WEBVTT - Zach Carter on the Real Story of Weimar Hyperinflation 0:00:11.039 --> 0:00:15.280 Hello, and welcome to another episode of the Odd Lots podcast. 0:00:15.320 --> 0:00:20.200 I'm Joe Wisn't Thal and I'm Tracy Allaway. Tracy, you know, 0:00:20.239 --> 0:00:23.880 it's interesting having watched the aftermath of two separate crises 0:00:23.920 --> 0:00:27.520 now because you start to see similarities and the sort 0:00:27.520 --> 0:00:32.360 of stories that people tell after each one of them. Yeah, 0:00:32.520 --> 0:00:35.320 that's true. Um. I also think it's really interesting to 0:00:35.360 --> 0:00:39.800 see how much opinions kind of change in retrospect. So 0:00:39.880 --> 0:00:43.120 I remember, for instance, after the two thous financial crisis, 0:00:43.680 --> 0:00:47.200 people would get upset if you suggested that quantitative easing 0:00:47.360 --> 0:00:50.240 could have an impact on stocks, Like if you actually 0:00:50.240 --> 0:00:53.480 said there was an asset substitution effect, people would think 0:00:53.560 --> 0:00:56.280 that you were crazy. I remember writing an alphabel post 0:00:56.680 --> 0:00:58.440 on this at the time and getting a bunch of 0:00:58.480 --> 0:01:01.640 comments saying it was complete, letely wrong. And now, of course, 0:01:02.680 --> 0:01:05.600 the idea that QUI pushes up stocks, you know, most 0:01:05.600 --> 0:01:08.920 people sort of accept that, even if it may or 0:01:08.920 --> 0:01:12.000 may not be true. But yeah, you're right, you're really 0:01:12.040 --> 0:01:14.119 ahead of the curve back then. I thank you. I'm 0:01:14.120 --> 0:01:17.760 just humble bragging like talking about asset substitution effects. But 0:01:17.840 --> 0:01:22.559 I also think like the dominant narrative like out there 0:01:22.840 --> 0:01:25.200 just in the sphere of the broad things, is all 0:01:25.240 --> 0:01:29.000 this idea of like QUEI would inevitably lead to inflation, 0:01:29.760 --> 0:01:33.960 maybe even hyper inflation all this government spending and obviously 0:01:34.000 --> 0:01:37.800 we saw a lot of talk around that, and we 0:01:37.840 --> 0:01:39.720 see a lot of talk about it now, just this 0:01:39.840 --> 0:01:43.920 idea that government policies, particularly US government policy, is reckless 0:01:44.040 --> 0:01:47.520 and we're going to destroy the value of the dollar. Yeah, 0:01:47.560 --> 0:01:50.880 And to offset what I just said about that Alphabel post, 0:01:50.920 --> 0:01:53.880 I'm pretty sure I also wrote things on Alphabel about 0:01:53.920 --> 0:01:56.640 the coming hyper inflation, or at least I summarized a 0:01:56.640 --> 0:01:59.360 bunch of notes about that, you know, back in two 0:01:59.440 --> 0:02:01.760 thousand eight, two thousand nine. But you're right, that was 0:02:01.840 --> 0:02:05.560 sort of well, it was the big concern after two 0:02:05.560 --> 0:02:08.600 thousand eight, and we saw it kind of come back 0:02:09.120 --> 0:02:13.880 in with the announcement of all this additional government spending. 0:02:14.360 --> 0:02:17.400 They're always concerns that it's going to lead to inflation, 0:02:17.560 --> 0:02:20.760 even though we've now had you know, over a decade 0:02:20.840 --> 0:02:25.000 of central banks missing their inflation targets. Right, So if 0:02:25.000 --> 0:02:27.760 you ever point out it's like, actually inflation isn't mild 0:02:27.880 --> 0:02:31.040 or whatever, you know, Quey, it's probably you know, doesn't 0:02:31.040 --> 0:02:34.480 have much of an inflationary impact or misunderstanding the deficit. 0:02:34.840 --> 0:02:37.520 What happens is if you say that that gold bugs 0:02:37.600 --> 0:02:42.160 like yourself or silver bugs like your dad respond with 0:02:42.200 --> 0:02:47.119 like memes of people pushing wheelbarrows of the deutsch Mark 0:02:47.440 --> 0:02:49.960 during the Weimarer hyper inflation and tell you why you're wrong. 0:02:50.760 --> 0:02:53.639 Let me tell you, Joe, if the inflation ever comes, 0:02:53.680 --> 0:02:57.080 I'm going to be stacking my my silver and gold 0:02:57.280 --> 0:03:00.799 in your face and you're going to be very very jealous. Yeah, look, 0:03:00.840 --> 0:03:03.200 I'm joking. You will definitely have the last level. But 0:03:03.240 --> 0:03:05.720 if we're going to talk about, okay, the prospect of 0:03:05.760 --> 0:03:09.600 what happened with the Weimar hyperinflation seems like, Okay, it's 0:03:09.600 --> 0:03:12.200 probably not gonna happen. I don't think our existing policies 0:03:12.200 --> 0:03:14.519 are on that route. But maybe we should actually learn 0:03:14.520 --> 0:03:17.440 about what really happened beyond just the memes of people 0:03:17.720 --> 0:03:21.680 pushing wheelbarrows wheelbarrows of cash. No, I totally agree, And 0:03:21.720 --> 0:03:24.760 I also think you know, the Ymar Republic is sort 0:03:24.800 --> 0:03:28.960 of this scary story that everyone brings up when they're 0:03:28.960 --> 0:03:32.680 talking about inflation, and people sort of throw the term 0:03:32.800 --> 0:03:37.320 or the name around, but actually not that many people 0:03:37.760 --> 0:03:41.920 know exactly what happened, what drove it, and how bad 0:03:42.120 --> 0:03:45.520 inflation actually got during that period. So I think it's 0:03:45.560 --> 0:03:48.200 a great idea to dig into the details. Great, well, 0:03:48.200 --> 0:03:51.119 I am very excited about today's episode. We are going 0:03:51.160 --> 0:03:54.000 to have a repeat guest. We talked to him back 0:03:54.600 --> 0:03:57.400 in the spring or summer. We're gonna be speaking with 0:03:57.480 --> 0:04:00.400 Zach Carter. He is the author of the New York 0:04:00.400 --> 0:04:04.360 Times best selling book The Price of Peace, Money, Democracy, 0:04:04.440 --> 0:04:08.000 and the Life of John Maynard Canes paperback coming out 0:04:08.120 --> 0:04:11.160 April twenty and there is a section in his book 0:04:11.160 --> 0:04:15.120 where he talks about the Wymar hyperinflation, so we thought 0:04:15.120 --> 0:04:19.080 we would dive into that and find out what really happened. So, Zach, 0:04:19.160 --> 0:04:21.240 thank you so much for coming back on Odd Lots. 0:04:21.279 --> 0:04:24.000 Thanks so much for having me before we start. Have 0:04:24.160 --> 0:04:26.520 you heard of this? I saw this on Wikipedia last 0:04:26.600 --> 0:04:30.120 night when I was doing my research zero stroke. Have 0:04:30.240 --> 0:04:34.039 you heard of that? This is the thing? It's this 0:04:34.120 --> 0:04:36.320 is the thing. It's on Wikipedia, so it must be real. 0:04:36.680 --> 0:04:40.039 There was a mental disorder diagnosed by physicians in Germany 0:04:40.080 --> 0:04:43.160 during the hyper inflation. I'm just reading the page, and 0:04:43.200 --> 0:04:47.120 the disorder was primarily characterized by the desire of patients 0:04:47.160 --> 0:04:50.440 to write endless roads of zeros, which are referred to 0:04:50.480 --> 0:04:54.040 as ciphers. And this is actually even John Kenneth Galbraith 0:04:54.080 --> 0:04:56.000 in his book about Money, talks about this and there 0:04:56.040 --> 0:04:58.720 seems to be a few references. I guess it's real. 0:04:58.800 --> 0:05:00.480 It's kind of hard to believe, but the currently there 0:05:00.480 --> 0:05:02.560 really was a mental affliction where people have just wrote 0:05:02.640 --> 0:05:06.640 zeros on pages hyperinflation. I've read the gall Braith book 0:05:06.680 --> 0:05:10.000 on Money, it's very good. I don't remember that particular episode, though. 0:05:10.360 --> 0:05:14.600 You know, this was a totally formative event for a 0:05:14.640 --> 0:05:17.520 lot of a lot of economic thinkers who would go 0:05:17.520 --> 0:05:20.159 on to have an extraordinary degree of influence to Friedrich 0:05:20.279 --> 0:05:24.880 Hyak witnessed this from Vienna and was just totally horrified 0:05:25.080 --> 0:05:29.200 and I think embarrassed by by by what happened after 0:05:29.240 --> 0:05:31.880 the war in Germany. And I think it shaped a 0:05:31.880 --> 0:05:34.839 lot of a lot of you know, sort of what 0:05:34.920 --> 0:05:38.040 we now call neoliberal views about how the world works 0:05:38.120 --> 0:05:42.320 and what the great threats to the economy and democracy are. 0:05:42.440 --> 0:05:44.920 And obviously we still talk about it today, even when 0:05:44.960 --> 0:05:46.840 I think it's you know, as you mentioned, I think 0:05:46.839 --> 0:05:51.000 it's totally inappropriate to be to be invoking you know, 0:05:51.040 --> 0:05:53.320 the Biber experience is something that we might have it, 0:05:53.600 --> 0:05:55.920 you know, in the near future here, but it obviously 0:05:56.520 --> 0:06:01.200 animates our understanding of the economy even today. Well, shall 0:06:01.240 --> 0:06:05.200 we dive into it then and maybe start at the beginning? Um, 0:06:05.320 --> 0:06:08.800 can you lay the scene for us of what exactly 0:06:08.920 --> 0:06:13.000 Germany and I guess the developed world order looked like 0:06:13.279 --> 0:06:17.839 going into this episode of hyper inflation. Yeah, I think 0:06:18.000 --> 0:06:21.120 you know, when we talked about this today, there's obviously 0:06:21.560 --> 0:06:24.800 a kind of political lens that we see this through. 0:06:25.120 --> 0:06:28.919 You have goldbugs and you know, inflation hawks tend to 0:06:28.920 --> 0:06:33.359 be more conservative invoking this this this episode, and you 0:06:33.400 --> 0:06:35.920 have you know, soft hearted liberals and their soft money 0:06:35.960 --> 0:06:39.200 ways saying don't worry about it. Uh, that wasn't really 0:06:39.320 --> 0:06:42.200 the way the politics of the time we're playing out. 0:06:43.360 --> 0:06:48.800 There was a consensus after World War One that the 0:06:48.839 --> 0:06:52.640 reparations duties that had been assigned to Germany, which lost 0:06:52.640 --> 0:06:56.400 World War One, were too stringent, too severe, that they 0:06:56.400 --> 0:07:01.240 were unpaid, unpayable, and they would result in economic turmoil 0:07:01.400 --> 0:07:04.840 for Europe and the world. And the person who issued 0:07:04.839 --> 0:07:07.359 this critique most famously was John Maynard Kane's which is 0:07:07.360 --> 0:07:08.640 why I write it, wrote it out in my book 0:07:09.040 --> 0:07:11.600 Kine's in the early nineteen twenties is not this sort 0:07:11.640 --> 0:07:15.320 of you know, hero of people like Paul Krugman and 0:07:15.360 --> 0:07:19.040 the and the kind of center left in further political sphere. 0:07:19.040 --> 0:07:22.080 He's He's a very conventional establishment figure in the British 0:07:22.120 --> 0:07:25.120 government and his critique is heralded by none other than 0:07:25.200 --> 0:07:28.480 free Ridge High. So this, this idea is not something 0:07:28.520 --> 0:07:31.400 that is is being harbored only by know, like left 0:07:31.440 --> 0:07:34.640 wing socialists trying to you know, bring about some sort 0:07:34.640 --> 0:07:38.760 of egalitarian millennium. This is a very standard conventional view 0:07:39.040 --> 0:07:44.040 within Germany and across Europe. And the size of these 0:07:44.120 --> 0:07:48.800 duties is so large. By the Reparations Commission that's established 0:07:49.120 --> 0:07:51.160 after World War One says Germany is getting to pay 0:07:51.200 --> 0:07:54.960 about thirty three billion dollars. German pre war GDP is 0:07:55.000 --> 0:07:57.200 about twelve and a half billion dollars. So this is 0:07:57.560 --> 0:08:01.320 like triple the German and about butt of the economy 0:08:01.320 --> 0:08:04.600 would be like somebody saying today, uh, you know, by 0:08:04.640 --> 0:08:06.960 the way, the United States, you've got to run your economy, 0:08:07.320 --> 0:08:09.000 you know, solve whatever problems you want, but you owe 0:08:09.040 --> 0:08:11.200 seventy trillion dollars somewhere else and it's and it's got 0:08:11.200 --> 0:08:13.360 to be paid over the next you know, several years. 0:08:14.080 --> 0:08:18.239 So these are huge, huge reparations figures that are looming 0:08:18.240 --> 0:08:21.200 over every decision that the German government is trying to make. 0:08:21.440 --> 0:08:24.200 And the German government from the end of the war 0:08:25.240 --> 0:08:28.480 really through into the nineteen thirties is in a kind 0:08:28.520 --> 0:08:32.040 of perpetual state of revolution um. The revolutions just just 0:08:32.120 --> 0:08:35.599 tend to fail. Communists like Rosa Luxembourg are murdered in 0:08:35.640 --> 0:08:39.440 the streets in nineteen nineteen. Walter Ratha, now, who is 0:08:39.800 --> 0:08:43.120 the foreign minister, sort of the most important diplomat in 0:08:43.160 --> 0:08:46.960 the German government, he is murdered by by far right terrorists. 0:08:46.960 --> 0:08:50.840 In nineteen nineteen twenty two, there is a communist uprising 0:08:50.840 --> 0:08:53.520 in Hamburg. In Hamburger, I think is the pronunciation in 0:08:53.559 --> 0:08:57.240 October three, which is just a few weeks ahead of 0:08:57.440 --> 0:09:00.400 Hitler's famous beer hall Pusch in November of three. So 0:09:00.600 --> 0:09:04.040 there's just an enormous amount of political turmoil happening right now. 0:09:04.120 --> 0:09:08.360 You have hundreds of political assassinations happening every year. They 0:09:08.400 --> 0:09:11.280 do not have conditions of political stability in Germany, and 0:09:11.360 --> 0:09:15.600 so the political coalition that is trying to trying to govern, 0:09:16.080 --> 0:09:19.760 is making choices with its budget to try and basically 0:09:19.760 --> 0:09:23.319 fend off some sort of violent takeover of the government, 0:09:23.360 --> 0:09:25.599 and it's and it's spending a lot of money in 0:09:25.679 --> 0:09:27.560 order to do that, and this is creating a very 0:09:27.640 --> 0:09:31.320 large budget deficit. So, Zach, before we go further into 0:09:31.400 --> 0:09:34.800 the German budget, I just wanna sort of get the 0:09:34.800 --> 0:09:40.280 background a little bit more about how the size of 0:09:40.360 --> 0:09:45.360 the German war debt or the German reparations were established. 0:09:45.400 --> 0:09:49.560 And you mentioned thirty three billion dollars multiple times the 0:09:49.600 --> 0:09:54.160 size of German GDP. What where did this come from? 0:09:54.240 --> 0:09:56.720 What were this sort of like talk a little bit 0:09:56.760 --> 0:09:59.200 about how this number was established. What was the dead 0:09:59.240 --> 0:10:02.200 sort of DENI dominated in at that time, because I 0:10:02.200 --> 0:10:05.040 think obviously that's an important thing, and so like, you know, 0:10:05.080 --> 0:10:07.640 where did this you know, the end of the war happens, 0:10:07.720 --> 0:10:09.600 and then they have this number that they owe who 0:10:09.640 --> 0:10:13.160 do they who do they owe it to? And so forth? Right, 0:10:13.360 --> 0:10:17.640 So the the answer is it's extremely complicated. Kane's issues 0:10:17.679 --> 0:10:20.360 his critique in a book called The Economic Consequences of 0:10:20.400 --> 0:10:23.439 the Piece that comes out in nineteen nine, and an 0:10:23.520 --> 0:10:26.719 interesting aspect of this critique is that it's enormously persuasive, 0:10:26.760 --> 0:10:30.560 but there actually hasn't been a formal reparations figure fixed 0:10:30.679 --> 0:10:33.520 by the conference. They they've decided that they were going 0:10:33.559 --> 0:10:37.480 to be enormous economic duties on on Germany, but the 0:10:37.520 --> 0:10:40.160 peace conference at the end of the war doesn't arrive 0:10:40.200 --> 0:10:43.120 at a final figure. It arrives at a set of 0:10:43.160 --> 0:10:46.640 principles that are going to guarantee a very very high figure. 0:10:46.880 --> 0:10:51.559 But the actual formal number is kicked to a reparations commission, 0:10:51.720 --> 0:10:53.640 which is going to be sort of overseen by the 0:10:53.720 --> 0:10:55.720 League of Nations, and they're going to spend the next 0:10:55.800 --> 0:10:58.080 year or two figuring out what this number will be. 0:10:58.160 --> 0:11:01.120 And and that number comes down from what some of 0:11:01.160 --> 0:11:03.400 the calls are. I mean that there are calls for, 0:11:03.480 --> 0:11:06.840 you know, a hundred and twenty billion dollar reparations duties 0:11:07.120 --> 0:11:09.280 at the Paris Peace Conference. And these numbers are just 0:11:09.960 --> 0:11:12.840 they're just totally ludicrous. They're not arrived at by making 0:11:12.840 --> 0:11:15.960 any kind of serious attempt to calculate what Germany can 0:11:16.000 --> 0:11:18.280 afford to pay. You just have the victors of the 0:11:18.320 --> 0:11:22.360 war sitting down and deciding, Okay, how can we come 0:11:22.440 --> 0:11:25.480 up with the largest number possible. Germany is responsible for 0:11:25.520 --> 0:11:28.040 this terrible war that has killed all these people. Now 0:11:28.040 --> 0:11:29.679 we have to make them pay. We'll come up with 0:11:29.720 --> 0:11:31.920 the biggest figure we can and then negotiate down as 0:11:31.920 --> 0:11:35.440 it becomes clear that this is, you know, not economically feasible. 0:11:35.920 --> 0:11:38.760 The result of this is that you have a series 0:11:38.880 --> 0:11:43.760 of efforts to renegotiate the actual German reparations duty over 0:11:43.800 --> 0:11:45.960 the course of the nineteen twenties. Every year or two, 0:11:46.600 --> 0:11:48.880 all of the major diplomats in Europe meet to try 0:11:48.920 --> 0:11:52.240 and move this figure down a little bit from wherever 0:11:52.280 --> 0:11:54.760 it was set the year before. And in fact this 0:11:54.800 --> 0:11:59.480 happens right right before the hyper inflation. The British interviewed 0:11:59.520 --> 0:12:01.840 and said, look, is thirty three billion dollar figures crazy, 0:12:02.240 --> 0:12:04.600 Let's let's set it's at something about equal to the 0:12:04.600 --> 0:12:06.760 pre war GDP level of twelve and a half billion. 0:12:07.600 --> 0:12:11.200 But even this is a very large number for a 0:12:11.360 --> 0:12:14.200 country that is in the thrives of revolution to be 0:12:14.320 --> 0:12:17.480 trying to trying to meet um in terms of how 0:12:17.559 --> 0:12:21.600 how it's paid. This is the sort of you know, 0:12:21.880 --> 0:12:24.600 loose era of the gold standard. The gold standard comes 0:12:24.640 --> 0:12:29.880 apart during World War One, but there is an understanding 0:12:29.920 --> 0:12:32.000 that the world is going to get back on gold. 0:12:32.360 --> 0:12:35.559 So you know, what is it denominated in. It's it's 0:12:35.600 --> 0:12:38.959 denominated in currencies that are expected to be fixed to 0:12:39.120 --> 0:12:42.360 gold at fixed exchange rates, but are not quite there yet. 0:12:42.800 --> 0:12:46.439 And so the understanding the true value of these numbers 0:12:46.440 --> 0:12:49.760 becomes a little bit of a you know, a metaphysically 0:12:50.360 --> 0:12:53.920 uncertain endeavor. But there is a consensus, and not just 0:12:54.080 --> 0:12:57.400 on the left here, that that the figure is is 0:12:57.440 --> 0:13:01.440 too high, and that that consent has a sort of 0:13:01.520 --> 0:13:06.720 political significance that impacts the way currency traders who you 0:13:06.760 --> 0:13:10.800 have these sophisticated, uh speculative currency markets that develop after 0:13:10.840 --> 0:13:13.559 the war. Because the gold standard has been broken and 0:13:13.600 --> 0:13:15.920 these currencies are not fixed to a certain amount of gold, 0:13:16.520 --> 0:13:20.040 traders and and and markets are are relying on these 0:13:20.120 --> 0:13:24.040 kinds of political judgments and and opinions as as they 0:13:24.080 --> 0:13:28.520 make their you make their investments. Before the war, the 0:13:28.559 --> 0:13:30.840 mark trade was was fixed at about four to one 0:13:30.920 --> 0:13:33.520 to the dollar. By the end of the war it's 0:13:33.520 --> 0:13:36.440 about sixty five to one. So Germany has relied on 0:13:36.440 --> 0:13:40.000 a policy of deliberate inflation to finance it's war machine. 0:13:40.040 --> 0:13:42.199 All of the governments did to some extent, but Germany 0:13:42.280 --> 0:13:44.880 was was the most extreme um, so you know that 0:13:44.960 --> 0:13:47.520 the dollar has has inflated quite a bit over the 0:13:47.520 --> 0:13:49.600 course of the war two. So sixty five to one 0:13:49.920 --> 0:13:51.800 against the dollar is sixty five to one against an 0:13:51.800 --> 0:13:57.479 inflated dollar. But by really, for whatever reason, the international 0:13:57.520 --> 0:14:01.000 community has has come to a consense is that that 0:14:01.120 --> 0:14:04.360 Germany is stabilized, and so the the the sort of 0:14:04.600 --> 0:14:07.720 wartime and post war inflation that keeps going up and 0:14:07.760 --> 0:14:12.000 up and up plateaus. And you you have for a 0:14:12.040 --> 0:14:14.760 few months, in about six months in n it looks 0:14:14.800 --> 0:14:17.400 like it looks like things are going to be okay. 0:14:17.440 --> 0:14:20.760 There's about two billion dollars in international investment that comes 0:14:20.800 --> 0:14:24.280 into into Germany through you know what we would today 0:14:24.280 --> 0:14:28.080 called markets, and and this is it looks like things 0:14:28.120 --> 0:14:30.080 are going to be okay. But then over the course 0:14:30.080 --> 0:14:33.200 of nineteen one you have a series of political developments 0:14:33.240 --> 0:14:36.280 which caused all of that foreign investment to evaporate and 0:14:36.360 --> 0:14:39.400 you start seeing, um, the the inflation take off again. 0:14:40.480 --> 0:14:42.000 The point I want to emphasize is that there are 0:14:42.040 --> 0:14:44.160 a lot of decisions that are made by the German 0:14:44.160 --> 0:14:47.400 government that you can criticize. If you end up in 0:14:47.200 --> 0:14:52.920 a situation of hyper inflation. It's not because your your 0:14:53.000 --> 0:14:56.000 finance ministers have done everything wonderfully, but they are in 0:14:56.040 --> 0:14:59.200 a very difficult predicament. And most of the problems that 0:14:59.240 --> 0:15:02.760 I think we associate with, the most of the problems 0:15:02.760 --> 0:15:05.320 that are that are most directly responsible for this hyper 0:15:05.360 --> 0:15:09.720 inflation are political problems that are reflected then in market confidence, 0:15:09.800 --> 0:15:13.000 not uh not problems with say, you know, the quantity 0:15:13.040 --> 0:15:15.480 of currency in circulation or the velocity of money or 0:15:15.920 --> 0:15:34.080 things like that. So I'm really glad you brought up 0:15:34.080 --> 0:15:37.520 the political charmoil point because I think, um, a lot 0:15:37.520 --> 0:15:41.160 of people tend to forget that Germany was absolutely terrified 0:15:41.320 --> 0:15:44.640 of communism in you know, the late well in the 0:15:44.720 --> 0:15:47.440 nineteen twenties. A lot of people think they just kind 0:15:47.440 --> 0:15:51.040 of went straight to Nazism or you know, fascism, But 0:15:51.240 --> 0:15:54.920 actually there was this huge, huge ideological debate um that 0:15:54.960 --> 0:15:56.840 went on for years in a real tug of war 0:15:57.000 --> 0:15:59.920 in power. So how do you think that played out 0:16:00.320 --> 0:16:04.320 in terms of the government spending. So they're running up 0:16:04.320 --> 0:16:07.280 a big deficit. A big chunk of that is going 0:16:07.480 --> 0:16:12.000 on reparations, which you just outlined very well. What else 0:16:12.080 --> 0:16:15.640 were they spending on? So it's what we would today 0:16:15.720 --> 0:16:21.000 call social social welfare spending in the In nineteen twenty 0:16:21.160 --> 0:16:25.120 nine one Germany moves to an eight hour work day, 0:16:25.520 --> 0:16:28.560 so people are working less than than they had been. Um, 0:16:28.600 --> 0:16:31.720 they start paying unemployment benefits to people who don't have jobs. 0:16:31.800 --> 0:16:35.240 And during the sort of heavy inflation era right after 0:16:35.280 --> 0:16:38.520 the war nineteen y where all the countries of the 0:16:38.480 --> 0:16:42.000 world are having heavy inflation, not hyper inflation, uh, the 0:16:42.040 --> 0:16:44.240 unemployment rate is very high. So there's a lot of 0:16:44.240 --> 0:16:46.680 people who you know, are having trouble paying their bills 0:16:46.720 --> 0:16:50.000 and making ends meet. And they're offering healthcare and food 0:16:50.000 --> 0:16:52.040 relief to the sick and the poor. And there are 0:16:52.040 --> 0:16:54.440 a lot of sick and poor people in Germany. The 0:16:54.480 --> 0:16:58.000 Allied blockade at the end of the war probably killed 0:16:58.160 --> 0:17:02.320 four thousand people through star vation. And in the cities, 0:17:02.360 --> 0:17:05.200 in particular in Germany and Austria, you have a lot 0:17:05.240 --> 0:17:10.239 of hunger and just very very serious destitution, uh, in 0:17:10.240 --> 0:17:13.320 a way that I think people living in European cities 0:17:13.359 --> 0:17:17.400 today have trouble imagining. So the material conditions are really 0:17:17.440 --> 0:17:20.639 quite severe, and they are spending quite a bit of 0:17:20.840 --> 0:17:25.119 money on these things. But the the government, which is 0:17:25.160 --> 0:17:27.920 sort of a center left government, feels like it doesn't 0:17:27.960 --> 0:17:31.160 have a choice. It it feels like it's political coalition 0:17:31.160 --> 0:17:34.440 will fall fall apart if it doesn't find some way 0:17:34.480 --> 0:17:38.639 to materially support all of these citizens. The threat, for 0:17:38.840 --> 0:17:42.400 most people is perceived as being from the left more 0:17:42.480 --> 0:17:44.280 so than than from the right. I think in the 0:17:44.359 --> 0:17:48.199 in the ruling elite. At first at Paris, people forget 0:17:48.280 --> 0:17:50.680 Canes before he became this this you know, sort of 0:17:51.359 --> 0:17:55.760 hero for American liberalism. His his chief ally at the 0:17:55.760 --> 0:17:58.880 Paris Peace Conference was the man named Herbert Hoover. Uh 0:17:58.920 --> 0:18:02.080 and Herbert Hoover, of course, would become sort of this 0:18:02.200 --> 0:18:05.520 Bettan noir in the Great Depression. But in nineteen nineteen 0:18:06.240 --> 0:18:10.080 they agreed that there was this terrible threat from both 0:18:10.080 --> 0:18:13.480 the left and the right of authoritarian violence if there 0:18:13.640 --> 0:18:18.479 wasn't some way to feed and clothe the people of 0:18:18.480 --> 0:18:21.440 of the of Germany, that this this sort of Soviet 0:18:21.480 --> 0:18:24.760 Hoover was particularly worried about the Soviet tide um sweeping 0:18:24.800 --> 0:18:26.920 across Germany. Cames was a little more worried about a 0:18:27.040 --> 0:18:30.080 right wing tide, but there was a consensus that authoritarianism 0:18:30.200 --> 0:18:34.439 was coming if the sort of moderate liberal democracy couldn't 0:18:34.640 --> 0:18:37.439 couldn't prove that it worked with with with citizens in 0:18:37.480 --> 0:18:39.879 the streets. So they're paying a lot on these social 0:18:39.880 --> 0:18:41.879 welfare things, and and they may they may be paying 0:18:41.880 --> 0:18:45.160 too much. I mean, the the inflation that takes over 0:18:45.680 --> 0:18:50.800 before things get really out of control. By ninety two, 0:18:50.880 --> 0:18:53.600 I think prices increase about forty times. I mean, this 0:18:53.680 --> 0:18:56.320 is this is not you know, a slight amount of 0:18:56.320 --> 0:19:00.080 inflation that that we're talking about. But you know, the 0:19:00.080 --> 0:19:05.000 the coalition in Germany, you have very conservative members of 0:19:05.000 --> 0:19:08.480 of the Reichstag, people like Hugos stins Stein's I get 0:19:08.480 --> 0:19:11.080 my German pronunciation mixed up, but this is like a 0:19:11.119 --> 0:19:14.000 coal baron who's saying, your lives are worth more than money. 0:19:14.320 --> 0:19:16.879 If we don't, if we the only the only choice 0:19:16.920 --> 0:19:20.119 we have for for keeping this government together is to 0:19:20.119 --> 0:19:22.920 inflate the currency. We just we can't, you know, we 0:19:22.920 --> 0:19:26.480 we don't have the productive power right now after this 0:19:26.600 --> 0:19:30.280 war to to to make this happen with ordinary wealth. 0:19:31.040 --> 0:19:34.040 So you know, we joked in the beginning about how 0:19:34.080 --> 0:19:39.359 every time there is a stimulus here KUEI whatever, people 0:19:39.480 --> 0:19:44.640 invoke comparisons to why my hyper inflation. But one difference 0:19:44.680 --> 0:19:49.359 it sounds like is you know we might get inflation here. 0:19:50.000 --> 0:19:51.640 I mean, there are many differences, but we might get 0:19:51.680 --> 0:19:55.719 inflation here as a potential cost of doing stimulus or 0:19:55.760 --> 0:20:00.359 whatever it sounds like. Then it was not seen as 0:20:00.359 --> 0:20:04.080 a potential cost, but that was the deliberate strategy that 0:20:04.080 --> 0:20:07.639 that was. Inflation was seen as the path out, as 0:20:07.680 --> 0:20:11.320 opposed to perhaps an acceptable cost of something else we 0:20:11.359 --> 0:20:13.960 want to achieve, which is how people would probably characterize 0:20:14.160 --> 0:20:19.040 current US macro policy. Yeah. I think in the current context, 0:20:19.119 --> 0:20:23.320 people who declare with absolute certainty what they think the 0:20:23.359 --> 0:20:27.399 consequences of running these multi trillion dollar seems programs are 0:20:27.400 --> 0:20:30.399 going to be. I think that certainty is difficult to 0:20:30.440 --> 0:20:34.080 take seriously. But the the idea that there is, you know, 0:20:34.200 --> 0:20:36.679 a risk that's worth taking seems to be the the 0:20:37.000 --> 0:20:41.200 assessment from from people who are supportive of these these packages. 0:20:41.480 --> 0:20:45.520 They're not saying, you know, we're certain to get double 0:20:45.560 --> 0:20:48.119 digit inflation if we do this, so let's do it 0:20:48.160 --> 0:20:50.480 because double digit inflation is good and that's the best 0:20:50.480 --> 0:20:53.720 outcome we can hope for. Um. You know, I think 0:20:54.320 --> 0:20:56.480 Ratha now, shortly before he was murdered, just a matter 0:20:56.480 --> 0:20:59.360 of hours, he's in this this big meeting, they're talking 0:20:59.359 --> 0:21:01.600 about the budget, and he says, our economy is is 0:21:01.680 --> 0:21:04.639 like a city that's surrounded by an army and the 0:21:04.680 --> 0:21:07.399 only way out is to is to break through the 0:21:07.400 --> 0:21:09.520 lines somehow, And it's going to be really costly, and 0:21:09.560 --> 0:21:11.960 we're gonna lose a lot of soldiers if we break 0:21:11.960 --> 0:21:14.159 through this line, but it's the only chance we we have. 0:21:14.280 --> 0:21:16.920 So that's how he feels about the hyper inflation. This 0:21:16.920 --> 0:21:18.919 this is not great, but it's what we've got and 0:21:18.920 --> 0:21:21.760 if we don't do it, we're going to be destroyed. Uh. 0:21:21.800 --> 0:21:25.360 And you know, maybe he was wrong, but the political 0:21:25.440 --> 0:21:28.240 judgment at the time, Uh, they don't have a whole 0:21:28.240 --> 0:21:30.439 lot of good options. And of course brath Now is 0:21:30.520 --> 0:21:34.320 literally assassinated by right wing death squads hours after making 0:21:34.359 --> 0:21:38.680 that comment. So the the parallels, there just aren't a 0:21:38.720 --> 0:21:41.800 lot of parallels politically between what's happening in Weimar, Germany 0:21:41.840 --> 0:21:44.199 and any of the crises that we've seen, certainly in 0:21:44.200 --> 0:21:47.760 the United States and in the decades since. But the 0:21:47.760 --> 0:21:50.680 the devastation that results from the hyper inflation is so 0:21:50.720 --> 0:21:54.199 severe that I think people thinkers from this time are 0:21:54.240 --> 0:21:58.919 are are scarred by it in ways that are are 0:21:58.960 --> 0:22:01.160 are hard to understand, and for for people who didn't 0:22:01.160 --> 0:22:03.840 live through it. Can you talk a little bit about 0:22:04.080 --> 0:22:08.600 how um class played into inflation, because I'm sure people, 0:22:08.960 --> 0:22:13.040 you know, different segments of society and the political sphere 0:22:13.080 --> 0:22:17.760 had different opinions, um about this policy and inflation. You 0:22:17.800 --> 0:22:20.679 mentioned Hugostons just then as someone who was, you know, 0:22:20.760 --> 0:22:24.680 sort of fighting for full employment. But you know, it's 0:22:24.680 --> 0:22:27.320 also true he was a huge industrialist, and I think 0:22:27.440 --> 0:22:32.240 conglomerates did pretty well during an inflationary era. So some 0:22:32.280 --> 0:22:34.600 people have argued that he was basically just talking out 0:22:34.600 --> 0:22:37.480 of self interest because if he got inflation, it would 0:22:37.480 --> 0:22:41.360 benefit him. So I'm just curious, like, how did the 0:22:41.400 --> 0:22:46.560 different segments of society feel about this policy, Like if 0:22:46.600 --> 0:22:48.520 you were going to look at the middle class, the 0:22:48.560 --> 0:22:51.200 upper class, and the lower class, can you segment it out. 0:22:52.600 --> 0:22:55.639 I don't know if if class in Germany at this 0:22:55.720 --> 0:23:00.639 period of time translates as obviously to us in our 0:23:00.680 --> 0:23:05.280 own momentum as I think we might intuitively want it to. 0:23:05.800 --> 0:23:08.880