Earlier this year, in a flea market, I found an interesting book: Exchange, Prices and Production in Hyper-Inflation: Germany, 1920 – 1923, by Frank D. Graham (Princeton University Press, 1930).Download PDF
I had come across Professor Graham’s name on Mises.org, so I suspected the book might offer insights into these matters from a free-market perspective. The copy I bought had languished in a well-known university’s library for about 80 years and then been discarded — since some universities apparently are no longer in the business of preserving knowledge.
Frank Graham (d. 1944) was a Princeton economist. He lived in, as the old Chinese curse has it, “interesting times.” Generally, he supported free markets and free societies during a time when they were under unrelenting attack by jack-booted, collectivist intellectuals of various stripes.
What is unusual about Professor Graham’s 1930 book is that it views the events in Germany without foreknowledge of the Great Depression, the Nazi takeover, or the madness of the long-running Soviet state. In that sense, it is an innocent book. For instance, the professor makes a passing reference to what we now view as the market crash of 1929, but to him it is just another Wall Street panic, barely worth a mention — not yet known as the harbinger of nearly twenty years of depression and war. FULL ARTICLE by Ralph Fucetola
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THE ROAD TO HYPER….
Just so we can go along ticking the boxes… obviously it’s just an approximation, but it’s more or less how it happened in other countries… Weimar/Zimbabwe/Argentina/Brazil/Yugoslavia….
http://en.wikipedia.org/wiki/Hyperin…hyperinflation
1. BOOM: mkts rise… asset bubbles
2. BUST: mkt crash, inflation goesn -ive, CBanks overreact: rate cuts, money injections
3. BOND BOOM: govt debt balloons, debt issues soar…
4. STABILIZATION: stocks, comodities recover, bonds stabilize, volatility declines…
5. BOND BUST: inflation goes +ive, bond buyers pull out… CBs step in.. buy bonds (QE), gradually crowd out, scare off real buyers…
6. CURRENCY CRISIS: money flees inflated currency, first a trickle, then a flood…
7. INFLATION ROARS: QE, currency weakness push prices, inflation accelerates, commodities rise, inflation reaches pre-BUST highs….
8. POINT OF NO RETURN: cbanks slow to contract money supply, govt still spending more, deficits keep growing…. real economy still slow… prices spiral
9. CURRENCY DESTRUCTION: double digit inflation, currency devaluation, bond mkt crash… inflation goes logarithmic… confidence in money is destroyed… eventually even monetary contraction will not help as demand for cash evaporates.
—————
..inject 1 dose of Volcker at any stage (before 8) to avoid going HYPER… side effects include: sharp recession, lost elections, unemployment spike, unpopularity, strikes…
pdf link is missing
Regards, Don
http://mises.org/books/hyperinflation.pdf
If you want to read a fantastic pre-Fed summary of the effects of paper money and inflation, try this:
http://www.libertarianpress.com/fiatmoneyinflation/
It’s by Andrew Dickson White, one of the co-founders of Cornell, describing in detail the effects of paper-money inflation in Revolutionary France, from 1790-95.
The effects (and the politics) he describes are unbelievably modern.
Quote from Frank Graham’s article: “Starting with a gold mark worth about a dollar in 1920, Germans ended up with a worthless paper mark that, in November 1923 was replaced by a new gold-backed mark, at the rate of 1,000,000,000,000 (one trillion) old paper marks to one new gold mark. As a comparison, the worst inflation experienced in the United States (so far) was the collapse of the Continental Dollar. From 1776 through 1787, Congress’s paper dollar fell from an exchange rate of one for each silver dollar to one thousand for each silver dollar.”
Quoting Wikipedia article on Zimbabwe’s inflation: “In February the government of Zimbabwe revalued its currency. One of these new Zimbabwean dollars is worth one trillion of the previous.[41] This move took the number of decimal places removed during the period of hyperinflation to 25 (1025 = 10 septillion short scale; thus, if no revaluations had taken place, Zimbabwe would now be issuing 10 septillion dollar notes).”
“Good grief, Charlie Brown, is that an all-time record?”
“Sure is Snoopy, but remember, records are made to be broken.”
Magnus,
I’ve just gone and read White’s summary of France’s paper money experiment.
The parallels to today are, indeed, spooky.
Mangus:
Fiat Money Inflation in France (1933) is also available at LvMI
http://mises.org/books/inflationinfrance.pdf
I know that when we get in the zillions people tend to lose count but:
Weimar record of 1,000,000,000,000 (one trillion) to 1 versus Continental at 1000:1,is NOT a Million times worse!
It is a BILLION times worse.
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