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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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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 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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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 29 May 2006
Review of the First Edition (rare hardcover) of When Money Dies, written by me on May 25, 2006, & not reedited:

I first read this book some 25 years ago. I was so impressed I immediately bought a dozen copies & gave them to pals. (In 1980 they were 3-4 pounds sterling each--it's ironic & interesting that the price of this out-of-print book now fetches multiple zeros).
Here are some parallels with our time:
The Germany of the '20s finds it cannot meet the costs of war reparations. The US of the 2000s starts a war intending to pay reparations before it begins, and then finds itself unable to meet the mounting the costs of war reparations it originally thought would leap out of the ground and just pay themselves. (Meanwhile, the US's wounded soldiers [& the families of its dead soldiers] are going to require entire lifetimes of domestic reparations).
The Germany of the '20s attempted to buy/finance prosperity with ballooning deficits. The US of the 2000s wants to buy/ finance prosperity with ballooning deficits. Neither nation-State can be told it is wrong--and neither admits (or even recognizes) inflation is a hidden and pernicious tax.
Germany before the '20s had every confidence in the mark. The US in the 2000s believes the only currency in the world is the dollar, & the only thing money can be made of is paper and ink (never gold or silver). But as one mixes ink with paper, hoping the mixture will have exchange value, one finds that one has given value to neither material.
As Germany becomes more unhinged in the '20s, it moves towards a strong man as a moth to a flame. As the US grows more unhinged, it loses faith in its 'strong man' (even if he does not lose faith in himself). If the US should subsequently shun whoever wants to be the next 'strong man', there may yet be be hope. Since it is possible for the next wannabe 'strong man' to be laughed off the stage, it is yet possible the US will not succumb. The jury is still out.
At times the mark strenghthens (goes against the ultimate trend, for short periods): the Germans of the '20s (and other investors) think the crisis is over and it is time to buy. At times the dollar strengthens (goes against the ultmate trend [?], for short periods): the world of the 2000s thinks the crisis may end--isn't it now time to buy cheap US assets?
The Germans of the '20s can add more zeros to their paper--but paper producition does not keep up with the 'demand' for money. The US of the 2000s has but to generate a computer entry and like magic, the 'demand' for money is met. The paper of Germany leaves a trail [Fergusson proves this]--computer entries can be a hidden and dirty little State Secret [until prices rise as the money actually depreciates, the state can suppress much of the evidence].
At many levels, this book about a frightening past speaks to a menacing present. Because of its price, many will not get to read that message. Between the Germany of the '20s and the US of the 2000s, there are differences too, but not differences that necessarily help. The potential for money supply to soar (the Fed's ability to create credit by computer without even having to buy ink, paper, and printers) has never been so boundless. We of the 2000s prefer to believe we are more intellegent than the Germans of the 20s. We live with the hope that our enlightened leaders comprehend inflation & understand that deficit spending shall ruin us. Enlighted people that they are, from government top to government bottom, we know and rely upon our leaders' fiscal responsibility. Just look at how enlightenment runs through the Nation--budgetary constraints are placed upon our brilliant leader, by those guardians of the Public Purse & Trust, a US legislature that checks and balances all his raw power. If you buy into the spin, they all do their utmost to preserve & protect the currency, while shouldering their duties to preserve and protect our Constitution. Tonight, I sleep contentedly, knowing both these National Treasures are safe and sound.
Read this book: it is still found in libraries. You will be witness to ink on paper that actually has and holds its value.
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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 28 July 2010
The parallels with today are clear for all to see - just substitute `credit crunch' for WW1, and `bankers' for `Jews'.
Then, as now, the colossal costs of disaster were met, not by higher taxation (or reduced government spending), but by printing money. Then, as now, it was politically expedient to conjure up a populist hate target, rather than deal with the real causes. Then, as now, the political imperative was full employment, regardless of its economic merit. Then, as now, there was a refusal to acknowledge that printing money, or debasing the currency, was the cause of the Mark's decline (consider, for example, the nonsense being put about that UK taxpayers have benefitted because the Bank of England has made a "profit" on the gilts that it purchased with £200bn of imaginary money. The reality is that, in just twenty four brief months, it has lost the nation 25% of its entire wealth, accumulated over centuries. But, as in the Weimar Republic, nobody sees that - they see only how expensive things have become overseas).
This is not what might be termed a `popular' novel. Indeed, it says much for Mr Fergusson's dour Scottish academic thoroughness that he should have been able to make a book about truly momentous events - social collapse, mass destitution, breakdown of law and order, widespread political assassination - such relentlesly hard work to read.
Nevertheless, despite its heavy-going style, the book is a must-read for anyone wishing to gain insight into a financial and social cataclysm that really did occur in modern times, and an understanding of the appalling risks inherent within present political and monetary policies. It is both scary and deeply depressing.
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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 23 March 2012
I am fairly familiar with the story of German hyper-inflation as I had a German great-grandfather living here, but with relatives back in Germany at the time and have some high-value, but worthless, banknotes of the period. Nevertheless, I found the book difficult to read.
The author is trying to do too many things: writing a political history, as well as an economic history AND a social history, while also publishing a statistical digest. There were statistics to the right of us and to the left of us, more than 600 (milliard!). How the book would have benefitted from the use of tables, drawing together the mark, dollar, pound and gold mark over time.
I found the social history best, detailing how families coped with problems we cannot begin to comprehend. Despite the obvious attractions to a publisher to draw comparisons with 1975 and 2008, I do not believe there are any to be made. Economists are firmly in control now: then weak politicians were entirely to blame, particularly in Germany (driven by fears of unemployment and even revolution) and in France (where Poincare's hatred of the Germans, enforcing impossible reparations) helped Hitler's ultimate seizure of power.
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on 6 May 2012
In 1914, 20 German Marks equalled a British pound. By 1924 a British pound was equal to the number of yards to the sun and Germany was all but a barter economy. The First World War had left Germany on its financial knees, though its industrial base remained strong. The payments to the allies under the Versailles Treaty hung heavily on the struggling economy. Gradually inflation started to rise, devaluing the mark against foreign currencies. This allowed German business to grow, but the domestic economy started to spiral out of control. The Reichsbank's solution was to increase wages and print more money to enable the populace to purchase goods. And as prices increased, the denominations of notes increased, and the value of savings and pensions plummeted. It soon became apparent that the only way to extract the value of money was to immediately spend it as Germany entered a period of hyper-inflation (when the value of money at the end of a month was worth half that at the start). By 1923, it was not uncommon for salaries to be raised several times a month to keep pace with inflation. Unable to pay the reparations to the Allies, the French and Belgians moved into the Ruhr, Germany's industrial heartland, to seize and exploit its assets, further weakening the economy and its ability to make such payments. Whilst people suffered, unemployment remained quite low, however by 1924 it was clear that a new strategy was needed to end the madness of exponential inflation. The solution was to introduce a new currency with a stable commodity base and to move the economy onto it, and to balance the books to reduce the need for deficit finance. The result, whilst curbing inflation, was a massive drop in industrial production as German goods became more expensive on the world market leading to mass unemployment. Although not directly responsible for the rise of National Socialism, Fergusson makes a good case that the turbulence of economic circumstance, the disenfranchisement of the middle classes, and the rise of unemployment helped provide the conditions within which it could grow.

Adam Fergusson does an admirable job of detailing for a lay audience what happened with the German economy in the early 1920s. He uses a mix of historical sources, including letters, British diplomatic material, and newspaper reports. Sometimes the narrative is a little dry and it would have been good to include more detail on Austria and Hungary, the strategy of German industrialists, and the French/Belgian intervention in the Ruhr. Although not its intention, what the book demonstrates is the value of the European project in binding Europe into a common monetary framework that makes it easier for countries whose economy is in trouble to weather financial storms. As the present crisis demonstrates, that process is not always straightforward and easy, and is fraught with difficult politics and decisions, but what Fergusson's book highlights is that trying to cope on their own with politicians who seem clueless about core economic principles can be a hell of a lot worse.
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