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VINE VOICEon 20 October 2010
Reading the history of German from 1914 - 1945 you realise that equable prosperity in Europe is a wonderful thing, and under no circumstances should it be taken for granted.

The suffering that the German people endured is unimaginable for us today. Fergusson's book covers chapter two, the consequences of the inflation that got into the economy during the First World War and the Governments addiction to printing money as a solution. Last year, I wrote a memoir of a heroin addict, and I can see parallels. The German Government didn't want to face the pain that would come when inflation was halted, so they carried on, despite warnings. They couldn't grasp that by increasing the money supply they debased the currency. In fact this book shows that once a Government is on a path, in the same way as once an addict is on a path, the madness has to burn itself out. Reason and alternative policies are not going to be pursued until the the bitter end has been reached, and then the turning point tends to be a bit of a mystery.

The book is written in an elegant style, and doesn't feel at all dated. I found myself looking up the characters who appear in the drama on Wikipedia - Rathenau, Stinne, Ludendorff, Schacht, and D'Abernon, which gave a deeper perspective. It's a cautionary tale, but the circumstances that caused it were unique, and, with hope, we understand how a currency works much better now.
My theory is that societies and human beings have to go through traumatic and self-destructive periods to learn lessons. When they forget those lessons over time, they are likely to repeat the same mistakes, and there's not a lot you can do to prevent it.
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on 24 September 2010
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.
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on 8 July 2010
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.
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on 13 July 2010
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 ?
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TOP 500 REVIEWERon 16 December 2011
Adam Fergusson in his now back in print book from 1975, "When Money Dies", details the circumstances and events leading to the devastating economic death of the German mark over the period 1914 to 1923, and then a new quasi-currency, the Rentenmark was issued with an illusory but confidence restoring asset backing.

Back in the early 1970's inflation was bemusing the political class and their economist sidekicks, and this book focused attention on the respective advantages and disadvantages of manipulating the supply of currency as a panacea for price stability. Nowadays known as Quantitative Easing, it was used without much thought or purpose by the Reichsbank presided over by Rudolph Havenstein, now widely regarded as the 'worst central banker of all time'.

The result of printing more and more money was catastrophic, totally destroying people's perception of it's value leading to hyperinflation on a frightening scale. In 1914 it took just 20 marks to buy a British pound but by 1923 it took 310 billion! Currency became a worthless commodity, people resorting to paying rent in butter, a cinema ticket with a lump of coal.

This book written well over 35 years ago was not only very relevant to the 1970's economic woes but to the current economic situation where Central Banks such as The Bank of England and others are once again embarking on the route taken in Germany in 1923, that of Quantitative Easing, ie. printing money by the container ship load. It is hoped this 'fiscal remedy' does not become overused causing the perception of the value of the currency devaluing and leading to instability and a fall from the proverbial tightrope being 'tottered over' by the Central Banks in their desperation to cross the chasm of financial doom to get to safety.

It also goes towards understanding the reason Germans are very reluctant to engage in Quantitative Easing to resolve the current problems in the EuroZone, not wanting to go back to the horrifying and corrosive effect that was experienced by their forebears in 1923.

A book that is an absolute must with any person that has an appetite to broaden their economic understanding. It is well written, informative, very interesting, and above all extremely relevant to what is happening around us today.
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on 1 November 2010
Originally published in 1975, the themes in this book reverberate with what is happening today. The style is a little dated but that is a very minor point. What caught my attention was the absolute and unshakable conviction of the Reichsbank that continuously printing paper marks would bring the public deficit and prices under control. The more the two grew apart, the more paper was churned out. As more paper was churned out, the gold value of the money in circulation withered. The people pursuing this policy were not uneducated nor inexperienced, quite the contrary, yet despite the blistering speed of the mark's collapse, they remained convinced that the policy was correct.
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on 24 September 2010
I set out reading this book for the same reason that others have done recently- which is to get an insight into what could happen when a government prints too much money. I ended up learning how such economic instability may well have been the reason why the German people were receptive to someone like Hitler. However I did not see any connection with the presentday economic situation.

Today if inflation were to appear central bankers would be at the ready to increase interest rates. There was no attempt to do that in the Weimar period. Inflation then was allowed to run unabated for a number of years before the hyperinflation took hold.

The book was an excellent read and a lesson in how economic stability is vital for political stability.
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on 22 March 2013
I have just finished reading When Money Dies and my eyes have been opened. I will read it again because some of the economic concepts are not easy to grasp, and I persevered through these to gain the whole picture of the printing of currency from 1914 to 1924 and its aftermath. The whole picture of post-war and of pre-war Germany is fascinating.

I was shocked that the Reichsbank man, responsible for the printing of money in the 1920s until he died in November 1923, a Dr Haverstein, did not link the vast printing of marks to the progressive devaluation of the mark. Can you believe it? Frankly, it was fortunate that he died since his successor, a Dr Schact, realised this territying link and brought the printing presses to a halt and introduced the Rentenmark to replace the mark.

The way the Fed, the BoE and other central banks are printing their currency in QE makes me wonder if, perhaps, they are all Dr Haversteins and do not realise that when you print more of a currency, you reduce the value of the individual units already in existence.

O, the hunger and starvation! When the urban people had the marks to buy food, the farmers refused to be paid in hyperinflated marks so they stockpiled the food on the farms. So, no food was available to buy even though the people had the currency to purchase.

But then, once the currency had been stabilised with the Rentenmark from January 1924, the farmers brought out their food to market but the people did not have the currency to buy. O dear, O dear! How bloody stupid!

It seems to me that without hyperinflation, which resulted from the printing of marks from 1914 to finance the killing machine of the first world war and went on post war, Hitler would not have come to power. The pain of the economic deprivation was blamed on the Jews and anti-semitism was everywhere long before Hitler used it to unite the nation racially.

Indeed, after the currency got back to some sort of normality from the end of 1924 with the Reichsmark, there were two notorious and well-publicised legal cases of corruption going all the way up through the politicians and civil servants, even involving the President lightly. I mention this because these two cases were started by two Jews from Lithuania, and I couldn't help thinking that this would not have done anything but inflame the already existing anti-semitism.

As the middle class in Germany, Austria and Hungary were being wiped out of existence, they sold their precious valuables and sentimental objects to realise their national currency, though grossly devalued. Food better than sentiment! Well, who would turn up to the selling parties but Jewish women, who were willing to buy and who would be wearing objects they had previously purchased elsewhere from the dying middle class.

So, there is in this book, a thread of antisemitism linking the two world wars. It made the national antisemitism and the industrial killing of Jews from 1939 more understandable by the dreadfully psychologically traumatised Germans. One wise word would be that one particular group of people should not take economic advantage of a whole nation of people, who are in dire hardship.

I thought that Adam Ferguson put the occupation of the Ruhr by France and Belgium into perspective. It made a difference but it was not, by any means, the whole story. The Germans were to blame for their economic misfortune and not the invading victors of the war. Nevertheless, the stone hearted Poincare, PM of France, led his people into the lion's jaws because the hatred by the Germans of the French for their hardheartedness in the Ruhr in the 1920s was shown most terribly in the second world war, particularly when so many young Frenchmen were removed from France to work as slaves.

In fact, as I write, I realise that I am making a powerful argument for the EU and the Euro. Better not to have national currencies when a supranational currency can force the national governments to work together cooperatively.

I haven't plumbed the depths of this wise book, yet. I will gain even more from it on a further reading. I think that an economic history of Germany between the wars is, arguably, the best history for that period and that country. The consideration of the dark valley between these two wars is greatly helped by When Money Dies, in a way in which a non-economic book could never achieve.
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on 19 January 2011
I've just finished reading this book. Funnily enough, the publisher of it spotted me reading it on the train and introduced himself. Apparently the author is still with us and as other readers have said, this is an excellent book on a very important subject. Not too long, lucidly written and with a judicious sampling of quotes from authoritative sources.

The author does repeat some things rather a lot, such as the latest price of eggs and butter, during the helter skelter descent into hyperinflation. And it would be nice to have had a bit more on the characters and backgrounds of the key players. We all know who Hitler was. But Schact, Streseman, Wirth, Havenstein? Having said that the author doesn't confuse the reader by introducing too many people or dates and figures. And he reflects at the end of the book on the role the inflationary period had on Hitlers rise to power. The chaos and confusion of Germany in the interwar period is usually ascribed to the defeat in WWI and the effect of the depression from 1929 onward. But as Fergusson reveals, the biggest source of chaos was the hyperinflation of the early 20's.

No great knowledge of economics is needed to understand the essence of the book. But if it goes to a reprint then it wouldn't do any harm to have a very short glossary of what is meant by terms such as floating debt and treasury bills. BTW the robustness of the paperback is excellent. Despite much spine flexing no pages have shown any sign of coming loose. If only all paperbacks were of that quality.
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on 23 September 2013
The Weimar hyperinflation conjures up images of universal suffering. Yet, as Adam Fergusson explains, there were plenty of winners too. Industrialists and speculators did very well. Individuals with access to loans saw their debts turn to dust overnight. They flaunted their new found wealth in the face of poverty and starvation. People on fixed incomes and savers on the other hand saw their wealth evaporate. Riots and looting were common.

During the London riots of 2011 the press unanimously proclaimed the looting and destruction of property as a contemporary phenomenon, the decadence of 21st century consumer society gone mad. One need only look at hyper-inflationary Germany and Austria to discover that this isn't true. Hordes of the impoverished urban poor ransacked the towns and countryside, smashing shops, burning farms, slaughtering livestock. The looting surpassed manifold by the devastation that was left behind. The rise of extremist ideologies was another manifestation of this collective insanity.

Adam Fergusson explains how the debasement of the German Mark was not inevitable, it was engineered, the result of a deliberate policy of monetary expansion, ultimately leading to a loss of faith in the Mark. Enabled by bad government and encouraged by speculators and industrialists. The latter grasping the opportunity to enrich themselves at the expense of society at large. Their modern equivalents, interestingly enough, are the hedge fund and private equity financiers.

The debasement of currency is relevant in both the past and the present. The Soviets made use of it after the revolution, debasing their currency to wipe out the wealth of the money holding classes.

A well researched historical account of Weimar hyperinflation, based on a thorough understanding of monetary theory.
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