Rudy, thanks. Your writing is insightful and funny about a deadly serious topic. I have been morbidly fascinated by the German hyperinflation and later embrace of national socialism. I believe the real Rudy claimed to not know how to stop the hyperinflation, but the Reichsbank used persuasion and coercion to get everyone to turn in their gold coins, then they turned on their presses to churn out paper money ad infinitum to fund the republic. Is that correct?
"A particular effort was made to get schoolchildren to campaign among parents and their elders and thus assist in the national quest for gold. Instructive little brochures were produced with stories illustrating how bright children, properly instructed by their teachers, could extract the golden treasures hidden by shortsighted adults. Reading a brochure like “The Goldseekers at Work,” one wonders if the famed authoritarian upbringing of German children was not being sacrificed to Mammon by the Reichsbank. It tells the story of three Gymnasium students who verbally harass a fictional elderly grain merchant, Bernhard Lehmann, into turning in his gold for paper money and perform this patriotic deed during school hours with the approval of their teacher. It had apparently become acceptable, even charming, to tell Herr Lehmann that he was a “betrayer of the Fatherland” and “unthinking” because of his reluctance to part with the precious metal." - The Great Disorder
For more than a decade, the unintended political ramifications of zero rate policy and QE have been obvious to any serious student of history. Nobody on the Board of the Federal Reserve EVER discussed the political implications of their actions, which tend to radicalize the population and turn them against capitalism. Inflation hurts all but the poorest or the richest and when taken to extremes wipes out the middle and upper classes except for those with large real assets financed by debt. Not saying we are there today, but Weimar clearly contributed to the rise of Hitler in Nazi Germany and great inflations open populations to the rise of strong-men who they hope can restore some measure of prior stability.
I was taught that this was one of the results of the demands of our allies for reparations demanded by Versailles, which we allegedly attempted to talk them (Brits & Frogs) down from. ?
Last year I read a diary from a woman that lived in Vienna which covered the end of the WWI period and through the early 1920s when Austria had its own hyperinflation problem and it was quite a tragic recount of events. Among other things she recounted in the book were selling her late husband's cigars (which were no longer available) to the butcher for meat otherwise her family would have no meat and would be that much closer to starvation. She ended up sending her grandson out of the city to stay with relatives on a farm so they knew the boy could get proper food and grow healthy. That book really reinforced to me the importance of having a stable currency for society to function properly. The central bankers and western governments have really put their countries in harm's way with their policies of the past decade (or more).
I don't recall the name unfortunately. If I am not mistaken I believe this diary was quoted a few times in the book "When Money Dies" which captured my interest and I wanted to learn more. I looked this book up from the references section of that book. I am in the US and was able to request this book through Interlibrary loan (The copy I received was falling apart and from some university library). I would like to get a copy myself. If I can track the exact title down I will let you know.
Sebastian Haffner's unfinished memoir, Defying Hitler, also describes the hyperinflation period. It's a terrific book by a sensitive, astute observer capable of deep reflection.
I have followed you for a long time. I am only now beginning to understand why you feel so passionate about inflation. The sad thing is that politicians of the left, who should be alert to the dangers inflation poses for ordinary people, are the ones who seem least concerned about inflation.
I am lucky. I am long real assets and short nominal liabilities. Like Powell, Yellen, Fink et al., raging inflation will be beneficial to me. As Sinclair Upton nearly said, "It is difficult to get a man to understand something, when his net worth depends on his not understanding it."
Someone in the Fed understands that it was the destruction of union power by Reagan that killed inflation, not monetary policy. I'm surprised they were allowed to publish this, as it undermines the myth that Volker, fearless leader of the Fed, single-handedly killed the dragon.
Margaret Thatcher in the UK, who was virulently anti-union, enacted legislation that similarly degrated the bargaining power of workers.
Excellent Rudy! I cringe at central bank wizardry believing they could attain a 2% inflation target, when this obvious example demonstrates how precarious inflation is to society. The hubris of inflation managers are analogous to quack doctors attempting to control just a smidgeon of a fatal disease. Does the disease ever disappear as it consumes host after host ? It didn’t for the Germans and now in real time we’ll tragically see it globally.
Venezuela too. My comments in the piece were specifically about Germany though. I've read many more contemporary sources that all say the same thing about the effects.
I see your point but places like Turkey and Argentina have their problems but the 50 percent inflation doesn't seem to be destroying the fabric of their societies.
Also I think there was this in Germany's case - "Inflation finished the process of moral decay which the war had started". I've become very anti-war over the years (but not pacifist.)
USD/TRY is at 16.4, 10 years ago it was 1.7 or something. That's very high inflation but not a currency collapse into the trillions. Peso is also awful but you're right, seems to be very high inflation, not hyperinflation.
If I didn't know better, I could easily think that the Fed and every major central bank has determined that their goal is a hyperinflation to eradicate the debt. Their denizens know they won't be negatively impacted, that their houses will still exist and that they will be able to eat, and they don't really seem to care much about the vast majority of the population. after all, they describe them as deplorable.
arguably, the very big difference between Germany in the 1920's and the US in the 2020's is that the US still has the 2nd amendment, and the people, and all 300 million of their private weapons, will be a very staunch impediment to their plans. The more polarization they create, the more likely they are to find themselves on the wrong side of that equation.
just sayin'. the need to feed one's family and protect it are the most powerful forces in civilization.
Given that the outcome of hyperinflation is total societal collapse, it seems prudent to avoid going *anywhere near* policies that could result in high inflation that later spirals into hyperinflation. All inflation is dishonest and arbitrarily reallocates wealth. The Fed thinks they can engineer slow inflation that no one will notice (money illusion). Well, people have now noticed -- I am skeptical that the Fed has the will to really tighten. They are playing with fire.
Rudy, thanks. Your writing is insightful and funny about a deadly serious topic. I have been morbidly fascinated by the German hyperinflation and later embrace of national socialism. I believe the real Rudy claimed to not know how to stop the hyperinflation, but the Reichsbank used persuasion and coercion to get everyone to turn in their gold coins, then they turned on their presses to churn out paper money ad infinitum to fund the republic. Is that correct?
"A particular effort was made to get schoolchildren to campaign among parents and their elders and thus assist in the national quest for gold. Instructive little brochures were produced with stories illustrating how bright children, properly instructed by their teachers, could extract the golden treasures hidden by shortsighted adults. Reading a brochure like “The Goldseekers at Work,” one wonders if the famed authoritarian upbringing of German children was not being sacrificed to Mammon by the Reichsbank. It tells the story of three Gymnasium students who verbally harass a fictional elderly grain merchant, Bernhard Lehmann, into turning in his gold for paper money and perform this patriotic deed during school hours with the approval of their teacher. It had apparently become acceptable, even charming, to tell Herr Lehmann that he was a “betrayer of the Fatherland” and “unthinking” because of his reluctance to part with the precious metal." - The Great Disorder
For more than a decade, the unintended political ramifications of zero rate policy and QE have been obvious to any serious student of history. Nobody on the Board of the Federal Reserve EVER discussed the political implications of their actions, which tend to radicalize the population and turn them against capitalism. Inflation hurts all but the poorest or the richest and when taken to extremes wipes out the middle and upper classes except for those with large real assets financed by debt. Not saying we are there today, but Weimar clearly contributed to the rise of Hitler in Nazi Germany and great inflations open populations to the rise of strong-men who they hope can restore some measure of prior stability.
Can we just start calling inflation what it really is - a universal flat government tax? Maybe someone can come up with a clever acronym for it.
Citadel Ben Bernanke agrees https://www.reddit.com/r/RudyHavenstein/comments/uz1aie/congressman_i_couldnt_agree_with_you_more_that/
Fantastic article. Cheers.
Thanks!
I was taught that this was one of the results of the demands of our allies for reparations demanded by Versailles, which we allegedly attempted to talk them (Brits & Frogs) down from. ?
Last year I read a diary from a woman that lived in Vienna which covered the end of the WWI period and through the early 1920s when Austria had its own hyperinflation problem and it was quite a tragic recount of events. Among other things she recounted in the book were selling her late husband's cigars (which were no longer available) to the butcher for meat otherwise her family would have no meat and would be that much closer to starvation. She ended up sending her grandson out of the city to stay with relatives on a farm so they knew the boy could get proper food and grow healthy. That book really reinforced to me the importance of having a stable currency for society to function properly. The central bankers and western governments have really put their countries in harm's way with their policies of the past decade (or more).
What book?
I don't recall the name unfortunately. If I am not mistaken I believe this diary was quoted a few times in the book "When Money Dies" which captured my interest and I wanted to learn more. I looked this book up from the references section of that book. I am in the US and was able to request this book through Interlibrary loan (The copy I received was falling apart and from some university library). I would like to get a copy myself. If I can track the exact title down I will let you know.
I found it: "Blockade - The Diary of an Austrian Middle-Class Woman 1914-1924" https://archive.org/details/Blockade-TheDiaryOfAnAustrianMiddle-classWoman1914-1924/page/n5/mode/2up
That's it! Thanks for the link. I think you will find it quite interesting.
Sebastian Haffner's unfinished memoir, Defying Hitler, also describes the hyperinflation period. It's a terrific book by a sensitive, astute observer capable of deep reflection.
https://www.amazon.com/Defying-Hitler-Memoir-Sebastian-Haffner/dp/0312421133
Cool. I haven't seen that one..
I have followed you for a long time. I am only now beginning to understand why you feel so passionate about inflation. The sad thing is that politicians of the left, who should be alert to the dangers inflation poses for ordinary people, are the ones who seem least concerned about inflation.
I am lucky. I am long real assets and short nominal liabilities. Like Powell, Yellen, Fink et al., raging inflation will be beneficial to me. As Sinclair Upton nearly said, "It is difficult to get a man to understand something, when his net worth depends on his not understanding it."
https://www.federalreserve.gov/econres/feds/who-killed-the-phillips-curve-a-murder-mystery.htm?s=03#:~:text=This%20paper%20provides%20an%20alternative,demise%20of%20the%20Phillips%20curve
Someone in the Fed understands that it was the destruction of union power by Reagan that killed inflation, not monetary policy. I'm surprised they were allowed to publish this, as it undermines the myth that Volker, fearless leader of the Fed, single-handedly killed the dragon.
Margaret Thatcher in the UK, who was virulently anti-union, enacted legislation that similarly degrated the bargaining power of workers.
Volcker was also key in getting the US off gold entirely, which enabled all this CB nonsense.
Dear Rudy, hope you enjoy this brief article we wrote on your unjust "suspension" from Twitter. Keep on trucking, brother!
- https://occupythefed.substack.com/p/who-is-rudy-havenstein-and-why-was?r=17kysn&s=w&utm_campaign=post&utm_medium=web
Hey, thank you!
Excellent Rudy! I cringe at central bank wizardry believing they could attain a 2% inflation target, when this obvious example demonstrates how precarious inflation is to society. The hubris of inflation managers are analogous to quack doctors attempting to control just a smidgeon of a fatal disease. Does the disease ever disappear as it consumes host after host ? It didn’t for the Germans and now in real time we’ll tragically see it globally.
Ok good distinction between the two, I guess I should look and see what happened in Zimbabwe
Venezuela too. My comments in the piece were specifically about Germany though. I've read many more contemporary sources that all say the same thing about the effects.
I see your point but places like Turkey and Argentina have their problems but the 50 percent inflation doesn't seem to be destroying the fabric of their societies.
Also I think there was this in Germany's case - "Inflation finished the process of moral decay which the war had started". I've become very anti-war over the years (but not pacifist.)
USD/TRY is at 16.4, 10 years ago it was 1.7 or something. That's very high inflation but not a currency collapse into the trillions. Peso is also awful but you're right, seems to be very high inflation, not hyperinflation.
I miss your funny seriousness on twitter. Including great ideas like a pigeon hotel
If I didn't know better, I could easily think that the Fed and every major central bank has determined that their goal is a hyperinflation to eradicate the debt. Their denizens know they won't be negatively impacted, that their houses will still exist and that they will be able to eat, and they don't really seem to care much about the vast majority of the population. after all, they describe them as deplorable.
arguably, the very big difference between Germany in the 1920's and the US in the 2020's is that the US still has the 2nd amendment, and the people, and all 300 million of their private weapons, will be a very staunch impediment to their plans. The more polarization they create, the more likely they are to find themselves on the wrong side of that equation.
just sayin'. the need to feed one's family and protect it are the most powerful forces in civilization.
I've said before I do think they all want to hyperinflate...they just want to do it very slowly. They think they're clever.
Given that the outcome of hyperinflation is total societal collapse, it seems prudent to avoid going *anywhere near* policies that could result in high inflation that later spirals into hyperinflation. All inflation is dishonest and arbitrarily reallocates wealth. The Fed thinks they can engineer slow inflation that no one will notice (money illusion). Well, people have now noticed -- I am skeptical that the Fed has the will to really tighten. They are playing with fire.
You write better than I do.
Great stuff.