Vox Rationalis

Why Our Credit Crunch Mirrors the Weimar Hyperinflation from 1919-1923

Avery Goodman wrote:

> 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?

Why Our Credit Crunch Mirrors the Weimar Hyperinflation from 1919-1923

This article is so far off-base it's hard to know where to begin. There are literally dozens of statements with which I would take issue.

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"?

Yamana Earnings Are Golden

I saw Golden Cross open for the Black Candles once. They had a good beat, I could dance to them, I gave them a 72.

Time to Revise Our Gold Expectations

I think the correct play here is not long gold, but short US Treasuries. Think about it - today, 4-week treasuries sold at 0.00%. Nothing! There is almost literally only one way for Treasuries to go. And suppose the Fed and Treasury get it just right, removing liquidity as the banking system restart lending, such that there is no inflation? What happens to gold if there's no rampant inflation? Might go up a bit, might go up not at all. As the economy improves, and as risk aversion lessens, money will move into more risky assets, and away from Treasuries, causing them to lose value. And as the battle shifts from deflation to inflation, interest rates WILL go up, and Treasuries will become less valuable.

User XXX wrote: "You deflationists out there, please tell me what prices are going down? Okay, gasoline. Name something else. Food? Not! Any other "necessities&quot.... Not! So, where is the DEflation?"

As overall leverage has dropped, there are fewer dollars chasing about the same assets, and about the same level of production. As confidence has dropped, there are fewer people spending money in the marketplace, as people are tending to save more. This is a simple supply/demand problem. If there are fewer dollars in the market and the same amount of stuff, the dollars become more valuable in terms of the stuff. Prices decline.

Sure, it's theoretical, but there are already signs of it. Since the summer, orange Juice at Costco is down 5%. Rotisserie chickens are down 10% (I believe Costco prices fall faster than most if not all other stores). All commodities have dropped significantly, and the prices are working their way through. As for financial assets and real estate - do I even need to say it?

Time to Revise Our Gold Expectations

Georealist: "As for currencies..they are ALL depreciating...the wannabe analysts who don't know that really should check the most recent liquidity and interest rate move by EVERY country."

I love people who know everything. Tell me...depreciating against what exactly?