Wednesday, July 14, 2010

When Money Dies: The Inflation Drug

“Inflation is like a drug in more ways than one. 
It is fatal in the end, but it gets its votaries over many difficult moments.”

When Money Dies is pretty hard to find cheaply. Luckily, a very awesome reader sent us a synopsis of the book in an article he found.

From the article:
If what happened to the defeated Central Powers in the early 1920s is anything to go by, then the process of collapse of the trusted medium of exchange, the currency by which all values are measured, by which social status is guaranteed, upon which security depends, and in which the fruits of labor are stored, unleashes such greed, violence, and hatred, largely bred from fear, as no society can survive uncrippled.

Certainly 1922 and 1923 brought catastrophe to the German bourgeoisie, as well as hunger, disease, destitution, and sometimes death to an even wider public. Yet any people might have ridden out those years had they represented one frightful storm in an otherwise calm passage. What most damaged the morale was that they were the climax of unreality to years of unimagined strain.

To ascribe the despair entirely to inflation would be misleading. Undoubtedly, though, inflation aggravated every evil, ruined every chance of national revival or individual success, and produced the conditions in which extremists could raise the mob against the state. It undermined national resolution when simple want might have bolstered it. Partly because of its unfairly discriminatory nature, it brought out the worst in everybody. It caused fear and insecurity among those who had already known too much of both. It fostered xenophobia. It promoted contempt of government and the subversion of law and order. It corrupted where corruption had been unknown, and often where it should have been impossible....

Thus were the government’s plans drawn up for financing the war—not by taxation but by borrowing, with the printing press as the well to supply both the needs of government and the credit demand for private business....

Politics were becoming irrelevant: at Christmas 1921, the cost of living had become people’s only concern. Since 1913, the price of rye bread had risen by 13 times; beef by 17. Sugar, milk, pork, and potatoes had risen between 23 and 28 times; butter had gone up by 33 times.

It was natural that people in the grip of raging inflation should look for someone to blame....

Among some, the rebirth of the German soul, battered by war, hard- ship, and humiliation, was becoming something of an obsession. Not just the militarists of Frontkämpfertag and the academics of Königsberg but many of all classes began to long for a great leader: not a ruler of the type of the Kaiser, but one possessed of the attributes and Spartan values of the legendary figures of early Teutonic history. It was a longing Hitler fully understood. When a nation is falling apart, its old values challenged by new conditions, there are always elements who will seize on any means of cohesion....

To say that inflation caused Hitler, or that inflation elsewhere could produce other dictatorships, is to wander into quagmires of irrelevant analogy. Com- parable, coincidental circumstances in Austria and Hungary do not support such a notion. On the other hand, the vast unemployment of the early 1930s gave Hitler the votes he needed, and it is indisputable that in the inflationary years, Hitler first tried his fingers for size on the throat of German democracy. Inflation did not conjure up Hitler, but it made Hitler possible.

Link to PDF