The risks of sticking to über harte währung(hard money principles) strategy

Discussion in 'Wall St. News' started by ASusilovic, Nov 21, 2011.

  1. Germany’s ‘hard money’ principles and opposition to Quantitative Easing by the ECB are, more often than not, framed with reference to the hyperinflation in the Weimar Republic.

    Indeed, it’s a widely accepted truth that the horrors of the Third Reich were caused by the three year period of hyperinflation between June 1921 and July 1924.

    But not in the way many people think, reckons Dylan Grice. The SocGen strategist believes the reaction to the policies of Reichsbank president Rudolf E. A. Havenstein played a more important part in Hitler’s rise to power. And this has implications for those attempting to understand the Eurozone crisis and Germany’s response.

    But while Hitler’’s first attempted power grab occurred in Bavaria at the peak of the hyperinflation,– the November 1923 “Beerhall Putsch” – by the late 1920s the Nazis were little more than one of the larger fringe groups whose best days were judged to be behind it.

    But as the world economy collapsed in the early 1930s the gold standard broke up. Successive countries chose to devalue their currencies and inflate their way out of painful deleveraging (chart below). Germany was the exception. Haunted by von Havenstein’s ghost, it fatefully chose to bear instead the brunt of gold standard deflation, experiencing a depression arguably greater even than America’’s. It was then that something broke in Germany’’s collective psyche. With resurgent Nazi support, Hitler won power in 1933, his rise facilitated not only by the 1923 inflation, but by the subsequent fear of inflation.

    Although SocGen´s Dylan Grice is a quacksalver IMO, he is delivering somthing useful with his observations of the Weimarer Gold standard mistakes...
  2. achilles28


    True. But I think there's more than fears of Weimar. Financial blackmail, specifically.
  3. Why is it hardly anyone talks about the risks of a "print-money" policy? "Printing money is fine so long as it doesn't turn out to be Weirmar redux... and of course we won't let THAT happen again"?
  4. Tsing Tao

    Tsing Tao

    The argument to not print is quite simple - as printing doesn't solve anything. The imbalances that exist between the economies of Greece, Italy and Spain vs. those in Germany are not solved by printing euros. They are enabled by printing euros.

    You might as well just institute transfer payments and make Germany pay for all the debt of the aforementioned countries in exchange for preferential export treatment, because that is all you are doing by turning on the machines. That, and of course, spurring on inflation. Germany realizes that once they give the green light on monetization, over the cliff you go. There is no putting that genie back in the bottle again.

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  5. zdreg


    why don't you inform helicopter Bernanke of this reality. obama is behind all of this because he wants to create a world government.
  6. Tsing Tao

    Tsing Tao

    Because the topic of the post was Germany, dopey.

    I have lashed out repeatedly on this forum (and many other places) on the perils of Bernanke and the crony behavior of the Fed. But that wasn't the topic.

    Get with the program.
  7. zdreg


    it was rhetorical and not a call to action. calm your feathers and skip the name calling. it only rebounds to you.
  8. Tsing Tao

    Tsing Tao

    You're such a jackass.

    "I'm made of rubber...blah blah blah."
  9. 75% of German export stays within Europe.

    Why people think Germany doesn't "need" the rest of Europe anymore is beyond me.