When Money Dies: The Nightmare of the Weimar Hyper-Inflation [Paperback]

A lot of misinformation with regards to this topic is spread, which this books clears up. First off, hyperinflation was set in motion as a direct result of failing to balance the books; running unsustainable deficits. With limited access to debt markets in the wake of WW1, the easy way out was to simply print money. And once in motion, refusing to raise interest rates, which would have increased savings, the population soon lost all faith in the currency.

The ultimate solution - introduce a new commodity-backed currency; the Rentenmark, and balance the books.

It is interesting to note the three reasons why it kept going for as long as it did - one, the authorities knew that balancing the books would lead to an increase in unemployment, two, printing was politically the easy solution, and three, (much like in Argentina in 1989) the authorities in large had an interest in keeping the inflationary scheme going.

It is also almost saddening that almost as soon as the hyperinflation chapter had passed, both the public and private sector indebted themselves up to their eyeballs, the precursor to the Great Depression.

The primary focus of the book is Germany, but both Austria and Hungary are included. Definitely recommended.

Reading, and digesting, `When Money Dies' is not particularly easy. In financial terms it is the equivalent of a snuff movie. For the sensitive of spirit, the experience is truly heart-rending. For this is not a fictional phantasmagoria; the extraordinary sequence of events within it genuinely happened, to real people.

As those schoolchildren who are still taught anything are told, the seeds of the Weimar hyper-inflation, like those of the Second World War, were sown in the ashes of the First World War, and most pressingly by the terms of the Treaty of Versailles. The Allies, and most notably the French, were determined to bleed Germany dry. Be careful what you wish for..

Germany could never hope to make good on the burden of Allied reparations forced on her. But few, Keynes perhaps apart, could have foreseen the extraordinary sequence of events that were to culminate in the economic firestorm of Weimar 1923, when sovereign allegiance to the printing press caused an entire currency and national economy to implode upon themselves. A few examples from Adam Fergusson may convey in some small way the surreal horror of what came to befall the largely unwitting populace, and political base, of Germany:

"In October 1923 it was noted in the British Embassy in Berlin that the number of marks to the pound equalled the number of yards to the sun. Dr Schacht, Germany's National Currency Commissioner, explained that at the end of the Great War one could in theory have bought 500,000,000,000 eggs for the same price as that for which, five years later, only a single egg was procurable. When stability returned, the sum of paper marks needed to buy a gold mark was precisely equal to the quantity of square millimetres in a square kilometre. It is far from certain that such calculations helped anyone to understand what was going on.."

A young Ernest Hemingway happened to be travelling, with his wife, through history in the making. [The following is the anecdote of the many from Adam Fergusson's book that, perhaps perversely, I find most moving of all.] Working for the Toronto Daily Star, Hemingway crossed the frontier from France during the monetary horror and had the following experience:

"There were no marks to be had in Strasbourg, the mounting exchange had cleared the bankers out days ago, so we changed some French money in the railway station at Kehl. For 10 francs I received 670 marks. Ten francs amounted to about 90 cents in Canadian money. That 90 cents lasted Mrs Hemingway and me for a day of heavy spending and at the end of the day we had 120 marks left !

"Our first purchase was from a fruit stand.. We picked out five very good looking apples and gave the old woman a 50-mark note. She gave us back 38 marks in change. A very nice looking, white bearded old gentleman saw us buy the apples and raised his hat.

`Pardon me, sir,' he said, rather timidly, in German, `how much were the apples ?'

"I counted the change and told him 12 marks.

"He smiled and shook his head. `I can't pay it. It is too much.'

"He went up the street walking very much as white bearded old gentlemen of the old regime walk in all countries, but he had looked very longingly at the apples. I wish I had offered him some. Twelve marks, on that day, amounted to a little under 2 cents. The old man, whose life savings were probably, as most of the non-profiteer classes are, invested in German pre-war and war bonds, could not afford a 12 mark expenditure. He is the type of the people whose incomes do not increase with the falling purchasing value of the mark.."

This anecdote perhaps best summarises the crushing and unpitying aspect of hyper-inflation. Those citizens who had been among the most virtuous, who had saved and patriotically supported their country by buying its debts, were wiped out in the financial holocaust.

The Weimar experience is cautionary, and perhaps, as Adam Fergusson suggests, its protagonists genuinely did not understand the hyper-inflationary mechanisms - money-printing without limit - by which they forcibly impoverished a country and above all its middle class (then, as now, economics was not a science - if science at all - well understood). But that excuse will not serve for those administrations determinedly taking us down what looks optically like a very similar path. Deficit financing; quantitative easing; monetary stimulus - these are all Orwellian weasel coinages that barely disguise the reality at the heart of current administrative desperation in the face of a colossal financial crisis: the somewhat forlorn hope that ongoing money printing will mysteriously solve, other than to extinguish the real value of, a super-abundance of both corporate, individual, and sovereign debt.

But that would be getting ahead of ourselves. The immediate threat is not inflationary, but deflationary: broad money growth - at the time of writing - is contracting across the developed world, and bringing the prospect of recession if not depression in its wake. Yet this does not absolve western central banks and politicians from the required responsibility to save their currencies and economies from both their own malign influence and from that of the bankers, who have displayed much of the same self-serving behaviour as German industrialists did during the Weimar experience. Adam Fergusson's book serves as the ultimate warning against the debauchery of currency in the name of shorter term political expediency. The question is, are the politicians and central bankers of today ready, willing or able to learn anything from such a monstrous historical example ?

I came across this book while browsing on Amazon, purely by chance. I hadn't actual knowledge of it's existence yet I had been hoping for it's like for over sixty three years. Why? Sometime during the gloomy autumn/winter dark nights of 1947 when I was thirteen I had brought my father his late edition of the London Evening Standard - a six nights a week errand. Barely had I handed him his paper than he leapt from his bomb damaged armchair in a fit of rage the like of which was unparalleled in my youthful experience. I stood there, in the living room, astonished, stunned, terrified! What ever had I done? Fortunately, nothing. I was merely the messenger, not the culprit; a fact for which I continue to give thanks - my father had a violent temper! What ever motivated this outburst, so etched into my memory? It was that night's headline which simply conveyed to the reader the information of a one farthing(a then, 1/960Th. part of the pound, sterling) on a particular item. Had he spiralled through the ceiling, I don't believe it would have amazed me, such was the blood-vessel-bursting fury, of his tirade. Like all such rage it was spurred by very deep emotional scars from which finally, I was able to garner that his concerned was rooted in 1920s Austro/Hungarian/Germanic economic and fiscal history; by then, and in the wake of the second world war barely a scant memory, even in the minds of quite well informed mature adults. His vision on that dark night was the very real nightmare of the Weimar Hyper-Inflation as so memorably he ranted: "We'll be taking carrier-bags of money to try to buy a loaf of bread before we're finished, like they did in Germany after the first World War". I have been haunted by that night ever since, and as the money men of the world play ducks and drakes so cavalierly with billions of other people's lives my blood runs cold with the terror of that memory. 'When Money Dies' should properly belong in every responsible person's library for this 20th. Century history eloquently is the stuff of fairy tales and bogeymen in real life and only yesterday and should prudently teach us all the vital health of long term stability. But, of course, it never will for there will always be an elite that knows better and actually benefits. A couple of years ago, I learned that my Grandmother originated from Bremen and after all these years I finally understood my father's rage. He had lived through his Mother's anxiety and despair for her family in Germany through all those terrible, unimaginable years and I am convinced that humanity does forget it's grief simply because so much of it is so impersonal and does not learn from it because that, would stunt greed. I shall be grateful to the grave to Adam Fergusson for his incredible work; now, at least, I understand. Clifford. M. Gollner.