"Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some.
The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become "profiteers," who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.
"Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose."
- John Maynard Keynes, “The Economic Consequences of the Peace”, 1919.
Last week, on a sultry summer‟s evening in London, I had the pleasure of attending the re-launch party of Adam Fergusson‟s „When Money Dies: the nightmare of the Weimar hyper-inflation‟. This über-cautionary tale was originally published in 1975 by William Kimber & Co. Having fallen out of print, second-hand editions were changing hands, amongst those who could locate copies, for several hundred pounds each. It has now, happily, been republished by Old Street Publishing Ltd., for the very affordable price of £12.99. Suffice to say that every reader of this commentary is gently encouraged to purchase a copy.
That said, reading, and digesting, „When Money Dies‟ is not particularly easy. In financial terms it is the equivalent of a snuff movie. For the sensitive of spirit, the experience is truly heart-rending. For this is not a fictional phantasmagoria; the extraordinary sequence of events within it genuinely happened, to real people.
As those schoolchildren who are still taught anything are told, the seeds of the Weimar hyper-inflation, like those of the Second World War, were sown in the ashes of the First World War, and most pressingly by the terms of the Treaty of Versailles. The Allies, and most notably the French, were determined to bleed Germany dry. Be careful what you wish for...
Germany could never hope to make good on the burden of Allied reparations forced on her. But few, Keynes perhaps apart, could have foreseen the extraordinary sequence of events that were to culminate in the economic firestorm of Weimar 1923, when sovereign allegiance to the printing press caused an entire currency and national economy to implode upon themselves. A few examples from Adam Fergusson may convey in some small way the surreal horror of what came to befall the largely unwitting populace, and political base, of Germany:
“In October 1923 it was noted in the British Embassy in Berlin that the number of marks to the pound equalled the number of yards to the sun. Dr Schacht, Germany’s National Currency Commissioner, explained that at the end of the Great War one could in theory have bought 500,000,000,000 eggs for the same price as that for which, five years later, only a single egg was procurable. When stability returned, the sum of paper marks needed to buy a gold mark was precisely equal to the quantity of square millimetres in a square kilometre. It is far from certain that such calculations helped anyone to understand what was going on...” |
