Why Our Credit Crunch Mirrors the Weimar Hyperinflation from 1919-1923 60 comments
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I am an amateur economist. But, one doesn't need years of schooling to be a better "economist" than Ben Bernanke. One merely needs to take the blinders off and release common sense. A broad background in law, economics and history helps, but it is not absolutely necessary. Economics is the study of human nature as it applies to money. So, it is precisely those who are narrowly educated, like some professional economists who don't study enough history, take an intensely academic viewpoint on things, and who don't understand fundamental human nature, who get things wrong. A narrowness of outlook and training may be blinding people like Ben Bernanke from reality, but, if they are operating knowingly and intentionally, as some claim, the situation is even more frightening.
Unfortunately, Ben Bernanke has been wrong on almost all his predictions concerning the course of this crisis. That has been true since the beginning. Where, then, can we obtain the confidence that he knows what he is doing, or, frankly, that he knows more than we do, as he should? Many wrong-headed people seem to believe that we must throw away common sense and listen to him, and the others who think like him, even though we have been consistently correct, over the past 4 years, and he has been consistently wrong. The American people understandably have little confidence in the Washington crowd. Is this surprising in light of the events? What assurance is there that they know how to address this situation, when they first failed to regulate the financial madness, and, then, afterward, were completely wrong on almost all economic projections, one after another?
One must reach the inevitable conclusion that neither Bernanke, nor his comrades, such as Timothy Geithner, actually "know" what they are doing. Instead, that crowd in Washington DC, think that if they throw money around, it will land somewhere, and help things. They are wrong. But, to partly achieve this goal, they have forced changes in accounting standards, legalizing misrepresentation of bank bookkeeping, and removed "mark to market" standards, replacing those standards with a system of "mark to fantasy" that is remarkably similar to that which previously existed and caused this crisis. "Mark to fantasy" accounting, now the order of the day once again, will allow insolvent banks to present the false appearance of big profits this quarter, even as they are really on the brink of failing. The end result will be more economic imbalances, as investors unknowingly misallocate their investment dollars to buy into the fraud.
In truth, there is only one way to save the zombie banks, and it is not through faked-up accounting books. The only way is to inflate their obligations away, while increasing the value of their assets at the expense of the rest of us. That appears to be the plan, if there is any plan. But, if Ben Bernanke and that crowd do know what they are doing, the most nefarious heist against the American people, as well as other innocent folks all over the world, is being planned. The upcoming massive inflation is going to be a stealth tax upon millions of innocent people, all for the benefit of a few still wealthy bank executives, who made huge mistakes, and should be forced to pay for those mistakes themselves. I will give Ben Bernanke and Timothy Geithner the benefit of the doubt and conclude, until presented with more evidence, that they simply don't know what they are doing.
The mass "throwing of money" has already resulted in a stealthy transfer of wealth, from those who earned it, to those who have political clout. This process is inherently destructive to the long term health of the economy, and it will get worse. This is the same insidious series of events that occured in post World War I Germany. Hyperinflation is a greater evil than economic depression. It is evil in nature, insidiously immoral in that it rewards misbehavior and is fundamentally destructive of our economy and the fabric of our society. It will eventually wipe out the American middle class.
So far, due to various external events, the U.S. Treasury has been able to borrow the money used. The final bill has not arrived. But, when it does, it will be left at the doorstep of the American people, and every other person, around the world, who once believed in America and the American dollar. The deep and sudden devaluation of the U.S. dollar, which is coming, will steal money from innocent pensioners, savers, and good people of all types and kinds, both here and abroad. Unfortunately, after having spent and wasted trillions of dollars for the benefit of those closely connected to the U.S. Treasury and Federal Reserve, there will be a massive dollar devaluation. Indeed, were that not to happen, there would be an overt legal default.
The intent to transfer wealth is the key to understanding all economic catastrophes. It is also the key to understanding why this particular crisis more closely mirrors that of the German hyperinflation 1919-23, rather than the early years of the Great Depression in 1930s America. To fixate on the Great Depression, as Ben Bernanke is doing, ignores the true problem, and sets us off into wrong directions. Let me point out some comparisons:
1) Post WW I Germany was the biggest debtor nation in the world, at that time. Debtor nations are dependent upon foreign cash flows. In contrast, in the 1930s, like Japan in 1990, the U.S. was the biggest creditor nation in the world. That is why Germany had hyperinflation when it printed money, while 1990s Japan and 1930s America had deflation as they did the same thing. Because we are the biggest debtor nation in the world, the current money printing will result in hyperinflation, NOT deflation.
2) Post WW I Germany had just finished fighting a major war on borrowed money, without properly budgeting or taxing. The USA has just fought, and continues to fight, multiple wars on multiple fronts that, while not quite as "big" as WW I, have been extraordinarily costly. We use a professional army, and its pay and equipment add huge costs. We have failed to budget these wars, and have borrowed money instead in order to fight them. By contrast, from an economic point of view, late 1920s and early 1930s America was a net "beneficiary" of WW I, which resulted in huge debts being owed to the USA, and the first stage of the rise of the U.S. dollar to replace the British pound as an international medium of exchange.
3) Post WW I Germany was heavily dependent upon the import of foreign raw materials. Indeed, the USA was one of its biggest creditors. The USA is no longer a creditor. It is now very dependent upon the import of foreign raw materials and finished goods. The temporary improvement in trade figures will disappear as the fake recovery gets under way. By contrast, in the 1930s, the U.S.A. was one of the biggest exporters of raw materials.
4) Post WW I Germany was heavily dependent upon foreign cash flows to plug holes in its budget after the War. Sales of bundesbonds to foreign buyers, including the American financier, J.P. Morgan, were critical. The USA is now even more dependent than post-war Germany once was, upon foreign cash flows. Sales of huge numbers of Treasury bills, notes and bonds are critical, and a lot of those sales are to China, who, unlike America to Germany in 1918, is currently our strategic competitor, and that makes our situation somewhat worse.
5) It is important to point out that Germany was not the only nation affected by the post-War depression and the so-called 1918 "credit crunch." All of Europe experienced it. Not all countries, however, followed the same path to ruin. Similarly, the whole world is now experiencing the so-called "credit crunch". Hopefully, not all nations will follow the path to ruin being forced by the United States, although the tendency to do so is greater, given the leadership position of this nation in the world compared to Germany then.
6) So, Germany led Europe in the effort to spend its way out of the post-war depression, while the rest of Europe, with the exception of the former Hapsburg possessions (the former Austro-Hungarian Empire) did NOT follow Germany's lead. The former Hapsburg possession did follow the German lead, although with less gusto, and ended up with hyperinflation, at a somewhat lower level. Similarly, the USA leads the world in an effort to spend its way out of this depression, and the U.K. is basically following in our footsteps. In 1919, many admired the Reichsbank. Employment rose, unemployment fell...economic output exploded -- or seemed to, at first. No doubt, that will be the case, again, this time as America leads the way into a fake recovery. Most of Germany's recovery amounted to irrational production. The industrial bailouts were improperly allocated and colored by the illicit transfer of wealth that is inherent when a nation chooses to print up new money. The same will be the case with America.
7) Like America, now, the post WW I German money flows, into that nation, continued for quite a while, in spite of the flawed policies of the Reichsbank. American trade interests, for example, supported German spending on U.S. raw material products, because Germany was one of their biggest markets. The USA played a similar role with respect to the Weimar Republic as China plays now to the USA. It was Germany's biggest creditor. It is quite likely that money flows to America may continue for an even longer time. However, eventually, they will be cut off. It is important, once again, to point out that China is our strategic competitor, whereas a large part of the U.S. population has German ancestry that made us a natural friend to Germany.
8) Like the foolish foreigners who now buy U.S. bonds, even otherwise savvy American financiers, like J.P. Morgan, were convinced by officials of the Reichsbank, that the problems were temporary, and that the mark would regain value, just as buyers of Treasury debt are now convinced that the dollar will retain value. The U.S. has a distinct advantage, because it is able to pump the exchange value of its currency with credit default events that must be settled in dollars. This results in a direct benefit to the dollar in terms of exchange value, and allowed the Fed to obtain foreign currency swap lines. The swap lines were obtained because foreign central banks temporarily needed to supply dollars to financial firms who needed to settle CDS events. In addition, most of the U.S. debt is denominated in dollars. So, the temporary party will go on longer in America, until the world's patience is finally exhausted, and the devaluation of the dollar will not be in the trillions, but, rather likely, it will be in the high single digits, or low double digits. My personal estimate is from a 4 to 10 to 1 devaluation, although anything is possible.
9) The Reichsbank claimed that it could control the events it created, just as the Federal Reserve does now. Questionable statistics were regularly published, just as is now the case in the USA. German authorities believed, just as American authorities now believe, that the perception is more important than economic reality. Eventually, however, when the foreign cash flows dried up, reality did reassert itself, as it always does, and the German economy entered hyperinflation.
10) Finally, most tellingly, the German "professional" economists called the 1918 post war depression, prior to the hyperinflation, "the credit crisis", or "the credit crunch", and the prevailing complaint was that banks were hesitant to lend money. Unwittingly, American professional economists, including Mr. Bernanke, have dubbed the present crisis with the same names, and the complaint is exactly the same. Notoriously, the prescribed remedy is also exactly the same, even though, from all the speeches given by Federal Reserve officials, rather than overtly intending to copy the Reichsbank, they seem to be blissfully unaware of the entire German event. Frightening...
Speaking frankly, in all the years I have studied history, I have never seen two historical events that turn out to be exactly the same. Yet, the parallels between the German hyperinflation and the current Credit Crisis are astounding, and the likelihood that the eventual outcome will be similar, is very high. The parallels that link this crisis to the Great Depression are far weaker.
For more information about the German hyperinflation experience, read the following book. It was written long before the current crisis, and even before the full impact of the Great Depression hit the world, back in the 1930s. Thus, it has no bias. It will be an eye-opener for the "doubting Thomas". In the German hyperinflation, only gold and silver, agricultural lands and, to some extent, rationalized modern plant and equipment, held its value over time. The word rationalized is very important, because a lot of useless stuff was purchased by German manufacturers who thought that all "hard" goods would protect the value of their money.
Turroni-Bresciano, Constantino, The Economics of Inflation – A Study of Currency Depreciation in Post-War Germany (George Allen Unwin 1931)
DISCLOSURE: Long gold & silver.
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This article has 60 comments:
If the entire world had done exactly the same thing at the same time, how would it have led to Hyperinflation in Germany alone?
The US was on the Gold Standard at the time as were many other Nations, Time stood still for Gold outside of Germany. It went Nowhere. As a matter of Fact, the USD went up just as fast as Gold.
in 1914 the reichstag had voted the credits to start the war on the assumption that the war would be brief & the losers (i.e., france) would be forced to pay the total costs of the war (like 1871). plans went awry (understatement). in 1919 germany had avoided a communist revolution but was bankrupt, inflation resulted. u.s.a lent money to germany so that german factories could make goods for export and receive money for the exports. call it a round robin if you like.
after a brief 1919 recession in the u.s.a, prosperity continued in the 1920's because everybody in the world owed us money. this came to a screeching halt in 1930 when the creditanstalt in vienna failed european economies collapsed and no further debt repayments were made.
the situations are so different that drawing of parallels is dangerous.
> jack
Supplies will be in excess of demand until the domestic economies of China, India and Brazil expand fill the demand void. This may happen sooner than many expect, particularly in China. The result will be a devalued dollar, stagflation but not hyper-inflation, wealth transfer to emerging markets, much higher energy and commodity prices, lower standards of living in the USA and the end of the USA as the dominant superpower. For this outcome we can thank the investment banks, hedge funds and compliant policy makers who have mismanaged and manipulated our economy.
For hyper-inflation to occur, the global economy would need to abandon the dollar as a reserve currency, creating an Iceland-like crisis and a near collapse of the dollar. If we are not careful, it could happen at some time in the future - perhaps 10 years out. Ultimately the value of our currency will represent the underlying value of our investment, intellectual, resource and legal system capital. We are failing on all fronts at the moment.
On Apr 12 09:38 AM imapopulistnow wrote:
> I think you could lose a lot of money by following this line of reasoning.
> The dollar will devalue but hyper-inflation will not occur. The
> demand side of the equation is gone - in Japan, Europe and the USA
> - simple demographics.
>
> Supplies will be in excess of demand until the domestic economies
> of China, India and Brazil expand fill the demand void. This may
> happen sooner than many expect, particularly in China. The result
> will be a devalued dollar, stagflation but not hyper-inflation, wealth
> transfer to emerging markets, much higher energy and commodity prices,
> lower standards of living in the USA and the end of the USA as the
> dominant superpower. For this outcome we can thank the investment
> banks, hedge funds and compliant policy makers who have mismanaged
> and manipulated our economy.
>
> For hyper-inflation to occur, the global economy would need to abandon
> the dollar as a reserve currency, creating an Iceland-like crisis
> and a near collapse of the dollar. If we are not careful, it could
> happen at some time in the future - perhaps 10 years out. Ultimately
> the value of our currency will represent the underlying value of
> our investment, intellectual, resource and legal system capital.
> We are failing on all fronts at the moment.
None of this makes the historical lessons of Weimar inapposite. It's just sad to see the matter wrapped in the sort of conspiratorial silliness that makes people stop reading before they get to the stuff that matters.
Stripped of unimportant talk about what motivates individual actors, the material problem is that we bought more than we could pay for and now have to default on our bills. We have to. There is no choice, as we don't have anything to sell to pay what we owe. We tried pretending that our real estate was worth more than it is, but that didn't work. Dollar-denominated obligations will be settled at less than par in real terms because there isn't enough of value to settle them in full. Inflation is merely the mechanism by which that default occurs naturally.
If there were no stimulus, no "runaway spending," the trade deficit would still be there, and the debts would still be coming due and we would not be able to pay them except by printing dollars. Without the stimulus, though, the Chinese and OPEC would simply stop taking our dollars sooner, as they would have less business to lose. They wil continue to supply us for so long as they can pretend they are getting paid. If we don't buy, the music stops now. If we do buy, it stops later. In the scheme of things, there's not much difference.
Our standard of living has long been subsidized by the poverty of others. That may or may not have to be the case, but foreign suppliers seem no more eager to elevate their workers and consumers than we are to demand that they do so. In a globalized world, the economies of the U.S. and India should be as much alike as those of New York and Iowa - different, but not very different. Is there enough productive capacity for that to be the case? If yes, can we get there? If the answer - to either question - is "no," then what? I mean, if our hyperinflated currency won't employ those call centers, what will?
Germany owed billions in war reparations to the allies.
Germany found the easiest way to pay these reparations was with hyperinflated money.
The nations that Germany owed the reparations didn't believe that Germany would wreck its own economy by allowing hyperinflation to occur in order to pay its war debts (I guess the allies sure were suprised when it happened.)
To learn more about the financial bailouts and economic craziness back then that mirrors today's economic craziness, read
A Bubble That Broke the World
(Can't find a copy near you? Here is a free version to download)
mises.org/books/bubble...
(Warning long pdf, size 12 megs )
After reading htis you will agree there is nothing new under the sun as far as economic insanity is concerned.
"I will give Ben Bernanke and Timothy Geithner the benefit of the doubt and conclude, until presented with more evidence, that they simply don't know what they are doing."
Here's more evidence - Bernanke, at least, in his writings has RELENTLESSLY confused the "gold standard". Unless you believe he is mentally challenged (I certainly do not), he is a liar, just like Sir Alan before him. Follow the links I've read from here.
www.nolanchart.com/art...
Yes, Weimar was the most severe, but its remembered more today for its significance in creating conditions for the rise of the Third Reich. The following countries also had hyperinflation following WWI - Austria, Hungary, Russia, Poland
Source: The Coming of the Third Reich by Richard Evans
By the by, it is Habsburg not Hapsburg.
www.von-allem-ein-bisc...
On Apr 12 12:01 PM User 261133 wrote:
> The Reichsbank and the Weimar Republic did the hyperinflation on
> purpose in order to repay the war reparations easily, because they
> considered them unjustufied anyway. It was a brilliant and politically
> motivated plan and it worked. Today, despite their toal destruction
> in WW 2, Germany is one of the richest countries in the world.<br/>By
> the by, it is Habsburg not Hapsburg.
yes we can thank the hedgie funds, the investment bankers, the corrupted rating agencies and the clueless & compliant policy dudes & legislators for the current mess.
> jack
America has lived long without any means i.e. use charge card first, then if you can't afford, then declare bankruptcy. The party is over. We made a fool out of the whole world that out attorneys are worth 300$/hr & their attorneys are worth 1$/hr if that much. Our stooco man is worth 30$/hr & their stucco man is worth 7$/day i.e. 90 cents/hr (1/33 the rate). So China & other countries are able to produce most of the items at about 5% of our cost of labor. I worked at some aerospace company at Long Beach Calif. (as an Industrial engr & then quality engr) for about 15 years. What I found that people were working about 35% of the time i,e, they are getting paid at almost 3 times their wages. That kind of company can't last very long. The company can't fire the employees because america has bogus judicial system. So no matter what the attorneys win.
To correct this: If the attorney files lawsuit to defend & the plaintiff looses, the attorney has to pay out of his pocket (deep pockets law as he gets % of the RANSOM/BOUNTY. Which is just like a partnership). If the attorney can't pay, then he not only looses license to practice but also goes to prison at the rate of 10$/hr i.e. if he owes 10,000$ he has to spend 14 months in prison. But if you did that, then how will our congressmen/women get their share of the law firms??????
In general the time is over & the reality is going to catch soon as soon as the dollar hits skids. This will start STAGFLATION. This non sense of 1 teacher for 30 students will eat america alive. Teachers can't put a hole in student's head to learn, The student has to study instead of GANG banging, Watching TV, GRAFFITI ARTISTS etc.
1998 Clinton said that China's 30 billion$ budget for defense is very high because in CHINA DOLLAR GOES 6 TIMES FARTHER THAN IN US.
German children faced starvation as a result of the postwar Allied blockade, designed to force Germany to sign the treaty of Versailles. American Quakers sent relief.
The German middle class was devastated far beyond anything experienced in America today. Germany financed its war with debt - bonds purchased by Germans that became worthless.
Whether the hyperinflation was deliberately created to thwart payment of war reparations may be debated; but in fact Germany wrecked the economy and accomplished that result. American loans bailed them out.
Speculators loved the hyper-inflation; they profited from it, buying real assets with devalued marks; creditors were destroyed.
Germany experienced a revolution; the emperor abdicated; there was fighting in the streets between communists and nationalists; there was no political stability. Germans were completely unfamiliar with the workings of a Republic. Why should there be currency stability?
But the main reason why this comparison is nonsense is the obvious one: Germany was not the lynchpin of the world economy in 1919.
We may face a devalued dollar and eventual inflation but our circumstances today are completely different from those faced by the citizens of the Weimar Republic. Linking the two is not insightful; it is a distraction.
On Main Street, we failed to follow financial discipline. We racked up credit card debt, adjustable notes, and just lived beyond our means! Our economic problems is partially made by us! We showed poor financial discipline and lived beyond our means.
Wall Street and the business world have been spoiled! They've been able to create the rules for trading and running banks with limited monitoring. Like a parent and teenager living with new curfew rules, government is creating stricter monitoring and rules to how businesses are run. Of course Wall Street and the business world is bucking and calling our government officials names, but notice... like the teenager... they are still abiding by the new rules.
Finally... our government. They know what's in our future, and they are bracing for the tough economic times. Creative legislation, leadership, and holding all Americans responsible for making better economic choices are on the horizon. Government must attract the common American to make better decisions and empower us to take part in helping our country to recover from this economic disaster. Like a horrible natural disaster, how well our government corrals us to come together and say, "What can we do to help rebuild our American economy?" will determine the life of this economic disaster.
Our recovery following post WW I Germany or paving a new path will be determined by how Americans see the country. Will we live as victims with finger pointing or will each of us own our problem as one country? Each of us had a hand in the problem, now let's see if each of us dip our hand to get us out!
The world has another problem at present ... too much productive capacity chasing too few customers
Unwanted cars and trashy entertainment are available in vast quantities
Gadgets and games are flooding the markets
Human capacity to manage with less and the ability to focus on those things which are really needed are in short supply
Simple food and clothes, basic shelter, education and spiritual growth are all that really matter ... trashy products are irrelevant
Americans have had more than their fair share of all of these things ... and now they need to realise that the world does not need their trash
What is needed is managerial skill and the intelligence which comes with education and with love for others
America could export these gifts ... but only when the profit motive is abandoned. Spiritual uplift is the answer to the world's needs and the way forward in America's crisis of unearned excess
Profit and greed have been America's downfall. Hospital, schools, libraries, colleges and churches do not need a profit motive. The thirst for profit is out-dated.
Friar Hilarius
As he looked up, Jesus saw the rich putting their gifts into the temple treasury. He also saw a poor widow put in two very small copper coins. "I tell you the truth," he said, "this poor widow has put in more than all the others. All these people gave their gifts out of their wealth; but she out of her poverty put in all she had to live on." [Luke 21 1-4]
Jesus was good at maths. He saw immediately that PROPORTIONATELY the widow had done more. This so clearly reflects the world as it is today. Involuntarily the poorest give over their entire lives to subsistence living … scratching food from over-cultivated dry soil and using water from infected streams. The rich sail past in luxury ocean cruises blissfully unwilling to consider that the wealth they have extracted from the planet is out of all proportion to the sufferings endured by the un-medicated neglected poorest of the poor.
The global financial crises will cause disease and death … while the thieves in banks and other institutions will in some cases enjoy millions of dollars in pay-outs from tax payer bail outs
This criminality is something in which we are all complicit through our apathy, our ignorance and our moral turpitude … were it not for the fact that some of us are in fact sorry but still left with a sense of powerlessness and a sense that our compassion has reached some kind of limit
It is a common-place to say that the cause of the financial crisis has been greed … but has greed been sufficiently removed from the solution? The widow who gave her two copper coins perhaps gave more than we will ever be willing to give.
Friar Hilarius
While the creditors buy up the real world of commodities and manufacturing, the U.S. worries fairness and equality of income.
As for the government and the Fed, it is hard to believe that they are really that stupid. It must be a plan. One involving inflating out of debt and increasing revenue by, you guessed it, taxes. Right now the public hears "lower taxes for me since I am not rich" and they don't even think about what 10x inflation will do to their tax bracket. You think that taxes will be lowered - take a look at California that just raised taxes in the middle of a death spiral. California is a mini -U.S. Watch what happens here.
A personal example: I sold my house in early 2007. Now, at 65 and about to start Medicare, I was thinking that my health insurance costs might go down. I might get something "back" from all those taxes.. Ha. I still pay $500 a month for added insurance and $300 a month for Medicare. Why? Because I am rich - I sold my house for a taxable profit, which was used as my basis for Medicare, and hence I deserve to pay 3 to 4 times what "normal" people pay for Medicare. It has nothing to do with my ability to pay.
It is all about taxes and how to pay for government programs and wealth transfer. Inflation is the answer and the plan. You can see hints buried in the garbage put out by the gov. Lower rates, forgive debt (thank you, Messiah) for those who got themselves in trouble, and later inflate the heck out of everything. The worse off you are, the more you will like it - the minimum wage will go up with inflation. The rest of us - we didn't deserve what we had.
Although I think that you have some valid comments mixed up in there, I sure hope that you have returned to your native country, since you hate this one so much.
As co-owner of a software company for twenty years, I probably fired 250 people, mostly for economic ups and downs, but many for real cause. Even my time at a government job involved firing four people out of a sixteen person group. They were not capable of doing their jobs. Your generalizations and love of places and things not American implies you miss home.
Friar Hilarius
Friar Hilarius
A valid question is why are Mr Bernanke and Mr Geithner doing so much to stimulate credit and so little to stimulate demand?
Also what is their plan to reverse the process of flooding the economy with money and debt?
How will they prevent hyper-inflation which is a clear risk from the money printing process after deflation has ceased to bite and their enlarged money supply starts to circulate?
Why is there so much emphasis on producing things we don't need such as energy guzzling cars and trashy entertainment?
Why is the truth about the moral bankruptcy of the world being so studiously hidden?
Friar Hilarius
Markets rarely allocate resources in the wisest way
They may allocate them in the greediest most self-seeking ways
The best guidance in the use of resources is obtained by attaching no profit to selfishness and rewarding selflessness
Non-profit hospitals, health funds and universities are examples of people working together efficiently for the common good
Efficiency is measured in the amount of good achieved and such measures are not always to be found in computer keyboards and slide shows
They are found in people's hearts and the amount of real peace in the world
When all polluted water sources have been unpolluted and nutritious food has replaced junk food the greed merchants may have something to crow about ... if they succeed
Yet when has greed produced the slightest good?
The under-nourished of the world should receive some of the fat being carried around by obese Americans
Friar Hilarius
I think it is a wealth transfer when the taxpayer is covering the losses.
Nevermind, we have to go thru this I guess. Arrogance is what it is, think we can buy our way out of this one when we need to work our way out.
Good luck America.
Nothing, I will say, just exploiting freedom of life liberty and the pursuit of happiness, is that still okay, or am I supposed to give my money to people who didn't plan AT ALL? Where is everyones savings?
Here it comes.
Buy platinum
I will instead ask just one question: How can anyone seriously write more than three paragraphs about the Weimar hyperinflation without even MENTIONING the word "reparations"?
Well, I do NOT think they are either incompetent or stupid at all. They are very smart people. I think they know exactly what they are doing.
So,
* Why are they trying to save these very corrupt & dysfunctional financial system and the criminal Wall-Street financial elite responsible for the present crisis?
* Why don't they use the already existing laws to close insolvent banks and fire their CEOs, VPs, etc., and confiscate all the stolen loot?
* How come there are no Congressional investigations of the causes of the present crisis?
Well, the answer is very simple: all these very smart people are trying to protect all these criminals and their corrupt & dysfunctional institution because they are a part of this criminal banking & government cartel.
They are trying to save this cartel at ANY COST, even at expense of ruining the US economy and the entire country.
The real question: How long will these criminals be able to commit their crimes and fraud with complete impunity before American people start to recognise what is going on?
It is human to deny, but it is not always logical or correct. We must often overcome such instincts in order to see the truth. One cannot flee from reality simply because it is very hard to accept. Neither the devastation of a war on a nation's own territory, nor forced reparations are a necessary prerequisite for hyperinflation.
Up until recently, Zimbabwee was the breadbasket of Africa, one of that continent's richest nations, a net exporter of grain and minerals, and one of the most successful African nations. It has not been involved in a devastating war. It did experience a change of government, in 1980, when blacks took over the government from the minority white government, but heavy inflation didn't start until years after that.
Inflation rates in Zimbabwee were high, in the 1980s, ranging from 7% to 20%, but, in the early part of that period, prior to the ascent of Paul Volcker to the Fed Chairmanship, inflation was high all over the world, including in America. Extraordinarily high inflation rates, in Zimbabwee, began in the 1990s. It did not begin as a result of any war, but, rather, as a result of economic mismanagement.
Zimbabwean inflation was made considerably worse, however, when the nation became involved in a war in Congo in 1998. That is when heavy inflation converted itself into hyperinflation. The war was never fought, however, on Zimbabwean territory. There was no bombing of cities or towns, no wrecked homes or industrial parks, no shell-shocked population. Zimbabwee simply intervened in a foreign war, pure and simple. All fighting took place in Congo. Just as George W Bush emptied America's coffers by invading Iraq, Robert Mugabe, the President of Zimbabwee, emptied his country's coffers supporting troops in Congo.
Since then, the situation has become uncontrollable. Just recently, it was taken out of circulation by the new government, and foreign currencies are now the circulating medium of exchange, with the U.S. dollar, and South African Rand dominant. In short, Zimbabwean hyperinflation was purely the result of economic mismanagement, including economic mismanagement of the budget for a war, and nothing else.
According to Wikipedia, "The first Zimbabwean dollar was introduced in 1980 and replaced the Rhodesian dollar at par...At the time of its introduction, the Zimbabwean dollar was worth more than the U.S. dollar, with ZWD 1 = USD 1.47...According to Central Statistical Office statistics, annual inflation rate rose to 231 million percent in July 2008." As most people already know, the Zimbabwean currency is now worth next to nothing.
One would hope that Americans, being more politically active, with a long history of an active republic, with traditions of independence and the rule of law, will eventually cry out so loudly that those in power will no longer be able to ignore them. The monetary oligarchy, otherwise known as the "Federal Reserve", and its constituent banks, will be forced to take notice. Before that happens, however, a devaluation in the range of the single or low double digits is certainly possible, and, dare I say...even likely.
As I said in the body of the article, my personal estimate for U.S. dollar devaluation does not reach into the millions or trillions. I believe that American devaluation will range somewhere between 1 to 4, or 1 to 10 by the end of the next 4 years. That, however, is still enough to essentially wipe out the savings of the middle class. The wild betters and risk takers will be subsidized, and those who were prudent will be punished.
That is why such inflation is immoral. That is why it will deeply scar our nation for a generation. It is time for people to begin to make their voices heard, so that the inevitable scarring can be kept as small as possible. Even in countries that do not own the world's exchange currency, the process of currency devaluation takes place over time. This time, the event will be far more protracted than in cases like Weimar Germany or modern Zimbabwee.
We are Americans, and fortunate enough to have the benefit of forefathers who were much wiser than we. The rest of the world willingly gave them the right to print the world's reserve currency. They did this because they believed in us, our integrity, our honesty, in our strength, in our courage and in our convictions. The monetary oligarchy, however, is in the process of either knowingly, or unknowingly, tearing all of that apart.
I'm not so sure that the current "credit crisis" - or whatever you want to call it - is like anything the world has seen before. There are substantial differences between our circumstances and post WWI Germany's. Many of the posts before mine point those out. But the question of whether we are heading to hyperinflation is legitimate.
In his monthly Investment Outlook posted at www.pimco.com/LeftNav/... Bill Gross says "The future of the global economy will likely be dominated by delevering, deglobalization, and reregulating."
Gross goes on to say: " ... it is important to recognize that the aftermath of an economic and investment bubble transitioning from levering to delevering, globalization to deglobalization and lax regulation to reregulation leads to an across-the-board rise in risk premiums, higher volatility and therefore lower asset prices for a majority of asset classes ... and ... "Investors should therefore favor stable income as opposed to speculative growth or the subordinate liability structures of most private market balance sheets."
His conclusion is that the asset classes that went up during our recent super-leveraged, globalized, lax-regulation environment will suffer the most. Of four asset classes that he mentions, he mentions the dollar first. "The Dollar – As the center of structured finance and the shadow banking system, the dollar was bolstered as it sold paper to the rest of the world. To date, its recent strength seems counterintuitive. Weakness may more accurately describe its future."
If he is correct about the dollar weakening, then some type of inflation should be an increasing possibility as dollars lose value. Whether or not we get to hyperinflation, is yet to be determined by more factors than just the printing press.
Because of the policies of the monetary oligarchy, all the elements needed for hyperinflation are already in place, with respect to the USA. By means of example, and not by limitation, all that is now needed is, perhaps, a new terrorist attack, or even just a series of failed treasury auctions to fill in the missing element of a "trigger" event. The same is even more true of the U.K., which is unlucky enough not to be issuing the world's reserve currency.
Buy commodities!
"...Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights..."
Paper speculation in Gold is clearly manipulated and the volatility makes a mockery of any attempt to discern a trend
Acvocating gold is a lazy substitute for identifying the production of goods and services that the world actually needs
Eliminate overwieght cars and overweight people, and their trashy entertainment "needs"
Find out what the world really needs and wage a victimless war on poverty before social unrest leads to civil disorder, and wars with real victims as has happened in the past when savings have been robbed of their value
America has no God-given right to prosperity and unless it invests in growth globally it will slide into poverty locally
Friar Hilarius
> Some comments imply that in the absence of the devastation of WW
> I, and the payment of reparations, hyperinflation is not possible.
> This is a reflection of the basic humanity of the commentators, and
> must be understood as such.
Okay, I let it slide to this point. But now you're discounting something I wrote. Let me make it plain: no historian worth his salt could possibly write anything of substance about the German hyperinflation without even mentioning the effects of WWI reparations. I defy you to cite ANY notable work on the period that completely ignores this fundamental element.
> Neither the devastation of a war on a nation's own territory, nor
> forced reparations are a necessary prerequisite for hyperinflation.
Never said they were. But how can you even begin to explain Weimar's hyperinflation without a discussion of WWI reparations? Better question - WHY did you leave it out? Was it a conscious choice because you think it's immaterial, or was it because you didn't know better?
> Inflation rates in Zimbabwee were high, in the 1980s, ranging from
> 7% to 20%, but, in the early part of that period, prior to the ascent
> of Paul Volcker to the Fed Chairmanship,
No. Volcker became Fed chairman in 1979. So much for the historian.
> George W Bush
> emptied America's coffers by invading Iraq, Robert Mugabe, the President
> of Zimbabwee, emptied his country's coffers supporting troops in
> Congo.
Nonsense. The Iraq war has cost about $650 billion since 2002 (zfacts.com/p/447.html), and 2002 US GDP has been about since that time's been about $76 trillion. Are you saying that Zimbabwe spent less than 1% of GDP on the war in Congo, and that this amount caused economic ruin?
> In short, Zimbabwean hyperinflation
> was purely the result of economic mismanagement, including economic
> mismanagement of the budget for a war, and nothing else.
In short, this has nothing to do with your comical explanation of the Weimar hyperinflation.
> a devaluation
> in the range of the single or low double digits is certainly possible,
> and, dare I say...even likely.
And I dare say - your "argument" is hardly persuasive.
> As I said in the body of the article, my personal estimate for U.S.
> dollar devaluation does not reach into the millions or trillions.
> I believe that American devaluation will range somewhere between
> 1 to 4, or 1 to 10 by the end of the next 4 years.
I must be an idiot, because I have no idea what you're trying to say here. Millions, trillions, 1 to 4, 1 to 10 -- how about putting a number on inflation, like anybody trying to make a case about hyperinflation would? Are you saying 10-25%? Are you saying 400-1000%?
Have you never read even the most basic Milton Friedman?
> the process of currency devaluation takes
> place over time. This time, the event will be far more protracted
> than in cases like Weimar Germany or modern Zimbabwee.
Right. The dollar is worth a fraction of what it was worth 100 years ago. And our standard of living sure has suffered.
> We are Americans, and fortunate enough to have the benefit of forefathers
> who were much wiser than we. The rest of the world willingly gave
> them the right to print the world's reserve currency. They did this
> because they believed in us, our integrity, our honesty, in our strength,
> in our courage and in our convictions. The monetary oligarchy, however,
> is in the process of either knowingly, or unknowingly, tearing all
> of that apart.
Such trite nonsense. If this is all so certain, why aren't the financial markets, which are fairly good at discounting known information, ALREADY punishing the dollar and U.S. Treasuries?
On Apr 12 09:08 PM Friar Hilarius wrote:
> The sooner the world is freed of free market red necks the better
>
>
> Markets rarely allocate resources in the wisest way
>
> They may allocate them in the greediest most self-seeking ways<br/>
>
> The best guidance in the use of resources is obtained by attaching
> no profit to selfishness and rewarding selflessness
>
> Non-profit hospitals, health funds and universities are examples
> of people working together efficiently for the common good
>
> Efficiency is measured in the amount of good achieved and such measures
> are not always to be found in computer keyboards and slide shows
>
>
> They are found in people's hearts and the amount of real peace in
> the world
>
> When all polluted water sources have been unpolluted and nutritious
> food has replaced junk food the greed merchants may have something
> to crow about ... if they succeed
>
> Yet when has greed produced the slightest good?
>
> The under-nourished of the world should receive some of the fat being
> carried around by obese Americans
>
> Friar Hilarius
You are correct, i.e., there will be a revolution in America.
On Apr 13 02:19 AM istartedi wrote:
> Comparisons of the US with Zimbabwe are far more off-base than comparisons
> with Weimar. Z drove all the productive farmers off the land--100%
> taxation if you like. This was accompanied by an expectation that
> any further investment in the country would be worthless due to dysfunctional
> politics. Since a fiat currency's value depends heavily on the political
> and economic stability of the underlying nation, the inflation in
> Z is more properly assessed as an effect, not a cause.
>
> At any rate, that's beside the point. I wrestle with ways to handle
> this issue because I have savings. You talk of "wiping out the savings
> of the middle class". Aye, there's the rub. For the most part there
> is no middle class savings. Thus, inflation would be politically
> saleable up to a point. Wages would have to keep pace, which causes
> the wage-price spiral charactersistic of true inflation, and we are
> nowhere near seeing that.
>
> Am I pissed off about my single-digit returns on cash investments?
> Yes. Am I going to get morally outraged? No. Moral outrage is not
> profitable. The question of money and how it should be spent has
> always been a social question. There is no one particular philosophy
> that is more moral than another.
>
> Currently, the system is using low interest rates as a means of applying
> social pressure to guys like me. When such things occur, the proper
> response is not to wail and gnash over the loss of a perceived God-given
> right to a store of wealth. In fact, if we were to bring Christian
> concepts into this discussion, as some did earlier, we would find
> that Jesus heaped much derision on those who stored grain and gold.
> They were parables; but they might also be enlightening if read literally,
> and from an economic perspective.
>
> At any rate, it does seem prudent to reduce cash allocations--but
> not to gold, which is really just another currency. It makes more
> sense to buy productive hard assets. In particular real estate, since
> supporting real estate prices is one obvious objective of those in
> charge. If they have to inflate to do that, they will. OTOH, if the
> price of gold falls off a cliff nobody really cares except gold bugs.
> This is because people need someplace to live; but they don't need
> gold.
1.- Masive Money destruction for the 2008 credit crunch is bigger than back to early 20’s. FED monetary policy does not match the lost of credit Money made in the last 8 months. Inflation requires fuel. Without credit recovery there will not be enough Money to overheat the system. Credit recovery requires an absent asset at present time named confidence.
2,. Back in early 1920`s Germany was a weak country. Her courrency was under atack. Commercial war and protectionism spread globaly. Last G20 meeting hampered this problems.
3.-The dollar is the world´s courrency. Most central banks support its value. It helps, because german devaluation was one of the most important factors to understand 1919-23 hiperinflation
I think present sitaution is quiet different than early 20`s ones.
On Apr 12 06:35 AM Conan the Barbarian wrote:
> Post world war Germany had unsolvable problems because it did not
> receive the same Aid that other conflict ravaged countries did.<br/>
>
> If the entire world had done exactly the same thing at the same time,
> how would it have led to Hyperinflation in Germany alone?
>
> The US was on the Gold Standard at the time as were many other Nations,
> Time stood still for Gold outside of Germany. It went Nowhere. As
> a matter of Fact, the USD went up just as fast as Gold.
You ask who has the courage to say why they give you thumbs down.
I do so because you are so clearly judgmental that we, the average Joes, are to blame for the current unpleasantness. You expect good intentions (solving world pollution, hunger, and disease) will lead to the expected results. The unfortunate, and ironic, truth is that good intentions are the road to hel....perdition.
You have a great heart. Get a head.
For insurance, I'd suggest investing in common calibers of ammunition. Hopefully, it won't come to that, but if it does, it'll be easier to trade a few rounds of ammo for a quart of soup than to market a gold bar that's nominally worth more than anyone has to trade.
I recently read an article on 'the Marginal Productivity of Debt' by Prof Fekete.
At what stage does servicing the debt become impossible for the debtor? Or does the creditor panic and pull the plug first?
I think the topic of marginal productivity of debt needs more analysis, and I wait to see an article on it by you.
I am on the side of the average Joe
But not just the American average Joe
Check the per capita GDP of the average Joe in Burundi compared with the average Joe in America
You want freedom to live your live in peace?
So does the average Joe in Burundi
When the average Joe everywhere has a fair go ... average Joes everywhere will have the right to live in peace
I urge you to read the book "Globality" ... sub-titled "Competing with Everyone from Everywhere for Everything"
When all the work in America disappears to Asia you might understand how the guy in Burundi feels right now
The work needs to be shared around ... and if the rewards are earned ... producing things that are really needed instead of trash enterntainment, trash computer games and trash ideas ... then the sooner Average Joes everywhere will enjoy both spiritual and material rewards
Think about it ... with your good brain and your good heart
Blessings and Peace
Friar Hilarius
On Apr 12 03:12 PM TeeBone wrote:
> Extending your comparison to Germany into the future, it is possible
> to see a prosperous USA, an export juggernaut of unknown future products,
> with a new western hemisphere currency - the Amero. Obama is courting
> Latin America because there is oil in them thar waters, minerals
> in the mountains and rich soil in the pampas, not to mention a few
> million consumers of those future products. He'd better be sincere
> and thinking about partnership rather than exploitation. He could
> think seriously about legalising marajuana, which would help Mexico
> with its drug wars. Mexico is a rich country with beautiful people,
> being torn apart and we don't need that instability on our borders
> sucking up billions of dollars in a winless war on drugs.
Textbook definitions and common sense suggest that money supply growth beyond GNP growth is inflationary.
Our money supply is the (money in circulations) times the velocity of the money. USA has been printing money and the reason it has not shown up yet as inflation is due to two things. 1) Banks and other institutions are hording money and limiting credit so that the velocity is practically zero. 2)The effect of stimulus takes about 12 months to work thru the system. If you take a look at M3 in Shadow Statistics you will see that M3 is climbing and were going to be in deep trouble sooner or later. There is no such thing as a free lunch and Treasuries are now paying zero is a bubble and this too will pop and interest rates will go sky high. Be prepared for super inflations and I said before we do not need to compare ourselves to Germany...OUR INFLATIONS IS GOING TO BE HOME GROWN....MarvinMBA
Many years ago, an editorial cartoonist by the name of J. P. Alley created "Hambone's Meditations" in the Memphis Commercial Appeal newspaper. The star of this single panel was an old negro gentleman who went by the name of "Hambone." By today's standards, this ancient sage would not be politically correct. He always wore overalls, smoked a corncob pipe, and affected a dilapidated straw hat. His one liners, usually delivered in dialect, were as revealing and penetrating as any in Gospel Parables. My very favorite went something like this "if yo' outgo exceeds yo' income, yo' upkeep will be yo' downfall". Adam Smith and Frederick Hayek could not have said it better.
> germany in 1919-20 had no significant war damage. battles were fought
> in belgium, france & italy & britain was bombarded. the 1919
> treaties required reparations be paid by germany for the war damage.
> britain & france used the reparations money to make progress
> payments to the u.s.a on their war debts.
The US is choking on their liabilities just as Germany was choked on the reparation payments.
Not only is the US liable to fund social security, medicare and soon universal health care, the US needs to fund the debt of trillions of dollars that other countries are holding.
There is your parallel and drawing that is not dangerous.
Some also feel that because Zimbabwe intentionally drove all productive farmers out, while such has not occurred in the US, any US - Zimbabwe comparison cannot be valid. US farming is presently feeling the impacts of a) the present financial crisis (e.g., see tinyurl.com/c9s74h); and b) an overlooked factor that can convert a recession into a depression, namely, drought (e.g., see tinyurl.com/c85jlc and tinyurl.com/aa39za).
History rhymes, rather than repeats, because although specific contributing factors to a historical situation are typically not identical to those of a later situation, conditions that give rise to similar types of outcomes by way of negative feedback effects shouldn't be dismissed.