[simplelife]

$this->bbcode_second_pass_quote('MonteQuest', 'B')efore World War I, Germany was a prosperous country; a gold-backed currency, expanding industry, and a world leader in optics, chemicals, and machinery. The German Mark was exchanged four or five to the dollar. In 1923, at the peak of the German hyperinflation, the German government required 1,783 printing presses, running 24 hours a day, to print money. The exchange rate was one trillion Marks to one dollar, and a wheelbarrow full of money would not even buy you a cup of coffee. Most of the German people never saw it coming.

Germany abandoned the gold backing of its currency in 1914 and financed the war with government borrowing. After the war, the Treaty of Versailles forced Germany to make reparations payment in gold-backed Marks. Between 1914 and 1919 prices doubled. In 1922, they doubled once more.

It is clear that the Articles of the Treaty of Versailles, claiming sole German responsibility for causing World War I was unjust, thus it was a shared responsibility for the cause of World War I. The Germans were given six weeks to review and sign the treaty. French Prime Minister Clemenceau said, "We will squeeze the German lemon 'til the pip squeaks.” To convince them, U.S. warships maintained the blockade that had never been lifted at war’s end. Within six months of the armistice, that blockade had achieved a casualty list of 700,000 children, old people and women. The German people, starved and dying by the hundreds of thousands, were reeling deliriously between blank despair, frenzied revelry, and revolution.

In late 1922, the German government had tried to support the mark by purchasing it in the foreign exchange markets. However, since they continued printing new currency at a feverish rate, the attempt failed. The printing presses literally could not run out money as fast as it was depreciating. This also flooded the market with hoarded Reichsmarks, causing the rampant inflation in Germany in 1923. In almost no time, a loaf of bread cost thousands of marks to buy.

The bankers used dollars to buy jewelry, artwork, homes, businesses, farms, and factories from Germans who needed the money to buy food. Within months, the German bankers — many of them Jewish — had become multi-millionaires and the German people had been reduced to paupers. While the rest of the world experienced the Roaring Twenties, Germans were in abject poverty. Many of them starved and froze to death.

The hyper-inflation experienced in the Weimar Republic had two fundamental causes: a low savings rate, and bad monetary and fiscal policy. They also ran large trade deficits.

Starting to sound familiar?

They were able to run huge trade deficits for the same reason we can: because investors from around the globe bought German assets: currency, securities, and real estate. When foreigners begin to realize that Germany was unlikely to be able to pay all its debts, the big capital inflow came to a stop and the Mark went into a free fall. The German government and the German central bank were willing to do anything in fiscal and monetary policy to counteract economic slowdown. It kept on looking for new ways to administer repeated fiscal stimuli, like finding ingenious ways of stimulating bank lending to large businesses on ever more dubious and toxic securities. There came to be called a “Havenstein put” — in which the central bank would keep its interest rate at basically zero, so that German businesses could continue to expand.

Deja vu?

How did this all end?

The German people turned to Adolph Hitler in 1933.

[nobodypanic]

$this->bbcode_second_pass_quote('Polemic', '"')We made a monster of Hitler, a devil. That is why we could not after the war say otherwise. We had personally mobilized the masses nevertheless against the devil. Thus we were forced after the war, to play along with this devil's scenario. We could not possibly have made our people clear that the war was only an economic preventative measure!"--James Baker III
SOURCE: DER SPIEGEL, 1992

[JohnDenver]

$this->bbcode_second_pass_quote('MonteQuest', '')$this->bbcode_second_pass_quote('seahorse2', 'C')areful Monte, if you warn of problems, JohnDenver will accuse you of fear mongering and being a racist.

[mattduke]

$this->bbcode_second_pass_quote('', 'E')arly in the year 1789 the French nation found itself in deep financial embarrassment: there was a heavy debt and a serious deficit.
Statesmanlike measures, careful watching and wise management would, doubtless, have ere long led to a return of confidence, a reappearance of money and a resumption of business; but these involved patience and self-denial, and, thus far in human history, these are the rarest products of political wisdom. Few nations have ever been able toexercise these virtues; and France was not then one of these few.

[InToWishin]

$this->bbcode_second_pass_quote('', '[')u]German parliament backs submarine sale to Pakistan

... Germany's parliament rejected Thursday an attempt to stop the sale of three submarines to Pakistan, with pro-government speakers defending the sale. ...

[ReverseEngineer]

$this->bbcode_second_pass_quote('InToWishin', '')$this->bbcode_second_pass_quote('', '[')u]German parliament backs submarine sale to Pakistan ... Germany's parliament rejected Thursday an attempt to stop the sale of three submarines to Pakistan, with pro-government speakers defending the sale. ...

[MonteQuest]

$this->bbcode_second_pass_quote('JohnDenver', ' ')Meanwhile, you and seahorse are pimping topics like this which have nothing to do with peak oil.

[nobodypanic]

$this->bbcode_second_pass_quote('ReverseEngineer', '')$this->bbcode_second_pass_quote('InToWishin', '[')u]German parliament backs submarine sale to Pakistan ... Germany's parliament rejected Thursday an attempt to stop the sale of three submarines to Pakistan, with pro-government speakers defending the sale. ...

[AlexdeLarge]

"I'm not worried about Obama trying to turn into Adolph.

I'm worried about the possibility of an Adolph showing up after Obama fails.

Obama wasn't elected into the maw of massive unemployment and economic disintegration. While the nation was in recession and things were "bad" during the election, we've been in that sort of "bad" before and its not really THAT bad - yet.

The sort of "bad" that produces an Adolph is an order of magnitude worse than what we've seen thus far, and believe me, neither you or I want to see it."

Genesis aka Karl Denninger

[pup55]

A couple of side points:

In 1925, 25% of the German population was involved in agriculture, who were particularly hosed by the government when prices were rising, and were also hard hit by financing issues when they borrowed a lot of money and the prices collapsed in 1930.

But, a quarter of the population could grow their own food at some level.

Now, less than 1% of the workers in the US are involved in agriculture and most of the rest are clueless in the finer points of this activity.

Also, apparently the number of "white collar workers" in Germany increased by 98% between 1907 and 1925 but the number of "blue collar workers" increased by only 25%, therefore, the society had a lot of people sending memos to each other rather than working.

The white collar middle class was particularly hard hit by the economic collapse that followed, and it was they who were so ticked off they started wearing brown.


The Logic of Evil

[copious.abundance]

$this->bbcode_second_pass_quote('MonteQuest', 'T')hree years after his election in 1936, Hitler had brought the nation back from the dead, creating full employment without inflation. How did he do it?

[MonteQuest]

$this->bbcode_second_pass_quote('OilFinder2', ' ')BTW in reference to your first post, the US has been running trade deficits almost non-stop since the late 70's. If trade deficits were to cause hyperinflation, it would have happened long ago.

[MonteQuest]

$this->bbcode_second_pass_quote('OilFinder2', ' ') Anyone can grow their economy by building gazillions of tanks, aircraft carriers, fighter jets and so on. That hardly makes it a genuine economic recovery, however.

[yesplease]

$this->bbcode_second_pass_quote('MonteQuest', 'R')eagan and a lot of Republicans thought it genuine. He spent 600 billion building gazillions of that stuff!

[kmann]

Similarities between US today and Weimar Republic 1923? Both are/were soverign nations, after that I don't see much in common. Similar financial problems? I think it was much worse back then in Germany (in fact I know it was). War reparations? We don't have any of those. Running the monetary printing presses 24/7? We're a little more constrained today. This is a manufactured similitude - it doesn't hold water.

[MonteQuest]

$this->bbcode_second_pass_quote('kmann', ' ') This is a manufactured similitude - it doesn't hold water.

[dohboi]

Aren't we pretty darned close to fascism now? We certainly have the nationalism and militarism parts down.

The US spends more on the military than how many other nations? As I recall, it's a whole lot, but I don't have the data at my finger tips right now.

When things get really painful, people will cheer any war effort.

Hell, we went to war on Iraq on the basis of a false rumor.

We love war. The only hope is that Iraq has had an effect similar to Vietnam on the national psyche, making us a but gun shy about further interventions. But when things get tough, I think we're going to invade Iran at least.

That said, Obama strikes me as about as far from the temperament of a Hitler as you could find.

[Snowrunner]

$this->bbcode_second_pass_quote('kmann', 'S')imilarities between US today and Weimar Republic 1923? Both are/were soverign nations, after that I don't see much in common. Similar financial problems? I think it was much worse back then in Germany (in fact I know it was). War reparations? We don't have any of those.

[Tyler_JC]

The money being created by the Federal Reserve right now is far less than the amount of money being destroyed by the crash in equity prices.

If they "print" a trillion dollars when ten trillion in assets have disappeared, does it really spark runaway inflation?

[Snowrunner]

$this->bbcode_second_pass_quote('Tyler_JC', 'T')he money being created by the Federal Reserve right now is far less than the amount of money being destroyed by the crash in equity prices. If they "print" a trillion dollars when ten trillion in assets have disappeared, does it really spark runaway inflation?