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on 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 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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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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on 28 March 2012
Pray to whatever deity you revere that we never repeat the experience documented in this stunning analysis of the causes and effects of the hyperinflation allowed by the political masters in the Weimar Republic. History, sadly, confirms that our political masters never learn, and regularly repeat their political ancestors' idiocies.

We read in horror as the wealth of the German people is pillaged by all and sundry, while the once-solid middle class is reduced to beggary, while even the rich are ruined, forced to sell any asset of value for the pittance needed to buy a loaf of bread - only to find the price doubled when the shop opens the next morning.

This is not a pleasant read, nor a quick one - but those who take the time to read and absorb will appreciate the lesson, and perhaps even take precautions against the possibility that our current political rulers will repeat the sins of their forebears.

Probability is probably a better word than "possibility" . . .
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on 11 November 2010
Incredibly interesting account of how a currency can get out of control and take on a life of its own.

Amazingly Havenstein couldn't connect that by printing so much money that he contributed to such conditions, didn't he buy things himself?

Granted Germany was in great social difficulties so its rather difficult to know what could have happened if hyperinflation had not happened. A civil war may have had Hitler in power earlier or the communists may have taken over. Both of which would have had great ramifications throughout Europe at those times. Granted the French squeezing the Germans until the pips squeaked was not the greatest idea to bring democracy to Germany and taking over the Ruhr as well did stiffen the resolve of the Germans, which says a lot for politicians grasp of current thinking.

Its a useful lesson for the people in Government to learn although the conditions are different to what Germany experienced.

I suppose fundamentally if a county is going to war then it should make sure it wins it.

I think in todays financial climate I wonder what war we lost. Perhaps it was the war for prosperity, unfortunately austerity won that war and we are going to be the losers.
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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 17 October 2013
This is a massively interesting book with spooky parallels to today's money-printing excesses. It is written almost exclusively from an economic standpoint. The author is particularity strong in describing how different the situation looked within Germany--an eerie parallel with Londoners gloating at the high values of their houses and not realizing what that means in macro terms. Perhaps this is personal taste but I could have done with less week to week economic data and more on the background. The Communists are only pesky operatives on the margins when it is plausible that, if Germany had been more economically responsible, the consequent mass unemployment could have tilted the country toward Moscow. Another minor gripe to an otherwise excellent book is that we cruise right on by that iconic wheelbarrow scene. The impact of 100 milliard notes gets lost in the big numbers. All the notes in that wheelbarrow could be reduced to one note, it's just a question of adding zeroes, but we are left wondering when the wheelbarrows rolled. Perhaps before the big notes?
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on 7 January 2013
This is a good book for anyone to read, explaining as it does the serious way that politicians let the Mark (and Germany) slide into ruin, reducing virtually everyone to penury. Some of the anecdotes detailed give a real idea of the desperate struggle of living through this period.

Some people (and I am amongst them) will draw some parallels between this episode and current debt-financing of western economies. We can only hope that our leaders have more sense now than they did then!
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on 30 November 2017
And you thought the 2008 financial crash was bad? This book is a wake-up call to the potential hazards of quantitative easing.
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on 17 April 2014
This must be the ultimate book about Germany in the 20'ies - ind inflation in general. It is superbly written, describes both the political side and the practical side of the hyper-inflation, and gives a chilling picture of everyday life in Germany in the period when money stopped making sense.
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