How they play out remains to be seen, but it is unlikely it will end well.


TOPICS: Business/Economy; Government; Politics
KEYWORDS:

1 posted on 01/18/2014 2:37:35 AM PST by markomalley
[ Post Reply | Private Reply | View Replies]

To: markomalley

I feel like I am in the 1920s and i’m in Germany—Now if a guy starts to get popular with rabblerosing speaches —a fellow people just love—who can do no wrong—Hey wait, we elect6ed a guy like that!


2 posted on 01/18/2014 2:49:48 AM PST by Forward the Light Brigade (Into the Jaws of H*ll)
[ Post Reply | Private Reply | To 1 | View Replies]

To: markomalley

Bad link?


3 posted on 01/18/2014 3:04:51 AM PST by Big Giant Head
[ Post Reply | Private Reply | To 1 | View Replies]

To: Big Giant Head
Bad link?

It worked for me (again). But here it is if you want to manually paste it: http://www.zerohedge.com/contributed/2014-01-17/formula-weimar-germany%E2%80%A6-showing-us-today

4 posted on 01/18/2014 3:09:52 AM PST by markomalley (Nothing emboldens the wicked so greatly as the lack of courage on the part of the good -- Leo XIII)
[ Post Reply | Private Reply | To 3 | View Replies]

To: Forward the Light Brigade
First; We didn't elect him ... I'm convinced it was stolen via phony votes, packed voting machines, a complicit media and a few others.

It doesn't matter if I can name all the culprits ... I beleve the election was stolen

Second; zero hardly gives rabblerousing speeches.
A quick trip to youtube will show some serious fire (and I don't speak nor understand German), coming out of hitler's mouth.

I don't know if the German language has .. uhhh ... umm ... errrr ... uhhhh ... in it, but it doesn't seem so, thus ... zero is a zero .. a phony, a puppet.

Hitler was insanely real.

The crowds of all civilized nations, listening to important people ... politicians, hollywood .. whatever ... were large and if gathered today .. would be an uncontrollable mob.

The one thing yet to be accomplished in modern America is our disarment, and THAT, by God, will never happen.

We will remain mired down in talk and legislation while they try to figure out a way to attack and disarm/kiill us in a way the rest of the world will accept.


I'm not sure any of this will be accomplished because of the remnant in America.

5 posted on 01/18/2014 3:13:10 AM PST by knarf (I say things that are true .. I have no proof .. but they're true.)
[ Post Reply | Private Reply | To 2 | View Replies]

To: Forward the Light Brigade; knarf

If econiomic policies of DC resembles those of Weimar republic, social&cultural are copied from pre-Stalinist Bolshevic USSR.
It smells like dictator is coming soon “to fix things up” and “make trains run on time”.


6 posted on 01/18/2014 3:59:09 AM PST by cunning_fish
[ Post Reply | Private Reply | To 2 | View Replies]

To: cunning_fish; Forward the Light Brigade; knarf
You are all correct - Fascism is just socialism and racism combined and we have plenty of both in this administration.

It's all there, the police state, the nationalization of industries, the vilification of Whitey.

Our only hope is "surrendering" our spent bullets before surrendering our guns.

7 posted on 01/18/2014 4:31:03 AM PST by Aevery_Freeman (Politics are just the rules - Power is the game!)
[ Post Reply | Private Reply | To 6 | View Replies]

To: markomalley
How they play out remains to be seen, but it is unlikely it will end well.

History has hsown that it generally ends in major warfare.

8 posted on 01/18/2014 4:38:29 AM PST by arthurus (Read Hazlitt's Economics In One Lesson ONLINEhttp://steshaw.org/economics-in-one-lesson/)
[ Post Reply | Private Reply | To 1 | View Replies]

Comment #9 Removed by Moderator

To: Forward the Light Brigade

The real problems of finance, economy, investor confidence, etc. is being hidden by the government and a willingly complicit media. Further, the stock market - at least those sharks and big companies that are willing to make their take off of the uninformed investors, taking QE money for MBSs every month, and live the lie, are helping a lot too.

They know at least as long as Obama is there, they’ll get their buyouts and plus-ups and nobody is gonna say a word.

Unemployment is so down right now, according to the media and Obama (when he’s not saying it’s bad because of Bush and we need to ‘jump start’ the economy with more entitlements). Don’t mind those 92 million able-bodied Americans that are not working now. They’re not really there.


10 posted on 01/18/2014 5:06:07 AM PST by Gaffer
[ Post Reply | Private Reply | To 2 | View Replies]

To: KoRn
It's easy to blame the Federal Reserve, but the Congress are the ones responsible for the Fed.

They're both the same really, joined at the hip. We have a few representatives and even a majority from time to time, but the Congress is the Federal Reserve, bought and paid for by the international banksters. The Democrats controlled the House for 40 straight years, that's not republicanism, that's a machine financed by the Fed.

11 posted on 01/18/2014 5:18:09 AM PST by Partisan Gunslinger
[ Post Reply | Private Reply | To 9 | View Replies]

To: Partisan Gunslinger

Wasn’t Wilson the driving force behind it, though the Congress approved the Charter?


12 posted on 01/18/2014 5:35:30 AM PST by KoRn (Department of Homeland Security, Certified - "Right Wing Extremist")
[ Post Reply | Private Reply | To 11 | View Replies]

To: KoRn
Wasn’t Wilson the driving force behind it, though the Congress approved the Charter?

Yes he was. And Wilson was a world government guy. The League of Nations was his aim. Wilson teamed with the international banksters to create the Federal Reserve and with that secured, then the international banksters were able o eventually create the UN. It's all connected, the Fed, the Dems, the UN, all working to take away American's freedoms so that they can have world domination.

13 posted on 01/18/2014 5:44:25 AM PST by Partisan Gunslinger
[ Post Reply | Private Reply | To 12 | View Replies]

To: Forward the Light Brigade

It might be Germany in 1932, but this time Goldstein has an AR-15 with a scope.


14 posted on 01/18/2014 6:00:44 AM PST by Travis McGee (www.EnemiesForeignAndDomestic.com)
[ Post Reply | Private Reply | To 2 | View Replies]

To: markomalley

15 posted on 01/18/2014 6:03:37 AM PST by Travis McGee (www.EnemiesForeignAndDomestic.com)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Travis McGee

Any idea how much worse it has to get before he pulls the trigger?


16 posted on 01/18/2014 6:30:40 AM PST by Gadsden1st
[ Post Reply | Private Reply | To 14 | View Replies]

To: markomalley

17 posted on 01/18/2014 6:46:02 AM PST by DannyTN (A>)
[ Post Reply | Private Reply | To 1 | View Replies]

To: markomalley

Our problems don’t originate with the FED. They originate with the lowering of the import tariffs in the 1960’s. That has resulted in U.S. industries being offshored to the point that we now have high unemployment and are now dependent on foreign nations for many industries.

Our stores are filled with Chinese made goods while Americans sit unemployed. It has nothing to do with our currency and everything to do with our international trade policy and now ridiculously small import tariffs. We tax domestic producers far higher than the tariffs we apply to foriegn producers.

So we effectively pay for the cheap imports twice. Once when we buy the import. And again through taxes when we pay to support the 100 million Americans on food stamps and other means of support.

The very slow debasing of the currency over a 100 year period makes a scary chart, but it is not a bad thing. Unless of course you plan to hoard cash in your mattress or wall for 100 years.


18 posted on 01/18/2014 6:55:06 AM PST by DannyTN (A>)
[ Post Reply | Private Reply | To 1 | View Replies]

To: markomalley

I think the important lesson is now how Weimar or the US got into the currency mess, but the technique that was used, with the help of the US, to get Weimar *out* of its mess and back to a stable currency.

The hyperinflated currency of Weimar was a fiat currency, called the Papiermark. Typically, even today, with strongly inflating currency, the first effort is to decimate the currency, that is, to strip all the zeroes from it. So say, a 10,000 note is revalued as a 1 note. But hyperinflation is too dramatic to do that.

So with US help, what Weimar did was to first create a new currency, called the Rentenmark. Importantly, it was *not* a public currency, but a bank and industry currency, 100% backed by gold.

So gold bugs, take note.

This meant that all the banking and industrial currency credit and debt lunacy could be ‘rationalized’ to the new currency, by trading Rentenmarks amongst themselves. This had a profoundly stabilizing effect on both their banking and business sector, which started to lift Germany out of the depression.

Then, and only then, the government introduced a third currency, called the Reichsmark, also backed with gold. Since all the chaos was resolved with the Rentenmark, the Reichsmark was as stable a currency as you could get. So people turned in vast amounts of Papiermarks to the banks, and were directly issued Reichsmarks in exchange.

With zero inflation. And it was so stable that even though Hitler wanted to tinker with it, every attempt for him to do so was effectively blocked, so he pretty well left it alone until the war was over.

After the war, it was finally replaced by another fiat currency, the Deutschmark. Which remained strong with the rebuilding of the German economy until it was finally replaced by the Euro.


19 posted on 01/18/2014 7:04:45 AM PST by yefragetuwrabrumuy (There Is Still A Very Hot War On Terror, Just Not On The MSM. Rantburg.com)
[ Post Reply | Private Reply | To 1 | View Replies]

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
Bloggers & Personal
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson