Krugman: Gold Obsession Was the Proximate Cause of Hitler Coming to Power

Krugman writes:

No, the 1923 hyperinflation didn’t bring Hitler to power; it was the Brüning deflation and depression. Hard money and a gold standard obsession, not excessive money printing, was the proximate disaster.

Note to Paulie: They don't call it a business cycle for nothing. The hyperinflation brought on the depression. What would you have liked to have seen, even more money printing? In 1923, the hyperinflation was raging. Often prices doubled in a few hours. By mid-1923 workers were being paid as often as three times a day. By late 1923 it took 200 billion marks buy a loaf of bread.

July 1914   1.0  Jan 1919  2.6  July 1919  3.4  Jan 1920  12.6  Jan 1921  14.4  July 1921  14.3  Jan 1922  36.7  July 1922  100.6  Jan 1923  2,785.0  July 1923  194,000.0  Nov 1923  726,000,000,000.0

Do you think the German people might have been justified in wanting a gold standard?

To link the gold standard in anyway as a proximate cause of the rise of Hitler when many complex factors were in play between 1923 and 1933 is complete fraud.

When Henreich Brüning assumed power as German Chancellor in 1930, he didn't help things at all for many reasons. He took significant interventionist steps including raising taxes and issuing a decree that all wages should be rolled back to what they had been in 1927. Not surprisingly unemployment soared. To be sure the mark was mispriced relative to the dollar and that was a problem, but to present in simplistic fashion what went on as being the result of Germany being on the gold standard is just absurd. In fact in 1931, Brüning took Germany off the gold standard, which resulted in a new round of inflation.

Brüning was a nut job. Some historians believe that Brüning through his wage decrees was attempting to weaken the powerful German trade unions and the Social Democratic Party through continuing mass unemployment so that he could roll back the democratic political system of Weimar and go back to the authoritarian state of pre-war times. Brüning gave credence to this in his memoirs, in which he admitted to having hoped to bring back the kaiser

As a further note, never let it be forgotten that Hitler was an anti-gold, interventionist proto-Keynesian. Lew Rockwell notes:

In the 1930s, Hitler was widely viewed as just another protectionist central planner who recognized the supposed failure of the free market and the need for nationally guided economic development. Proto-Keynesian socialist economist Joan Robinson wrote that "Hitler found a cure against unemployment before Keynes was finished explaining it."

 What were those economic policies? He suspended the gold standard, embarked on huge public works programs like Autobahns, protected industry from foreign competition, expanded credit, instituted jobs programs, bullied the private sector on prices and production decisions, vastly expanded the military, enforced capital controls, instituted family planning, penalized smoking, brought about national health care and unemployment insurance, imposed education standards, and eventually ran huge deficits. The Nazi interventionist program was essential to the regime's rejection of the market economy and its embrace of socialism in one country.

Such programs remain widely praised today, even given their failures. They are features of every "capitalist" democracy. Keynes himself admired the Nazi economic program, writing in the foreword to the German edition to the General Theory: "[T]he theory of output as a whole, which is what the following book purports to provide, is much more easily adapted to the conditions of a totalitarian state, than is the theory of production and distribution of a given output produced under the conditions of free competition and a large measure of laissez-faire."

Keynes's comment, which may shock many, did not come out of the blue. Hitler's economists rejected laissez-faire, and admired Keynes, even foreshadowing him in many ways. Similarly, the Keynesians admired Hitler (see George Garvy, "Keynes and the Economic Activists of Pre-Hitler Germany," The Journal of Political Economy, Volume 83, Issue 2, April 1975, pp. 391—405).