Wednesday, June 3, 2009

They Still Remember the Weimar Inflation

German Chancellor Angela Merkel is now publicly questioning the inflationary polices of the Federal Reserve and the Bank of England.

"I view with great skepticism the powers of the Fed, for example, and also how, within Europe, the Bank of England has carved out its own small line," Merkel said in a speech in Berlin. "We must return together to an independent central-bank policy and to a policy of reason, otherwise we will be in exactly the same situation in 10 years' time."

Merkel is correct, of course, except that it won't take 10 years.

Axel Weber, the head of Germany's central bank and a member of the ECB's 22-person Governing Council, has also been a staunch critic of central bank money printing.

As WSJ points out, the hyperinflation in the 1920's during the period of the Weimar Republic is seared into the memories of the German people.

The only positive to come out of that hyperinflation, that I am aware of, is a situation that involved me personally.

Because I like to walk in major cities at all odd hours of the night, I usually carry around a couple of 50 million Reichbanknotes from that hyperinflation (You can pick them up at coin shows for about $1.00), as mugger money. I have only had to use them once, late at night in Boston Common. Two characters approached me and asked me for change. I got the distinct impression that their next step was going to be to attempt take whatever I had, so I gave them each 50 million.

They obviously weren't up on their hyperinflation history. These guys reacted like they had hit the lottery. As I walked away from them, I heard one of them say to the other, "I can't wait for the banks to open."


  1. Nice picture of that 50m note.

    I have some too - went to a coin shop and bought an assorted ten notes of various devalued currencies at $1. each, and use them as bookmarks in financial books. Helpful reminder!

    Your use is very interesting idea, wonder if it will work for other transactions!

    Thanks for an interesting post too.

  2. I really wonder how much the lesson of hyperinflation is burned into their memory... that country is so guilty about the Nazi regime experience they've taken a lot of... Nazi... steps to try to stamp out former Nazi influence and policies. Kind of silly that a country burned by collectivism and socialism resorts to those same tactics to scoure a particular brand of it from the land. My guess-- they've learned nothing, at least not the politicians. How can you learn a lesson when you never bear the cost of acting mistakenly?

  3. They remember the hyperinflation. They don't get the collectivism and socialism connection.

  4. They remember the hyperinflation primarily because it is generally - and probably wrongly - believed to have been one of the main contributors to the Nazis' political success.