Nathan Tankus: Germany, the “German View” of Hyperinflation and the Ghettoization of Dissent

By Nathan Tankus, a student and research assistant at the University of Ottawa. You can follow him on Twitter at @NathanTankus

Money is a social construct. It also facilitates many complex, interrelated social relations. As a result, it’s difficult to pin down for the average person what the effects of a particular policy will be, especially with regard to economic policy. While inflation may have negative effects in certain times or places, it’s difficult to figure that out just by looking around a city or country. As a result when politicians or other figures with agendas want to talk about inflation, they inevitably go for the most visceral descriptions available. For some number of decades now, the example they go to do decry inflation is people carrying around “wheelbarrows full of money” to go buy something such as bread. One of their favorite examples is Weimar Germany. So let’s talk about it.

What’s odd about this knee-jerk reaction is that it’s just begging for context. Weimar Germany? Wasn’t that a government formed right after Germany’s defeat in world war one? Perhaps that had something to do with the ensuing collapse? Indeed it did. Dealing with this issue was a major obstacle for monetarists. In the 1920’s there were certainly people touting the quantity theory of money as an explanation for Germany’s crisis, but there were also prominent people pushing different ideas. It’s sometimes forgotten that Keynes first became famous by writing The Economic Consequences of the Peace criticizing the allies for imposing reparations (in real goods and services and foreign currencies) beyond Germany’s ability to pay.

This point should be emphasized. Keynes finished writing his book a little over a month after the Treaty of Versailles was signed. His work was the definitive opinion on the treaty and spread the view that the terms were unfair, which was taken up by people across Europe and the United States. A few years later Harold Moulton, an American economist, wrote an entire book called Germany’s Capacity to Pay taking a similar view point. How then did the view that the allies created a balance of payments crisis by imposing on Germany those reparations, get transformed to the point that now even German political elites believe that Weimar Germany printed too much money and caused hyperinflation?

Well, first Keynes’s position had to slip away into the sands of history. Over a decade after Keynes’s polemic, Bresciani-Turroni wrote The Economics of Inflation: A Study of Currency Depreciation in Post-War Germany. Finally the definitive monetarist explanation of Germany’s experience had arrived (you can tell how successful it was because is the one hosting the pdf file). Bresciani-Turroni mentions Keynes, but he makes sure not to remind his readers that Keynes ever wrote specifically on the German situation. However, he doesn’t ignore the “balance of payment view” all together. Instead he does something more insidious: he forever brands it “the German view”.

What was the “German View”? Bresciani-Turroni used Karl Helfferich, a German Treasury secretary during World War I (then called the Great War) and a prominent critic of reparation payments. This choice was very deliberate since it was easy to make the case that any view he proposed was of the most self serving ideological type (notice that among monetarists and neoclassical economists it’s only those whose they criticize who have a “special” interest). Anyway, Helfferich argued (quite rightly in my opinion) that the causality ran from falls in the exchange rate to inflation which in turn increased the money supply (as Post-Keynesian authors have been arguing for decades ):

The depreciation of the German mark in terms of foreign currencies was caused by the excessive burdens thrust on to Germany and by the policy of violence adopted by France; the increase of the prices of all imported goods was caused by the depreciation of the exchanges; then followed the general increase of internal prices and of wages, the increased need for means of circulation on the part of the public and of the State, greater demands on the Reichsbank by private business and the State and the increase of the paper mark issues. Contrary to the widely held conception, not inflation but the depredation of the mark was the beginning of this chain of cause and effect; inflation is not the cause of the increase of prices and of the depreciation of the mark; but the depreciation of the mark is the cause of the increase of prices and of the paper mark issues. The decomposition of the German monetary system has been the primary and decisive cause of the financial collapse. (Helfferich 1923, cited in Bresciani-Turroni 1931 pg 45)

Bresciani-Turroni goes on to make the case that this view was shared by most of the German press and elite. Obviously this view was self serving, but just because you’re paranoid doesn’t mean they aren’t out to get you and just because your theory is self serving doesn’t mean it’s wrong. It goes without saying then that in such a short sighted and ahistorical field as economics, Bresciani-Turroni was wildly successful. Almost a century later, this view of hyperinflation is still being called the “German view” in the academic literature even though now even the German elite are parroting the opposite view (indeed, now that they are running the balance of payment surpluses and have the rest of Europe under their heel, they are again presenting the most self serving view). In this time of crisis, it’s obvious just by walking around how much worse things have gotten. You can see austerity in the streets and faces around you. If you want to know the seriousness of a balance of payments crisis, I suggest you visit a Greek hospital.

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  1. reason

    very good. But the monetarists are right. The Germans could have refused to print more money and all starved instead.

    1. William C

      My own family history, which I learned only fairly recently, perhaps gives some insight into why the French wanted heavy reparations from Germany.

      They were factory owners near Lille, with a large house. This was all occupied by the Germans throughout 1914-1918. The Germans stole the machinery from the factory and all the household valuables, furniture, paintings etc. The family did get some compensation after the war (paid for by Germany) but it was nowhere near the value of what had been lost. The family never regained their former wealth. The compensation arrived too late to start up the business again (and no doubt the world had moved on).

      My grandmother always used to speak of ‘les sales Boches’ (apologies to my German friends)

      War is terrible

      1. Nathan Tankus

        I didn’t get into it in this post, but actually the biggest motivation for France and Britain was debts owed to the United States. Historically when a country provides financial support to an ally it was in theform of subisidies (as was the case during the revolutionary war from France) or loans that get canceled after the war is over. The U.S didn’t do this however. Instead they squeezed europe for all they could provide so europe squeezed Germany in turn. Note that Keynes advocated a cancellation of all inter-Allied debts. Hudson documents this well in superimperialism.

        Not to say that there weren’t real costs to a war that were devastating. Only that I don’t think it was the primary motivation.

        1. jake chase

          As I recall, WWI ended in an Armistice. Germany didn’t surrender, and thus didn’t ‘lose’ the war. Germany lost the peace. America insisted that England repay its war debts; England was only willing to pay if France repaid it’s debt to England (the amounts were roughly equivalent). France couldn’t possibly pay without reparations from Germany, and Germany couldn’t possibly pay what France demanded (and in fact, never did pay all that much through 1930, when the reparations were cancelled)

          What destroyed Germany in the Twenties was the unequal impact of inflation on various segments of society. Those engaged in ‘business’ probably profited on balance, since they bought goods today and resold them tomorrow, as prices were skyrocketing through 1923. Those on fixed incomes and pensions, those whose claims were limited to money (eg, bank accounts), lost everything in a few weeks. All of this was blamed on ‘bankers’, many of whom were Jewish. The rest, sadly, is history.

          Economic devastation has political consequences. Don’t think it can’t have consequences here. Any damn thing is possible.

          1. Susan the other

            A very clear explanation of what happened, in the course of the next 20 years, to completely “destabilize” the western world. Very good info.

          2. hexagram

            “Many of whom were Jewish”??? Jews were 0.05% of the population in Germany and certainly did not dominate the banking industry. They were not even particularly influential in banking . But, of course, that hurts the story.

          3. different clue

            “Germany did not lose the war” is a fair point which is not often enough noted. Did Keynes predict a German nationalist reaction to the poverty engineered for Germany by the Versailles Peace? If Keynes predicted that, then Keynes was a very good predictor indeed.

            I do remember reading another very good prediction, though I don’t know how/where to find proof of it just now.
            Captain of Artillery Harry S. Truman was supposed to have written somebody-or-other in a letter that Germany should not be allowed to opt out of fighting through an Armistice.
            He wrote that Germany should have been forced to keep fighting to the bitter end on its own territory. “If they are not defeated on their own territory, they will start another war in twenty years” he is supposed to have written.

          4. John Yard

            Also remember that Germany did not pay for WWI through taxation, but through war bonds . Redemption of the bonds through taxation was unthinkable. Runaway inflation eliminated the war debt, ruined the middle class, but equities and real estate did well.

        2. Moneta

          With hundreds of centuries of warfare under its belt, Europe knew war reparations were a no-no.

          However, the US, the teenager it still is, forced war reparations on Europe.

          We can easily argue that the US and its war reparations were at the root of WW2.

          1. John F. Opie

            Sorry, not the case. All the major conflicts in Europe through WW1 have involved the losers paying for the costs of the victors: in the war immediately preceding WW1, the Franco-Prussian War (aka The War of 1870-1871) ended with France ceding both the Alsatia and Lorraine provinces to Germany, since Germany was happy to abandon monetary claims for the resources in those provinces.

            In fact, the US abandoned its claims against Germany in recognition of the inability of Germany to ever, ever repay them. Both France and the UK, on the other hand, were keen on extracting from Germany as much as possible, including the return of Alsatia and Lorraine provinces (which they got) as well as punitive damages. The idea was to prostrate Germany for generations as punishment for having started the war. We know how that ended.

            Not well.

          2. Moneta

            True. And there will always be demand for retribution. That is human nature.

            However, there was extensive debate about the justice and likely impact of the reparations demands before the treaty was signed. Keynes resigned in protest.

            France might have wanted it but I have trouble believing that the US did not have the last word.

          3. ChrisPacific

            That’s not the way it happened. Interested parties should read Economic Consequences of the Peace – it’s much more readable than Keynes’ other work and is available for free via Project Gutenberg.

            It was France, not the US, that wanted Germany punished. Wilson (US) was the architect of the 14 Points of Peace which were the basis for Germany’s surrender, and which were subsequently subverted by the treaty. The UK was initially sympathetic to the US but election politics and a desire by UK citizens to ‘make Germany pay’ ended up swaying them to the French viewpoint.

            Why the US ended up not having the last word is an interesting point, and one Keynes spends some time on:

            The disillusion was so complete, that some of those who had trusted most hardly dared speak of it. Could it be true? they asked of those who returned from Paris. Was the Treaty really as bad as it seemed? What had happened to the President? What weakness or what misfortune had led to so extraordinary, so unlooked-for a betrayal?

            Yet the causes were very ordinary and human. The President was not a hero or a prophet; he was not even a philosopher; but a generously intentioned man, with many of the weaknesses of other human beings, and lacking that dominating intellectual equipment which would have been necessary to cope with the subtle and dangerous spellbinders whom a tremendous clash of forces and personalities had brought to the top as triumphant masters in the swift game of give and take, face to face in Council,—a game of which he had no experience at all.

        3. rotter

          In Britain the term “Uncle Shylock” became very popular in reference to the US, which was viewed (correctly) as mainly a war profiteer, at a time when the concept of a “war profiteer” was still shameful.

          1. Susan the other

            This is the first time I have heard about Uncle Shylock… evidence of the very effective shut-dow in the US on adverse propaganda… almost the entire 20th century… and so I do believe this is part of the emotional history of the world of conflict that does not get carried over historically. It does get carried over, however.

          2. hunkerdown

            Shylock is barely even Jewish anymore in the public imagination. Why would anyone *want* that brought back to the forefront except to derail?

          3. Lambert Strether

            @Carla My father called credit card rates “Shylock rates.” For him, it was a Shakespearean reference. Now, we can have a discussion about The Merchant of Venice, but whatever the term meant, it wasn’t vulgar anti-semitism as I think you mean it.

        4. K Michael Wilson

          From Michael Hudson’s ‘Trade, Development, and Foreign Debt’ (great book, really approachable writing style) (vol. 2, pp. 387-388):

          ‘Inasmuch as France had borne the heaviest reparations bills in the nineteenth century, especially those owed to Germany, it seemed only natural that it sought even higher reparations from Germany after World War I, and that its fellow Allies would want to share. After all, the war was unprecedented in direct costs ($209 billion). All Europe was submerged in the conflict, and much of an entire generation of men was lost. Matters were greatly complicated when the US government did not forgive its wartime arms debts as had been expected by the Europeans (and by many Americans), but demanded repayment for its S12 billion in arms loans and postwar reconstruction lending. The Allies turned to defeated Germany to bear the cost of this demand. They also wanted to be reimbursed for the physical property destroyed in France and other countries, and for the general domestic costs incurred in waging war.

          The magnitude of the resulting war debts was unprecedented. In fact, Germany’s liability was literally unlimited: it was burdened with reparations so vast that their amount was not even specified by the Treaty of Versailles. The intention of the Allies as phrased by Eric Geddes, head of Britain’s Admiralty, was to ‘squeeze Germany until the pips squeaked’. Its reparations burden represented the world’s first indemnity levied in excess of a defeated a country’s ability to pay on the spot, for example, by liquidating its portfolio of foreign investments and colonial possessions, transferring its land and domestic capital goods and borrowing the balance.’

          And then Hudson goes on:

          ‘In view of the fact that trade historically had followed the direction of international capital flows, it seemed logical that Germany’s export trade would follow the course of its reparations payments. To the extent that these reparations were in turn transferred by the Allies to the United States in the form of inter-Ally debt service, German exports appeared likely to increase most sharply to North America. However, the United States blocked this by increasing its tariffs. Specifically to thwart German competition it levied these tariffs on the basis of relatively high American selling prices rather than the foreign invoice value…

          A falling currency value was supposed to discourage imports and other payments to foreigners and to spur exports. However, Germany’s essential import needs and scheduled debt service were so high that currency depreciation did not succeed in balancing the country’s international payments. By the time the mark was devalued a billionfold, the fallacy of the liberal faith in adjustment mechanisms was demonstrated irrefutably: instead of capital transfers, the currency collapse and falling domestic income forced the economy even further into poverty and threw its balance-of-payments ever further into deficit. This was just the opposite of what was supposed to occur according to the price-specie flow mechanism.’

          Veblen has a great response to Keynes’ book here It’s obvious that Veblen understands things about political economy that Keynes can’t wrap his head around.

          1. jake chase

            Thanks for this wonderful bit of Veblen, which has eluded me despite a determined effort to scavenge every word he ever wrote.

            Says Veblen, of the Treaty’s architects: “in
            effect, in their efforts to safeguard the existing
            political and economic order — to make the world
            safe for a democracy of investors — the statesmen
            of the victorious Powers have taken sides with the
            war-guilty absentee owners of Germany and
            against their underlying population”.

            This is precisely what BHO and our other corrupted politicians have done in regard to the recent ‘war’ levied on the US population by our criminal banking cartel. They have immiserated everyone except for those directly responsible for the carnage, and they have further enriched these looters beyond the dreams of mere avarice.

            No doubt this should be called making the world safe for a democracy of bondholders.

          2. ChrisPacific

            Maybe I’m lacking context or taking advantage of hindsight, but I don’t find Veblen’s argument all that convincing in comparison to Keynes. The idea that we shouldn’t worry about the harsh conditions imposed because they were simply a starting point for negotiation (and anyway the Treaty wasn’t really about Germany at all) does not seem to have been borne out by history. In contrast, many of Keynes’ predictions proved all too accurate.

          3. K Michael Wilson

            I’d be interested to hear from anyone has studied these issues more closely. Was the indemnity expected to be paid? I’m not sure, really. I would wager that the Elder Statesmen actually believed that some kind of perfectly elastic Ricardian adjustment would occur.

            If Veblen was wrong, perhaps he was wrong in overestimating the agency and self-consciousness of the capitalist/ rentier classes. These classes had goals and ideas that were perhaps mutually inconsistent. They wanted Germany (and everyone, as Nathan points out) to pay its debts due to their debt morality presuppositions, but they also really wanted German elites to fight off German communists. These two desires at times might pull in opposite directions.

            What is so disturbing, I think, is that the rentier classes, through their experience in the 1930s, and then in the 1970s and now, have been learning to tweet inflationary/deflationary dynamics without the pesky business of social spending. Keynesianism in its original form was to a great deal out of fear; from the 1970s onward, a new Keynesianism for the 1% has been developing. This is, roughly speaking, the argument I make here, using a lot of the same sources from which Nathan draws.

    2. Moneta

      Had they refused to print more money, the system would have collapsed quickly instead of taking more than a decade.

      And had it collapsed quickly, the French and the US would have seen it as bad faith on the part of the Germans and would have forced reparations thinking the Germans had not suffered enough.

      So yes printing goes hand in hand with devaluations and mass psychology.

  2. Ignacio

    Nice contextualisation effort. I end with impression that the eurozone perifery is now payng for the political error of WWI reparations inmposed to Germany with new political errors that have some vengeance flavour.

    1. Nathan Tankus

      Then I did a good job, thank you! I would say that the imposition of reparations during World War One set off a chain of events that ultimately led to this point (not that the Germans are explicitly persuing their position as “revenge”. remember a lot of local elites and former allied countries are complicit with the Troika’s policies. indeed the Troika is only a third German). Hudson (who to my shame I forgot to cite in this post) has a good account of this process in his book Superimperialism and the sequel Global Fracture.

      1. Ignacio

        Agreed, it is more an automatic repetition of similar errors rather than a conscious error, but I wonder if in the inner psyche of the Bundesbank there is some feeling of rancor when imposing the politics that they did not want to implement in the past, as Reason suggests, I guess sarcastically, they should.

      2. from Mexico

        Nathan Tankus:

        …not that the Germans are explicitly persuing their position as “revenge”.

        The German oligarchs are presently very much not playing the role of avergeners. They are playing the role of liberal internationslists (aka neoliberals, fascists): the quintessential rational maximizers whose first step is to murder domestic labor. This dampens internal demand, creating superfluous capital, which is then exported, in the current case in the form of loans to other nations.

        The revenge part comes later, in the form of mass movements, which may take on a nationalistic form as did National Socialism. And if it does indeed come to that, the role of avenger will be played by the victims of debt peonage — in the immediate case Greece, Portugal, Spain, Italy or Ireland. Granted, it was Germany who was the victim of debt peonage in the 1918 to 1932 era, and the avenger in the 1932 to 1945 era. So German’s role has been reversed.

        All this goes back to something Charles Dickens wrote in A Tale of Two Cities. In that case the enemy was internal, but the message remains the same:

        All the devouring and insatiate Monsters imagined since imagination could record itself, are fused in the one realisation, Guillotine. And yet there is not in France, with its rich variety of soil and climate, a blade, a leaf, a root, a sprig, a peppercorn, which will grow to maturity under conditons more certain than those that have produced this horror. Crush humanity out of shape once more, under similar hammers, and it will twist itself into the same tortured forms.

        1. Nathanael

          Of course, the “rational maximizer” is a short-term thinker, a psychopath even. If they keep pursuing these policies, eventually there are no more places to extract profits from using the excess capital, the capital ends up being uninvestable, unreal money, and capitalism collapses.

          At that point they may *imagine* that they will remain on the top, but they won’t, because they have the wrong skillset. In that environment, the necessary skillset is that of a warlord who is beloved by his troops. And that ain’t them.

        2. Nathanael

          A more interesting question is: how did England escape the trap of overly-rigid elites “killing the golden goose”? Repeatedly, when the UK came close to crisis, the elites would loosen their grip and offer improvements to the masses.

          The result is that they are one of the few countries where the descendents of 17th-century lords are still rich and powerful.

          How did they do this, psychologically? What was the cultural (or other) difference which caused England’s elites to repeatedly step back from the path which led to the guillotine or the crossing of the Rubicon?

  3. Marinbelge

    What a poor grasp of German history this post displays. German economic and financial history is not just a marginal subset of Keynes text books or any other by the way!

    You can certainly argue about the way the Eurozone is drifting badly. In the monetary field for sure. In terms of reallocations of industrial capacities as well.

    But this post is another sample of this “US exceptionnalism” this once great blog is now getting replete with. That is exceptionnalism is “liberal”-based does not change one thing.

    This is US-centric to say the least…

    “If you want to know the seriousness of a balance of payments crisis, I suggest you visit a Greek hospital.”

    Of course, Greece could and possibly should get out the Euro-trap. We certainly can not decide on their behalf. Neither should we.

    1. Gerard Pierce

      “Of course, Greece could and possibly should get out the Euro-trap. We certainly can not decide on their behalf. Neither should we”.

      Of course, “we” can’t make such a decision, but possibly we could learn from their experience and from the parallels to our own problems.

      In both Greece and the United States, ordinary people have clearly expressed their opinions about how to handle the economic crisis.

      In both Greece and the United States, the politicians and technocrats have decided that it’s their way or the highway. The Greeks had referendums and the results were ignored by the political class.

      When Greece collapses, it’s likely that Golden Dawn will become the new government and will engage in ethnic and political cleansing. And anyone who needs medical care or anyting else will sign up with the facists.

      The United States cannot collapse in the same way. Regardless of our economic problems, we have all the guns so it will be very difficult for the rest of the world to rein us in.

      If any economic pressure is brought to bear on the US it will be the same people paying the price for the sequester that will pay the price for a collapsing economy.

    2. Yves Smith

      This post never pretended to be a history of Germany. It is a discussion of theorizing about Weimar hyperinflation. Please don’t straw man.

  4. Fiver

    I suggest WWII and the explicit conditions laid upon Germany after that conflict were seared far deeper into the German elite’s psyche than the fading memory of a panic which, however explained, did effect a panic accompanied by perceived loss of moneyness as paper multiplied with abandon.

    What’s left out of the argument is that the US built and still runs the entire structure of power within which Germany operates, including the principles so oft-described by critics as one or other “fetish”. The Marshall Plan laid on Germany within the Marshall Plan the same basket of conditions as employed by the IMF. The greatest “structural adjustment” ever. If you have a beef with what’s going on in Germany, address it to the global corporate warlords in Washington or the Federal Reserve in New York.

    See “The Making of Global Capitalism – The Political Economy of Global Capitalism”.

    1. from Mexico

      Your comment, like that of Marinbelge above, runs far afield of the content of this post. However, whereas I very much disagree with the point of Marinbrelge’s post, I very much agree with yours.

      The understanding of the history of this era, and of ours, is greatly enhanced if placed within the context of the rise of the pernicious dogma of liberal internationalism that began in the late 18th century (and is still very much with us today), Engand’s rise to world hegemon and its slow decline beginning by about 1870, and the rise of the United States and eventual replacement of Engand as global hegemon by 1945.

    2. Nathanael

      On the other hand, the Marshall Plan economy of post-war Germany involved the equivalent of massive money-printing and deficit spending.

      In this case, it was “foreign aid”, but it meant a structural money-printing bias. Which turns out to be crucial in maintaining full employment in a money economy.

  5. tom

    There is much more to it. Actually after the German revolution of November 1918 which ended the war, the allies didn´t lift the blockade until Germany signed the Versailles treaty. There was mass starvation in Germany after the war and nobody knows how many died. That was the precursor to Weimar inflation. Not unlike what happened in Iraq after the first gulf war. What is also conveniantly forgotten are the the death squats of the Freikorps. These were paramilitary gropus who from 1919 – 1923 subdued worker risings in Berlin, the Ruhr, in Saxony at al. Nobody knows how many they killed and nobody counted. These were the predecessors of the SS. And also no doubt that they got financing from mainly Britain but also the US. (Not unlike Bin Laden many years later) Because if there was something that the Western powers feared even more than a resurgent Germany it was a socialist Germany acting together with the Soviet Union. That also is today conveniently forgotten.
    Not the least in Germany herself, where there´s a new narrative that was taken wholesale from the US.

    1. from Mexico

      tom says:

      What is also conveniently forgotten are the death squads of the Freikorps. These were paramilitary groups who from 1919 – 1923 subdued worker risings in Berlin, the Ruhr, in Saxony at al. Nobody knows how many they killed and nobody counted. These were the predecessors of the SS. And also no doubt that they got financing from mainly Britain but also the US.

      All quite true, and anyone who doubts the part about Britain and the US financing the death squads should read George Orwell’s “England Your England” and “Looking Back on the Spanish War.” Given the depths of moral depravity that the lords of capital in the US and Great Britain had sunk to by the 1920s, it’s remarkable the US and Great Britain didn’t also slip into full-blown fascism.

      There are several theories advanced as to what motivated the June 1934 Night of the Long Knives, the purge of the Sturmabteilung (SA), where the SS demonstrated its loyalty to Hitler. Some assert it was because Ernst Röhm, head of the SS, was a notorious homosexual thug. Others postulate it was because the SA represented a threat to Hitler’s relationship with the German Army. But there is another theory, and that is that the Night of the Long Knives was the amputation and extermination of the “Socialist Workers” part from the National Socialists Workers Party. The SA threatened to sour Hitler’s relations with the conservatives of the country; people whose support Hitler needed to solidify his position in the German government.

      Röhm’s roots and loyalties were solidly working-class, and he and his followers objected to Hitler’s cozying up with the German oligarchs, wanting the party to support the working class.

      More on this can be found here:

      The SA became the proletariat wing of the armed NSDAP while the SS represented the middle and upper class wing. Himmler and Hitler both courted wealthy industrialists for financial backing and many of them were given honorary commissions in the SS in return. This incensed Röhm and the Strassers, who believed Hitler was betraying the NSDAP’s working class roots (just look at the name of the party!). Röhm became bold and outspoken in his opposition to Hitler, even after his rise to the Chancellorship on January 30, 1933.

      And here are examples of some of the criticisms Röhm leveled against Hitler:

      • “Adolf is a swine. He will give us all way. He only associates with reactionaries now. Adolf knows exactly what I want. Not a second edition of the old imperial army. Are we revolutionaries or aren’t we? We’ve got to produce something new, don’t you see? A new discipline. A new principle of organization. The generals are a lot of old fogies.” – May, 1933.

      • “If these bourgeois simpletons think that the national revolution has already lasted too long, for once we agree with them. It is in fact high time the national revolution stopped and became the National Socialist one. Whether they like it or not, we will continue our struggle – if they understand at last what it is about – with them; if they are unwilling – without them; and if necessary – against them.” – June, 1933.

      • “Hitler can’t walk over me as he might have done a year ago; I’ve seen to that. Don’t forget that I have three million men, with every key position in the hands of my own people, Hitler knows that I have friends in the Reichswehr, you know! If Hitler is reasonable I shall settle the matter quietly; if he isn’t I must be prepared to use force – not for my sake but for the sake of our revolution.” – January, 1934.

        1. from Mexico

          What happened next is also open to debate.

          Franz Neuman argues in Behemoth: The Structure and Function of National Socialism that once the alliance between the Nazi Party with the German oligarchs was cemented, that this was the defining characteristic of Nazi Germany from that point on:

          Folks like Hannah Arendt and Eric Hoffer, on the other hand, posit a very different theory. They draw a rather stark line between fascism and nazism, the latter being a phenomenon where the irrational quest to punish their oppressors overtakes the desire for indiviual utilitiy maximization, and a new equilibrium is reached where the nation descends into an orgy of active nihilism. Here, for instance, is Arendt from The Origins of Totalitarianism:

          Only when the nation-state proved unfit to be the framework for the further growth of capitalist economy did the latent fight between state and society become openly a struggle for power. During the imperialist period neither the state nor the bourgeoisie won a decisive victory. National institutions resisted throughtout the brutality and megalomania of imperialist inspirations, and bourgeois attempts to use the state and its instruments of violence for its own economic purposes were always only half successful. This changed when the German bourgeoisie staked everything on the Hitler movement and aspired to rule with the help of the mob, but then it turned out to be too late. The bourgeoisie succeeded in destroying the nation-state but won a Pyrrhic victory; the mob proved quite capable of taking care of politics by itself and liquidated the bourgeoisie along with all other classes and institutions.

          I am a fan of the Arendt/Hoffer theory, and I believe the recent findings of a broad swath of researchers from the social and behavioral sciences bear them out. For instance, researchers have found that, in Western societies, only about 15% of any given population are rational maximizers, with maybe an equal percentage exhibiting spiteful or envious preferences, but by far and away the largest group, maybe 60%, being strong recipriocators:

          A spiteful or envious person always values the economic payoff of relevant reference agents negatively. The person is, therefore, willing to decrease the economic payoff of a reference agent at a personal cost to himself (Kirchsteiger 1994, Mui 1995), irrespective of the payoff distribution and irrespective of the reference agent’s fair or unfair behavior.


          Strong reciprocity is a predisposition to cooperate with others, and to punish (at personal cost, if necessary) those who violate the norms of cooperation, even when it is implausible to expect that these costs will be recovered at a later date.


          It is important to emphasize that strong reciprocity is not driven by the expectation of future economic benefit.

          — HERBERT GINTIS, SAMULE BOWLES, ROBERT BOYD AND ERNST FEHR, Moral Sentiments and Material Interests

          This seems to dovetail very nicely with what Arendt writes in The Origins of Totalitariansm:

          The disturbing factor in the success of totalitariansm is rather the true selflessness of its adherents: it may be understandable that a Nazi or Bolshevik will not be shaken in his conviction by crimes against people who do not belong to the movement or are even hostile to it; but the amazing fact is that neither is he likely to waver when the monster begins to devour its own children and not even if he becomes a victim of persecution himself….

          Eminent European scholars and statesmen had predicted, from the early nineteenth century onward, the rise of the mass man and the coming of a mass age… Yet, while all these predictions in a sense came true, they lost much of their significance in view of such unexpected and unpredicted phenomena as the radical loss of self-interest, the cynical or bored indiference in the face of death or other personal catastrophes, the passionate inclination toward the most abstract notions as guides for life, and the general contempt for even the most obvious rules of common sense…

          Actually, the bourgeoisie was as much taken in by the Nazis as was the Röhm-Schleicher faction in the Reichswehr, which also thought that Hitler, whom they had used as a stoolpigeon, or the SA, which they had used for militaristic propaganda and paramilitary training, would act as their agents and help in the establishment of a military dictorship. Both considered the Nazi movement in their own terms, in terms of the political philosophy of the mob, and overlooked the independent, spontaneous support given the new mob leaders by masses as well as the mob leaders’ genuine talents for creating new forms of organization. The mob as leader of these masses was no longer the agent of the bourgeoisie or of anyone else except the masses.

          1. from Mexico

            And I suppose all this feeds into what one believes happened post-1945, and the current row between the two filmmakers Adam Curtis and Scott Noble:

            There was a great review of “The Century of the Self” published by Media Lens. In it, the author quotes a passage from the film:

            “Politicians and planners came to believe that Freud was right to suggest that hidden deep within all human beings were dangerous and irrational desires and fears. They were convinced that it was the unleashing of these instincts that had lead to the barbarism of Nazi Germany. To stop it ever happening again, they set out to find ways to control the hidden enemy within the human mind.” (The Century of the Self – The Engineering of Consent, BBC2, March 24, 2002)

            The critic goes on to state:

            “As you’ll know, if you’ve read Elizabeth Fones-Wolf’s study of the period, Alex Carey’s work, and countless books by Edward Herman, Noam Chomsky, and many others, this could not be further from the truth. Post-1945, as now, the real fear of politicians and planners was the existence of dangerous +rational+ desires and fears – popular desires for equity, justice and functioning democracy; popular fears that unbridled capitalism and militarism would once again lead to horrors on the scale of the two world wars. Freud’s theories were incidental – useful in refining traditional methods of popular control perhaps, but a sideshow.”


      1. Massinissa

        Yet more evidence, if any were needed, that the claims of Nazism being ‘socialism’ are completely farcical.

      2. Roland

        Hitler had a class dilemma to deal with.

        On the one hand, much of his support derived from the SA. whose leaders wanted to replace the aristocratically-led German army with a revolutionary German nationalist army under the command of “natural leaders.”

        Hitler understood such an army to be in the long term interest of the Third Reich. However, he knew that the efficiency of the armed forces in the near term lay in co-opting the aristocrats who officered the army.

        It was a question of whether the establishment of a German hegemony over the European continent should precede, or follow, the full regeneration of German society along National Socialist lines.

        Hitler and his faction within the Nazi Party favoured the resolution of the external political questions first. In this fashion, the highly favourable–but probably temporary–geopolitical situation caused by the fracture of the old enemy Triple Entente could be exploited by Germany. The remaining usefulness of the old military aristocracy could also be exploited, while victory might serve to truly convert some of them to Nazi ideology.

        The political turmoil necessarily resulting from a purge of the aristocracy from the army would be easier for the regime to survive after a major military victory in Europe.

        In Hitler’s view, Roehm was being badly premature, and therefore dangerous. Hitler thus undertook to liquidate the SA leadership with the help of the army aristocrats, rather than the other way around. “We can deal with the aristocratic swine later, after they’re no longer useful.”

        The aristocrats in the army, for their part, took a similar utilitarian view of the Nazis. Once German hegemony over Europe was established, those upstart guttersnipe Nazi commoners could be put back in their rightful place!

        As long as Germany was (a) busy with preparations for war and with waging the war and (b) looking victorious, the Hitler faction and the aristocrats in the army could all hold their noses.

        Even in the course of the war, Hitler began building up the Waffen SS units as an army-within-the-army, a nucleus of a truly Nazified army of the future with an officer corps loyal above all to the Fuhrer and to the Party.

        Once Germany was losing the war, a cabal of army officers attempted a coup d’etat, as a last desperate bid to save their own class from the general debacle, and perhaps, if a separate peace could be made with the Western allies, even restore aristocratic control over Germany. The coup failed, and then Hitler in the end carried out some of the sort of purges which he had tried to avoid a decade earlier.

        In some of his “table talk” Hitler is said to have mused over whether he should have done it Stalin’s way, i.e. liquidate the potentially disloyal elements in the armed forces before a major war breaks out. On the one hand the German armies did not suffer the terrible loss of effectiveness seen in the disorganized Soviet armies after the 1938-39 purge. On the other hand Stalin never, even in the darkest times of the autumn of 1941, had any of his staff officers planting a bomb under his map table! Which situation is better? Take your pick…

        1. Nathanael

          Stalin was clearly more effective.

          It’s worth noting that if Hitler had won WWII (which was, in fact, impossible for basic resource-availability reasons), the political situation in Germany would have degenerated into feudalist coups and counter-coups by different groups of would-be warlords almost immediately.

          The USSR came very close to that and I’m pretty sure only Communist ideology prevented it.

          I’ve found the history of Mexico extremely informative. People don’t study South American history enough, and I think it’s a harbinger of the future.

    2. Lexington

      A little history is a dangerous thing.

      You don’t seem aware that the Freikorps’ actions were undertaken in the midst of an abortive attempt by German Communists to seize power and was done with the full backing of Germany’s interim Socialist government. No doubt there was some extrajudicial killing by both sides -as there inevitably is under such circumstances- but your sensationalist invocation of “death squads” is revisionist history at its worst.

      Similarly calling the Freikorps the precursor to the SS is just embarassing. The Freikorps were not affiliated with any political movement or party and their agenda was predominantly nationalist – particularly recovery of German territory that had been ceded to the Soviet Union and Poland as a result of the Versailles Treaty. The Freikorps leaders and rank and file was mostly composed of World War I veterans whose political reference points looked back to Wilhelmian Germany rather than forward to Hitler in the 1930s.

      But if your ideological disposition is to re interpret all of German history through the prism of National Socialism I can see how all that could be far to nunanced and complicated to follow.

        1. Lexington


          I thought I was pretty restrained, all considered ;)

          In this age of nearly universal historical illiteracy I shouldn’t discourage those that are at least trying, but over the top talk of Freikorps death squads and being the precuror to the SS is so obviously an attempt to force historical facts into a preconceived narrative that’s its painful to read – and over the years I’ve read lots and lots of this stuff.

          If people who practice history in bad faith (so to speak) aren’t called out on it how can they come to question the validity of their own assumptions?

          That having been said I know I’m touchy about these things. History will always be my first love and I cannot bear to see violence done to her!

          1. EconCCX

            Really? I thought I was pretty restrained, all considered ;) @Lexington

            I wasn’t challenging the substance of your comment. Merely suggesting that little dig at the end of it was not entirely successful.

      1. from Mexico

        It’s always interesting listening to the various theories of history and the back and forth.

        But when you assert that “History will always be my first love and I cannot bear to see violence done to her!,” you should take a look in the mirror, for of all the commenters here, you rank amongst the most egregious offenders when it comes to “doing violence to her.”

        In this comment and your others below, you take your version of history, custom tailored by filtering it through your lens of Anglo-American exceptionalism, and present it as if it were sure truth. Then, low and behold, you accuse others of doing violence to her!

        You use history like a weapon. It’s called lying by omission. And I wonder how your facile and easy interpretaton of history would respond to some of the inconvenient truths that George Orwell reminds us of in, for instance, “England Your England.” Speaking of the British lords of capital, he writes:

        After years of aggression and massacres, they had grasped only one fact, that Hitler and Mussolini were hostile to Communism. Therefore, it was aruged, they must be friendly to the British dividend-drawer. Hence the truly frightening spectcle of Conservative M.P.s wildly cheering the news that British ships, bringing food to the Spanish Republican government, had been bombed by Italian aeroplanes.

        On the other side of the ideological divide we find Guido Preparata in the article ‘nobody’ links above:

        So now, in reaction to your myth of Anglo-American exceptionalism, comes the manufacture of its opposite myth. Both of you, in your drive to make history conform to your Manichean construct, are guilty of dragging history into propaganda and denying the humanity of the dead: their sins, their virtues, their efforts, their failures. One could do worse than remember the advice of the Brazilian novelist Jorge Amado, reflecting on an earlier era of conquest and domination by a global hegemon. Reflecting on the 500th anniversary of Columbus and the conquest of the New World, he wrote, it means for some

        the epic of discovery, the meeting of two worlds; for others, the infamy of the conquista and of genocide… One must set up and compare appearances and differences because only in this way, by understanding what was great and will be an eternal glory, by disclosing what was wretched and will be a perpetual shame, only thus, in reflection and understanding, can we both celebrate the epic and condemn the massacre, neither of which expunges the other. We are the product of both.

  6. chris

    don’t mean to be a spelling nazi, but someone should tell Mr. Tankus that it’s WEImar not Wiemar.

        1. monday1929

          Last week I spoke with a family friend who went to Greece to deal with a sick relative. I asked specifically (sp?) about the hospitals, expecting to hear that it was not as bad as is being reported. Because that is usually what you hear. But he informed me that people were dying and sadly said, “even young people”. He was bringing his relative to the US.

      1. Lambert Strether


        I went in and fixed that, and a few others. Thanks, spelling Nazis!

        NOTE Since proper spelling, like good teeth, is more and more becoming a class marker, as our educational system collapses, it’s important to do it well…

  7. gerold k.b. weber

    Good piece which furnished some relevant historical context.

    The author could also have mentioned that for some years the gold standard played a comparable role to the Euro of today, as it forced economically heterogeneous countries into a fixed exchange rate regime.

    In the Eurozone we are not only trapped in a balance of payments crisis which went on for some time and created imbalances in net foreign asset positions.

    This crisis unfolds itself on top of a Great Crisis of Global Financial Capitalism, with all its specific circumstances such as credit and derivative bubbles, high profits and decreasing labor share, increasing income and wealth inequality, low or even negative growth, unemployment, and a tendency to deflation which is countered by ‘quantitative easing’, low interest rates, and increasing central bank balance sheets.

    It is not advisable to discuss only the specific Eurozone aspects, without embedding them into the broader context and its causes.

    For sure we have to do much more to reestablish faster circulation of more money in Eurozone problem countries, and – most importantly – to help the distressed parts of her population. And we need multiple instruments, such as direct transfer payments, investments, reduction of balance of payment imbalances, debt restructuring and relief, and actions of the ECB. Yes, and we should gradually improve debt-to-GDP ratios, as relying on increasig debt ‘out of thin air’ as a solution strategy gets the incentives wrong.

    And especially but not exclusively in Eurozone countries which are able to help themselves (I count rich Italy like Germany among them), we should consider more taxation of corporate profits, ultra-high incomes and wealth. For countries with a current account surplus we should strive for higher wages and somewhat higher inflation.

    We shouldn’t reduce the discussion to the one and only Keynesian (+ Post-Keynesian + MMT) vs. neoclassical/conservative Austerity dichotomy, which also starts to get a little boring.

    1. Ignacio

      You wrote

      “And especially but not exclusively in Eurozone countries which are able to help themselves (I count rich Italy like Germany among them), we should consider more taxation of corporate profits, ultra-high incomes and wealth. For countries with a current account surplus we should strive for higher wages and somewhat higher inflation.”

      And I reply


  8. casino implosion

    The other day, probably after reading Pilkington’s latest, I searched wikipedia to see if they had any articles on the Weimar inflation and indeed they do. Very oddly, the talk page is largely devoid of argument.

  9. Lune

    This has striking parallels with the debate about the causes of the Great Depression in the USA. While Weimar Germany suffered hyperinflation, in the Great Depression, the USA suffered deflation. In both situations, the monetarists have created the dominant view (Weimar: govt printed too money; Great Depression: govt printed too little money) which conveniently leaves out other more political factors (Weimar: the reparations; Great Depression: the rise in inequality during the Roaring ’20s).

    It always struck me that monetarists, believing in the all-controlling power of the money supply, are either naive in disregarding the tremendous socio-political forces at work, or willful accomplices in deliberately turning people’s eyes away from said socio-political forces so that they don’t revolt.

    1. William Allen

      So causality runs From currency depreciation To inflation. I think this is pretty consistent with Barry Eichengreen’s conclusion in his chapter on Weimar in”Golden Fetters”. What not many seem to know about or want to talk about is the enormous amount of unrestricted capital flight, particularly by wealthy, from Germany before 1922. IMO, this is one of the biggest causes of the currency depreciation. So why did a “surrendered country”, I won’t venture into the debate about defeated or armistice, that knew in 1918 that it would have to make SOME amount of reparations, not introduce capital controls?

    2. Nathanael

      There is a fundamental link between the *distribution* of money — equality vs. inequality — and the *real* money supply — the amount of money in circulation among the average people.

      This is obscured by the lobbyists for the superrich. The fact is that high inequality makes it impossible to expand the money supply, because money stashed by rich people in bank accounts *isn’t real money economically* — it’s not circulating, it’s not doing anything.

      A more equal distribution of wealth is *necessary* in order to increase the circulating money supply.

  10. kevinearick

    Investment Banking OxyMorons

    Next, the idiot orators are going to pass a statute prohibiting any male, not getting direct deposit from a public, private, or non-profit corporation, from taking a piss in the morning, without meeting 7 billion to-be-determined conditions, subject to wealth confiscation and imprisonment, if not completed in a timely manner, as determined by the Treasury rocket scientists…while they circle the Mohave for 40 years, penning a one million word statute giving the investment banks, themselves, exemptions by preference from the Volcker rule.

    Investment banks don’t do anything. They spend money, given to them by the Fed, themselves, to expand the artificial supply and demand economy. That’s it. If a hedge fund, a church, or a firefighter “buys” your property for 20 cents on the dollar, sells it later to a like-minded reptile for 120 cents on the dollar, resets the system, and the Fed ignores the intermediary transactions, except to provide negative real interest rates to the preferred stock, why do you suppose housing prices don’t fall on a nationwide / global basis for a protracted period of time?

    Hire more cops, write more tickets, build more jails, bankrupt your neighbors, and steal their property – the American XYZ Empire Dream, on a global dc chip, distributed into everyone’s Smartphone, so everyone can report on everyone. Stupid is as stupid does, in a positive feedback loop.

    The last thing a man is going to tolerate is government pulling on his d- first thing in the morning and telling him that he can’t piss until he builds a golden latrine for everyone in the majority. If you want to build Krugman a bigger Keynesian platform to spout his bullsh- from, do it with your own labor.

    Winning the lottery is finding someone to love who will love you back, as an example to your children in a community that honors the product, as a privilege, not a right executed by law. Funny, it happens everyday, all over the world, with no emperor involved, and the empire participants cannot abide it. Now hand over your kids quietly, so the homosexuals have equal rights to nature’s yield, or go to jail.

    The solution is not to follow others into the casino / bridge-to-nowhere at the first or any subsequent crossroad.

  11. David Petraitis

    Both Weimar and Zimbabwe come up as arguments from the gold friendly, or frenzied, that the current debt, helicopter money, printing press, or whatever will cause hyperventilation err… hyperinflation in the USA. The cases of Weimar and Zimbabwe actually point to other causes than money printing only as a sole cause. In Germany’s case destruction of the currency in foreign exchange markets as outlined above, also the continued tussle over the Alsace/Lorraine – a productive area whose productivity was severely challenged starting in 1870.

    In Zimbabwe’s destruction of the productive ability of the country as outline a few years ago in Billy Blog:

    Weimar also comes in for a peek in this treatise on hyperventilation as well…

  12. Jim

    “The disturbing factor in the success of totalitarianism is rather the true selflessness of its adherents.”

    Zygmunt Bauman in “Modernity and the Holocaust” makes a persuasive case that a large degree of blame for the Holocaust can based on the emancipation of the political bureaucratic state from social control, primarily through the dismantling of all non-political power resources and institutions of social self-management.

    Bauman argues that the choice of physical extermination as the right means to the task of Entfermung was a product of routine bureaucratic procedure: mean-ends calculus, budget balancing, and universal rule applications. Bauman also maintains that at no point in its long and tortuous execution did the Holocaust come in conflict with the principles of rationality.

    For example, Bauman saw organizational discipline or the demand to obey commands of superiors above all other devotions and commitments– as a readiness to obliterate one’s own identity and to sacrifice one’s own interests

    In organizational ideology a readiness for such an extreme kind of self-sacrifice is often articulated as a moral virtue or as the honor of the civil servant in his ability to execute conscientiously the order of superior authorities exactly as if the order agreed with his own conviction.

    There appear to be many modern bureaucratic and technological social mechanisms (for example, physical or psychic distance between the act and its consequences) which made the Holocaust as well as modern drone warfare feasible.

    Can it be claimed that without modern civilization and its bureaucratic structures there would have been no Holocaust?

    1. Nathanael

      “Rationality”, perhaps. But there is something necessary to modernity other than rationality: empiricism.

      Both the Holocaust and drone warfare lack that. They are both based on fundamentally insane assumptions which are contrary to reality.

      In the case of the Holocaust, the fundamentally insane assumption was that Jews (and Gypsies, and homosexuals, and so on) were a “problem”. (What problem?) The Nazi death camps started out containing primarily the political opposition — Communists and Socialists — and you can make a coherent, evidence-based argument that murdering your political opposition *does* make sense. But then the lunatic Nazi “philosophy” took over.

      In the case of drone warfare as practiced by the US today, the fundamentally insane assumption is that murdering people from the skies with bombs is going to make the killers more popular in the area where people are murdered rather than less popular.

  13. nobody

    Another view, and a rather eccentric one, is articulated by Guido Giacomo Preparata in his Conjuring Hitler: How Britain and America made the Third Reich. There’s a brief summary of his assessment of the hyperinflation, from a interview published in the Asia Times last year:

    [Lars Schall]: The Weimar Republic for its part is inextricably linked with the hyperinflation of 1919 to 1923. What were the singular circumstances of that hyperinflation, and why is it very unlikely that at least a hyperinflation à la Weimar will ever happen again?

    [Preparata]: The mystery resides in Germany’s War debt. I don’t remember where exactly or when the controversy began, but radical voices — especially from the Right-end of the spectrum, if I recall correctly — intimated this much early on; Hitler himself abetted this contention. Therefore, needless to say, mainstream historians often begin their exposition of this episode by denying in the most categorical fashion that there could be fibers of truth to the claim: they support their rebuttal by showing that redemption and inflation had in less than two years virtually eaten away the amount due on that debt. So, for them, end of story; the inflation, they say, was Germany’s crazed egress from what seemed a despaired situation (the Reparations), itself dictated by the malevolent obtuseness of the Allied gerontocrats (Keynes again). The rest is, natuerlich (of course), cheap conspiracy theory.

    Well, not so fast. Indeed, the principal of that debt vanished quite fast, but it didn’t just evaporate like summer rain: it was systematically poured, when it stayed in Germany, in shorter-term T-bills, and/or liquidated and converted in foreign exchange when exported out of Germany (capital flight) — and this last was one of the chief factors of the inflationary dynamics: the massive depreciation following the conversion. For evident geographical reasons, Holland seems to have been the principal haven for the hidden fortune of the German absentees. And, indeed, it was via a Dutch outfit that the clique of Harriman — of which Prescott Bush was a steward — was caught red-handed, funding the Hitlerites, by a US Senate investigation.

    To return to the hyperinflation, the joint effect of shortening the debt’s maturity (easily convertible into cash on short notice) and capital flight caused/primed the soaring inflation, which exploded into full-scale runaway hyperinflation, via mass redemption of those bills, when the fate of the Weimar Republic seemed sealed after France’s invasion of the Ruhr in early November 1923 (in fact, this only sealed the first of a very Hollywoodesque three-act structure: a) Pre-1923, b) The Dawes Bailout, 1924-1929, c) The Crisis, 1930-1933). (France’s showing in all this story, I must add, was an utter, horrifying, and unqualified disaster: and it pains me much to say this considering how deeply I love and admire that nation.)

    Seen thus — i.e., in its geopolitical context — the hyperinflation of 1923 loses much of its catastrophic, aleatory mystique: there were precise mechanisms at work here. In my view, on the basis of Veblen’s prophecy, the British were expecting the meltdown and fully prepared for it. Indeed, the ‘best’ was yet to come: a bailout, and, then … the Nazis.

    A synopsis of his book is here:

  14. Roland

    Should mention that the deliberate hyperinflation policy pursued by the Weimar gov’t concerned, above all, the effective elimination of the DOMESTIC war debts owed by the German government to the millions of Germans who had purchased war bonds.

    The policy of hyperinflation wiped out those bondholders, who were mostly from the petty bourgeoisie.

    As a result, the class who would have normally been expected to form the principal basis of support for a parliamentary form of government, instead became mostly hostile to such a form of government.

    It wasn’t any kind of unreasoning “mob” who gave so much political momentum to the militant authoritarian nationalists. That so-called “mob” was mostly made up of people whose first experience of parliamentary government was to be promptly dispossessed.

    Another thing is I find wearisome is this notion that hyperinflations look like 1923 Germany. Such examples of hyperinflation, although interesting, do not shed much light on the current inflation problem in the world, a problem which deserves careful analysis in its own right.

  15. Zachary Smith

    *** Bresciani-Turroni goes on to make the case that this view was shared by most of the German press and elite. Obviously this view was self serving, but just because you’re paranoid doesn’t mean they aren’t out to get you and just because your theory is self serving doesn’t mean it’s wrong. It goes without saying then that in such a short sighted and a historical field as economics, Bresciani-Turroni was wildly successful. ***

    I’d reckon it’s “self serving”!! I’m no economist, and never will be, but that ‘German View’ strikes me as a pack of lies.

    To have a hyperinflation of the magnitude they did tells me somebody was doing it deliberately, and really piling on. Besides spitting in the eyes of the victors of WW1, I’d expect somebody was making out like bandits with the whole procedure.

    ~~~ The great German industrial combines — Krupp, Thyssen, Farben, Stinnes — condoned the inflation and survived it well. ~~~

    Buy local German raw materials with Marks of ever decreasing value, pay German workers with the same evaporating Marks. Sell the finished goods overseas for hard Pounds or Dollars or whatever. Repeat process. That’s a pretty good recipe for getting fabulously rich, and who cares that the German population was despoiled and radicalized.

    And one more thing: I’m sick of hearing about Poor Germany and how badly they were treated. No doubt the Versailles treaty wasn’t well thought out, but the Allies had some genuine axes to grind with their former enemy.

    ~~~ Adding insult to injury, during the final days of the war, retreating German troops devastated France’s most industrialized region and the source of most of its coal and iron ore, the Northeast. The Germans flooded mines, tore up railroad tracks, dynamited bridges and factories, and razed entire villages. Any just peace, Clemenceau was convinced, would require Berlin to compensate the French people for the terrible damage its armies had inflicted on their country. ~~~

    page 43 of

    After what Germany had done to the Russians with the Treaty of Brest-Litovsk, I’m surprised the Germans had the gall to bitch and whine about anything. But memory can be mighty selective. And self serving.

    1. Lexington

      The problem with the Versailles Treaty fundementally wasn’t whether it was “fair” or not, but rather that it imposed terms on Germany that the Allies ultimately were incapable of enforcing and which in the end discredited the whole peace process, the consequences of which hardly need to be emphasized. Keynes’ argument that the size of the indemnity exceeded Germany’s capacity to pay is now the consensus position. But more to the point, short of maintaining a huge peacetime army of occupation, which was politically unfeasible, the Allies had no leverage to force Germany to pay the full indemnity even if she could. Keynes himself favored a smaller indemnity combined with the cancellation of intra Allied war debts – with the final cost being born largely by American creditors. As others have pointed out the US’ insistance on being repaid in full for the credit it extended to its allies during the wat is what made the whole reparations issue particularly intractable.

      The hyperinflation wasn’t the product of deliberate German policy but a combination of the collapse in German trade and financing of passive resistance to the Franco-Belgian occupation of the Rhineland the Allies’ one attempt to compel Germany to pay, and it turned out to be a fiasco). By printing marks. Sure, a lot of American and French writers have said Germany should have accepted working to raise the living standards of the French and Belgians in preference to commiting monetary suicide.

      So what exactly was your point about selective and self serving, again?

      1. different clue

        So Keynes wanted the final money-cost to be born primarily by American creditors? Why did he not want the money-cost of the debt writeoff divided equally among all the Allied Creditors?

        1. Lexington

          Short answer: the European Allies couldn’t repay their war debts unless they could somehow extract the money from Germany, and Keynes had written a whole book explaining why they couldn’t extract the money from Germany. The logic of the circumstances was that debt forgiveness was the only way to restore fiscal health to Europe -perhaps not for every dime, but certainly for the lion’s share of it. From the European perspective an equal division of the debt would in practice have been highly unequal, given that the US was in a much better position to absorb the loss, not leastly because it had suffered no physical or financial damage as a result of the war, and its blood contribution to the Allied victory was frankly negligeable (the US suffered fewer than 120 000 total casualties, whereas France and Germany suffered 700 000 combined in the battle of Verdun alone!)

          The US’ ascendant financial position was symbolized by New York superceding London as the world’s financial capital after 1918 (something Keynes, who had a pronounced streak of anti Americanism, deeply lamented) and the view in Europe was that if they had to accept American financial hegemony the US should have to accept that leadership had a price attached to it.

        2. Nathanael

          Shorter answer: after WWI destroyed Europe, there simply wasn’t enough real weath in Europe to pay off the debts. “Debts which cannot be repaid will not be repaid”.

          The choices were to inflate away the debts (the question being who got hit with the inflation and when) and to forgive the debts.

  16. Lexington

    Part of the reason The Economic Consequences of the Peace is such a classic is because it is impossible to read it even today and not be struck by how prescient many of Keynes points appear in light of later history.

    I’m currently reading Robert Skidelsky’s biography of Keynes and came across the following passage from a lecture he gave to the National Liberal Club on 13 December 1923, in relation to the Britsih government’s efforts to restore the prewar exchange value of the pound through painful deflation and tolerance of high unemployment, which Keynes predicted (with the example of contemporary events on the continent before him) would lead to massive social unrest:

    “I would like to warn the gentlemen of the City and High Finance that if they do not listen in time to the voice of reason their days may be numbered. I speak to this great city as Jonah spoke to Nineveh…I prophesy that unless they embrace wisdom in good time, the system upon which they live will work so very ill that they will be overwhelmed by irresistible things which they will hate much more than the mild and limited remedies offered them now”

    Who can read these comments and fail to grasp their relevance to the current crisis in international political economy?

    1. different clue

      Perhaps the Gentlemen of the Cities and High Finance today think they have enough private guards and troopers from Blackwater/Xe/Academi, Dyncorp, Triple Canopy, the various pro-Upper Class police departments, the Intelligence Agencies, etc.; that they feel it is a Social Class Civil War they can win after they get it well and truly started.

      1. Lexington

        In my mind there is no perhaps about it.

        The growth of the national security and surveillance state since 9/11 is only incidentally about combating terrorism and essentially about ensuring that elites have the tools in place to keep the masses in line when the social stresses induced by their neoliberal agenda become impossible to contain within the bounds of the existing constitutional order.

        As I said elsewhere on NC plutocracy and democracy are fundementally incompatible, and right now democracy is on the ropes just waiting for the knockout blow.

        1. different clue

          Well, if the masses don’t want to charge police lines in the end ( and I certainly don’t . . . physical coward that I am), then what could the masses do in the meantime to target and attrit and degrade and begin to destroy the moneyflows and wealthpools of the upper classes?

          Are there things that the masses ( or at least some mass-members) could do starting now if they had the right information and methods starting now, to begin undermining the upper-class biased economy and shrinking it from the top down, so as to shrinkwrap it around the faces and heads of the upper classes? So as to choke off their financial air supply?

          Or will the masses support Richie Richism in the belief that if even one in a million massmen can win whatever lottery it takes to become a Richie Richist him/herself, then he/she must defend OverClass privilege in the meantime, so he/she can share it if he/she wins the lottery?
          If so, the masses will NEver EVer reach the point of rebellion unless the OverClasses themselves deCIDE that the time has come to FORCE the masses into understanding the facts of social class life. And they wouldn’t do that unless they felt they had their forces all lined up and their battlespaces all shaped ahead of time.

        2. Nathanael

          Lexington: I’m sure this is what the elites think, but the elites are IDIOTS, and are simply writing their own death sentences. Their own underpaid, abused, mistreated mercenary troops are the ones most likely to overthrow and kill them.

          1. Nathanael

            Please note that this fits in with my discussion about the elites today: the fact that they are not industrialists, not even financiers, but rather upper-class twits.

            One competent warlord, who actually understands the nuts and bolts of military action, could wipe the floor with them. And this may actually happen, though I hope we can find a peaceful solution instead.

      2. Nathanael

        The police-state thugs have precisely zero chance of winning.

        Want to know why?

        Because they treat their own grunts, the low-level police, military, and even Blackwater/Xe/Academi employees, *really badly*.

        Therefore the enforcers they are relying on have no loyalty to them. Which leads to a guaranteed fail.

        This is in contrast to the Burmese Junta, or Julius Caesar, who have the personal loyalty of their troops. If you are in that position, you *can* run a military dictatorship.

        Honestly, based on my study of history, the most likely outcome is that a would-be warlord arises, who *does* have personal loyalty from his troops, and overthrows the entire existing police state apparatus.

      3. Nathanael

        Another comment on the same subject: the elites of the 1910s and 1920s treated their military thugs and mercenaries *much* better than the elites of today are treating theirs. They actually had more reasonable expectations that they would have the loyalty of the military if they fought against the mass of the populace.

  17. Generalfeldmarschall Von Hindenburg

    As part of the Volksdeutsch diaspora, it saddens me to see that the Reich is going to shoot itself in the foot for the third time in a century

  18. Nathanael

    It’s worth pointing out, as DeLong and Krugman have pointed out, that the 1923 hyperinflation period actually worked out pretty well for Weimar Germany.

    Yes, everyone lost their savings, but suddenly Germany could export again and there were jobs available for everyone!

    It was the subsequent austerity/deflation period in 1931 that *really* messed things up and led to the rise of Hitler.

  19. old.frt

    Oh, but this has been a romp!
    Not having any history courses under the belt, but having many who would spend years learning their craft sharing it online made the past 2 hours intellectually profitable.
    Grazie mille!

  20. ellen epopa

    A small amount of people like to try the food at their favorite restuarant but don’t have enough cash for it, I like going to places knowing that i’d be okay covering the bill.

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