29 July 2011
Some thoughts on “When money dies” by Adam Fergusson

This book, which even some normal people I know have heard of, was originally published in the 1970s and is about the Weimar hyperinflation of 1923.

It’s a bit fact after fact.  Sure the thousands become millions and millions become billions (or milliards as they said at the time) and the our billions become the their billions. And it’s good at describing how some do badly then most do badly while a small minority who have borrowed at nominal rates do very well for themselves indeed. But there’s not enough space given over to consider the debates of the time or the principal actors.  Thus we never get to find out anything about key figures like Hugo Stinnes, the industrialist or Rudolf Havenstein, the Ben Bernanke of the day.

What is odd is what the Germans do not do.  They do not refuse Reichsmarks.  They do not seriously examine how they got into this mess.  They do not question the existence of a united Germany [Incidentally, why is it that the appeal of German unity has never been dimmed by its rather less than stellar reality?]

Actually, that’s not quite true.  Towards the end there are nascent secessionist movements in Bavaria, the Rhineland, Hamburg and Saxony. It is at this moment the government gets its act together.

The other feature of the final stages was the food situation.  Farmers stopped supplying the towns which led to the towns coming to the farms.  And not in a nice way.

At root of it all was a government deficit.  Fergusson never really explains how this comes about.  One can speculate that it’s the consequence of the Germans having to pay not only for their own war but for everyone else’s (through reparations) as well as propping up inefficient state industries like the state railway and post office.  But Fergusson never does the sums so we don’t know.

[Afterthought.  Actually, he does point out that towards the end even the government had given up trying to do the sums. Another impact of hyperinflation.]

One of the odd things about that time was the virtual absence of unemployment.  But then it struck me - in a hyperinflation you have to keep working.  If you are unemployed your savings won’t last 5 minutes.  Unemployment can be a “good” which hyperinflation denies.

The end is also rather odd.  Normality - or what passed for it in Weimar Germany - came with the introduction of the Rentenmark backed not by gold - they’d run out of it - but by mortgages and rye contracts.  And, bizarrely enough, it worked.

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