I am delighted to have read Adam Ferguson’s book “When Money Dies: The Nightmare of Deficit Spending, Devaluation, and Hyperinflation in Weimar Germany”. I was expecting the book to be filled with boring graphs or economic calculations but the success of the book is that it frames the infamous story from the perspective of those who lived the nightmare. You get a rare glimpse of the madness and personal tragedy of those oblivious to the threat that builds with each passing page. It reads more like a novel, closer to a tragic comedy, than a dry time line of events placed on a Wikipedia page. From this, you get the inside scoop on the mood and mindset of the masses from diary entries and financial journals to the narrative of those who held objective views of the unfolding crisis of the time. You get all the maddening loops of misdiagnoses and disastrous outcomes resulting from the misdiagnoses –followed by more disastrous outcomes and further misdiagnoses. You get a great historical perspective of the time after reading that feels accidental. Most importantly, the book puts the blame squarely where it belongs: At the hands that crank the printing presses. Ferguson does not discount the impact of the Treaty of Versailles, the communist radicals, WWI and annexation of German land by the allies or French invasion of the Ruhr. However, the book remains consistent (and correctly) in the view that the devaluation of the mark from the printing presses is the undoing of the German population.
I imagine that readers not familiar with basic economics would still find the book as enjoyable as someone more familiar with. Readers from an Austrian perspective should find the book to be further proof of the impossibility of centrally planning an economy. The book highlights all the economic fallacies; inflation is regarded as a rise in prices (instead of the inflation of money supply causes rising prices), the “stabilization” efforts of prices leading to shortages, the illegalization of speculating and hoarding, the subsidy of industry and employment, and the curbing of foreign currency in the exchange process to name a few.
1920’s Germany is not modern America and America is not 1920’s Germany. What links Post WWI Germany and the America of today is the real and tragic results of government, first creating the problem of inflation, then, creating more problems when the economy stumbles by propping up the disaster it first created. The history of the Weimar hyperinflation is a history of a dog chasing it’s tail. America is chasing it’s own as well. Perhaps the story of America’s hyperinflation will be that no one believed it could happen to them as if they were immune to economic law? Whether it’s on purpose or not, this book has a very Austrian economic perspective. How else could one take this classic story of hyperinflation? I can’t even imagine how the Keynesians approach this story. Do they blame the economic downfall of Weimar Germany on lack of aggregate demand as they do today? Even the Federal Reserve Chairman, Ben Bernanke, said he would throw money from helicopters if need be!
When I walked away from the book I had a greater understanding of how the stage was set for Hitler’s rise to power. The German people were beaten, punished by an international treaty, lands under control, money worth nothing, growing poorer and hungrier by the hour, looking for scapegoats, and desperately looking for any answer. Fergusson writes, ‘Inflation is the ally of political extremism, the antithesis of order. In other times – In post-revolutionary Russia, in Kadar’s Hungary – it may have been deliberately engendered in order to destroy the social order, for chaos is the very stuff of revolution. In Germany at this time, however, the inflationary policy was the consequence of financial ignorance, of industrial greed and, to some extent, of political cowardice. It therefore produced the hothouse conditions for the greater and faster growth of reactionary and revolutionary crusades. Hitler set his hopes in 1923 on the ‘revolt of the starving billionaires’.’ Fergusson does a fantastic job of highlighting the social impact of inflation; the fall in ethical standards, the growing communal hatred, the moral decay.
Another important aspect that Fergusson illustrates is those who endured and those who suffered greatly. The irony of inflation is that it never helps the people it alleges to rise up; minorities and the poor. Instead, inflation always helps those who always get the new money first; banks, contractors, and big business. Those industries and firms who did not expand during the inflationary boom were the least impacted –even though they were hit very hard. Those people with access to food (farmers) profited first by the extreme prices they were able to sell it for and later were fortunate enough when they were able to use the food they grew to not starve when economic reality hit. While not the intention of the writer, the book provides good ideas on how to survive hyperinflation. With a little imagination and open mindedness, you could even learn how to profit from inflation (assuming government won’t confiscate profits or throw you in jail for profiteering or using foreign currency, as they did in Germany). I couldn’t help but think I was getting a prelude of events to come by reading about the lengths at which the State will go to make things pass as economically workable.
In Weimar Germany, hardly anyone understood that their currency, the Mark, was being devalued by the Reichsbank. They believed that the mark was “as good as gold”. They only partially understood the mark was worthless when they were filling wheelbarrows full of marks to buy bread –too late for some to prepare for their demise. If anything, the book is a warning to our present. A time which is shaping up to have many more things in common with Weimar than differences.
