Speaker 1: Hello, and welcome to another episode of the Odd Lots podcast.
Speaker 1: I'm Joe Wisn't Thal and I'm Tracy Allaway. Tracy, you know,
Speaker 1: it's interesting having watched the aftermath of two separate crises
Speaker 1: now because you start to see similarities and the sort
Speaker 1: of stories that people tell after each one of them. Yeah,
Speaker 1: that's true. Um. I also think it's really interesting to
Speaker 1: see how much opinions kind of change in retrospect. So
Speaker 1: I remember, for instance, after the two thous financial crisis,
Speaker 1: people would get upset if you suggested that quantitative easing
Speaker 1: could have an impact on stocks, Like if you actually
Speaker 1: said there was an asset substitution effect, people would think
Speaker 1: that you were crazy. I remember writing an alphabel post
Speaker 1: on this at the time and getting a bunch of
Speaker 1: comments saying it was complete, letely wrong. And now, of course,
Speaker 1: the idea that QUI pushes up stocks, you know, most
Speaker 1: people sort of accept that, even if it may or
Speaker 1: may not be true. But yeah, you're right, you're really
Speaker 1: ahead of the curve back then. I thank you. I'm
Speaker 1: just humble bragging like talking about asset substitution effects. But
Speaker 1: I also think like the dominant narrative like out there
Speaker 1: just in the sphere of the broad things, is all
Speaker 1: this idea of like QUEI would inevitably lead to inflation,
Speaker 1: maybe even hyper inflation all this government spending and obviously
Speaker 1: we saw a lot of talk around that, and we
Speaker 1: see a lot of talk about it now, just this
Speaker 1: idea that government policies, particularly US government policy, is reckless
Speaker 1: and we're going to destroy the value of the dollar. Yeah,
Speaker 1: And to offset what I just said about that Alphabel post,
Speaker 1: I'm pretty sure I also wrote things on Alphabel about
Speaker 1: the coming hyper inflation, or at least I summarized a
Speaker 1: bunch of notes about that, you know, back in two
Speaker 1: thousand eight, two thousand nine. But you're right, that was
Speaker 1: sort of well, it was the big concern after two
Speaker 1: thousand eight, and we saw it kind of come back
Speaker 1: in with the announcement of all this additional government spending.
Speaker 1: They're always concerns that it's going to lead to inflation,
Speaker 1: even though we've now had you know, over a decade
Speaker 1: of central banks missing their inflation targets. Right, So if
Speaker 1: you ever point out it's like, actually inflation isn't mild
Speaker 1: or whatever, you know, Quey, it's probably you know, doesn't
Speaker 1: have much of an inflationary impact or misunderstanding the deficit.
Speaker 1: What happens is if you say that that gold bugs
Speaker 1: like yourself or silver bugs like your dad respond with
Speaker 1: like memes of people pushing wheelbarrows of the deutsch Mark
Speaker 1: during the Weimarer hyper inflation and tell you why you're wrong.
Speaker 1: Let me tell you, Joe, if the inflation ever comes,
Speaker 1: I'm going to be stacking my my silver and gold
Speaker 1: in your face and you're going to be very very jealous. Yeah, look,
Speaker 1: I'm joking. You will definitely have the last level. But
Speaker 1: if we're going to talk about, okay, the prospect of
Speaker 1: what happened with the Weimar hyperinflation seems like, Okay, it's
Speaker 1: probably not gonna happen. I don't think our existing policies
Speaker 1: are on that route. But maybe we should actually learn
Speaker 1: about what really happened beyond just the memes of people
Speaker 1: pushing wheelbarrows wheelbarrows of cash. No, I totally agree, And
Speaker 1: I also think you know, the Ymar Republic is sort
Speaker 1: of this scary story that everyone brings up when they're
Speaker 1: talking about inflation, and people sort of throw the term
Speaker 1: or the name around, but actually not that many people
Speaker 1: know exactly what happened, what drove it, and how bad
Speaker 1: inflation actually got during that period. So I think it's
Speaker 1: a great idea to dig into the details. Great, well,
Speaker 1: I am very excited about today's episode. We are going
Speaker 1: to have a repeat guest. We talked to him back
Speaker 1: in the spring or summer. We're gonna be speaking with
Speaker 1: Zach Carter. He is the author of the New York
Speaker 1: Times best selling book The Price of Peace, Money, Democracy,
Speaker 1: and the Life of John Maynard Canes paperback coming out
Speaker 1: April twenty and there is a section in his book
Speaker 1: where he talks about the Wymar hyperinflation, so we thought
Speaker 1: we would dive into that and find out what really happened. So, Zach,
Speaker 1: thank you so much for coming back on Odd Lots.
Speaker 1: Thanks so much for having me before we start. Have
Speaker 1: you heard of this? I saw this on Wikipedia last
Speaker 1: night when I was doing my research zero stroke. Have
Speaker 1: you heard of that? This is the thing? It's this
Speaker 1: is the thing. It's on Wikipedia, so it must be real.
Speaker 1: There was a mental disorder diagnosed by physicians in Germany
Speaker 1: during the hyper inflation. I'm just reading the page, and
Speaker 1: the disorder was primarily characterized by the desire of patients
Speaker 1: to write endless roads of zeros, which are referred to
Speaker 1: as ciphers. And this is actually even John Kenneth Galbraith
Speaker 1: in his book about Money, talks about this and there
Speaker 1: seems to be a few references. I guess it's real.
Speaker 1: It's kind of hard to believe, but the currently there
Speaker 1: really was a mental affliction where people have just wrote
Speaker 1: zeros on pages hyperinflation. I've read the gall Braith book
Speaker 1: on Money, it's very good. I don't remember that particular episode, though.
Speaker 1: You know, this was a totally formative event for a
Speaker 1: lot of a lot of economic thinkers who would go
Speaker 1: on to have an extraordinary degree of influence to Friedrich
Speaker 1: Hyak witnessed this from Vienna and was just totally horrified
Speaker 1: and I think embarrassed by by by what happened after
Speaker 1: the war in Germany. And I think it shaped a
Speaker 1: lot of a lot of you know, sort of what
Speaker 1: we now call neoliberal views about how the world works
Speaker 1: and what the great threats to the economy and democracy are.
Speaker 1: And obviously we still talk about it today, even when
Speaker 1: I think it's you know, as you mentioned, I think
Speaker 1: it's totally inappropriate to be to be invoking you know,
Speaker 1: the Biber experience is something that we might have it,
Speaker 1: you know, in the near future here, but it obviously
Speaker 1: animates our understanding of the economy even today. Well, shall
Speaker 1: we dive into it then and maybe start at the beginning? Um,
Speaker 1: can you lay the scene for us of what exactly
Speaker 1: Germany and I guess the developed world order looked like
Speaker 1: going into this episode of hyper inflation. Yeah, I think
Speaker 1: you know, when we talked about this today, there's obviously
Speaker 1: a kind of political lens that we see this through.
Speaker 1: You have goldbugs and you know, inflation hawks tend to
Speaker 1: be more conservative invoking this this this episode, and you
Speaker 1: have you know, soft hearted liberals and their soft money
Speaker 1: ways saying don't worry about it. Uh, that wasn't really
Speaker 1: the way the politics of the time we're playing out.
Speaker 1: There was a consensus after World War One that the
Speaker 1: reparations duties that had been assigned to Germany, which lost
Speaker 1: World War One, were too stringent, too severe, that they
Speaker 1: were unpaid, unpayable, and they would result in economic turmoil
Speaker 1: for Europe and the world. And the person who issued
Speaker 1: this critique most famously was John Maynard Kane's which is
Speaker 1: why I write it, wrote it out in my book
Speaker 1: Kine's in the early nineteen twenties is not this sort
Speaker 1: of you know, hero of people like Paul Krugman and
Speaker 1: the and the kind of center left in further political sphere.
Speaker 1: He's He's a very conventional establishment figure in the British
Speaker 1: government and his critique is heralded by none other than
Speaker 1: free Ridge High. So this, this idea is not something
Speaker 1: that is is being harbored only by know, like left
Speaker 1: wing socialists trying to you know, bring about some sort
Speaker 1: of egalitarian millennium. This is a very standard conventional view
Speaker 1: within Germany and across Europe. And the size of these
Speaker 1: duties is so large. By the Reparations Commission that's established
Speaker 1: after World War One says Germany is getting to pay
Speaker 1: about thirty three billion dollars. German pre war GDP is
Speaker 1: about twelve and a half billion dollars. So this is
Speaker 1: like triple the German and about butt of the economy
Speaker 1: would be like somebody saying today, uh, you know, by
Speaker 1: the way, the United States, you've got to run your economy,
Speaker 1: you know, solve whatever problems you want, but you owe
Speaker 1: seventy trillion dollars somewhere else and it's and it's got
Speaker 1: to be paid over the next you know, several years.
Speaker 1: So these are huge, huge reparations figures that are looming
Speaker 1: over every decision that the German government is trying to make.
Speaker 1: And the German government from the end of the war
Speaker 1: really through into the nineteen thirties is in a kind
Speaker 1: of perpetual state of revolution um. The revolutions just just
Speaker 1: tend to fail. Communists like Rosa Luxembourg are murdered in
Speaker 1: the streets in nineteen nineteen. Walter Ratha, now, who is
Speaker 1: the foreign minister, sort of the most important diplomat in
Speaker 1: the German government, he is murdered by by far right terrorists.
Speaker 1: In nineteen nineteen twenty two, there is a communist uprising
Speaker 1: in Hamburg. In Hamburger, I think is the pronunciation in
Speaker 1: October three, which is just a few weeks ahead of
Speaker 1: Hitler's famous beer hall Pusch in November of three. So
Speaker 1: there's just an enormous amount of political turmoil happening right now.
Speaker 1: You have hundreds of political assassinations happening every year. They
Speaker 1: do not have conditions of political stability in Germany, and
Speaker 1: so the political coalition that is trying to trying to govern,
Speaker 1: is making choices with its budget to try and basically
Speaker 1: fend off some sort of violent takeover of the government,
Speaker 1: and it's and it's spending a lot of money in
Speaker 1: order to do that, and this is creating a very
Speaker 1: large budget deficit. So, Zach, before we go further into
Speaker 1: the German budget, I just wanna sort of get the
Speaker 1: background a little bit more about how the size of
Speaker 1: the German war debt or the German reparations were established.
Speaker 1: And you mentioned thirty three billion dollars multiple times the
Speaker 1: size of German GDP. What where did this come from?
Speaker 1: What were this sort of like talk a little bit
Speaker 1: about how this number was established. What was the dead
Speaker 1: sort of DENI dominated in at that time, because I
Speaker 1: think obviously that's an important thing, and so like, you know,
Speaker 1: where did this you know, the end of the war happens,
Speaker 1: and then they have this number that they owe who
Speaker 1: do they who do they owe it to? And so forth? Right,
Speaker 1: So the the answer is it's extremely complicated. Kane's issues
Speaker 1: his critique in a book called The Economic Consequences of
Speaker 1: the Piece that comes out in nineteen nine, and an
Speaker 1: interesting aspect of this critique is that it's enormously persuasive,
Speaker 1: but there actually hasn't been a formal reparations figure fixed
Speaker 1: by the conference. They they've decided that they were going
Speaker 1: to be enormous economic duties on on Germany, but the
Speaker 1: peace conference at the end of the war doesn't arrive
Speaker 1: at a final figure. It arrives at a set of
Speaker 1: principles that are going to guarantee a very very high figure.
Speaker 1: But the actual formal number is kicked to a reparations commission,
Speaker 1: which is going to be sort of overseen by the
Speaker 1: League of Nations, and they're going to spend the next
Speaker 1: year or two figuring out what this number will be.
Speaker 1: And and that number comes down from what some of
Speaker 1: the calls are. I mean that there are calls for,
Speaker 1: you know, a hundred and twenty billion dollar reparations duties
Speaker 1: at the Paris Peace Conference. And these numbers are just
Speaker 1: they're just totally ludicrous. They're not arrived at by making
Speaker 1: any kind of serious attempt to calculate what Germany can
Speaker 1: afford to pay. You just have the victors of the
Speaker 1: war sitting down and deciding, Okay, how can we come
Speaker 1: up with the largest number possible. Germany is responsible for
Speaker 1: this terrible war that has killed all these people. Now
Speaker 1: we have to make them pay. We'll come up with
Speaker 1: the biggest figure we can and then negotiate down as
Speaker 1: it becomes clear that this is, you know, not economically feasible.
Speaker 1: The result of this is that you have a series
Speaker 1: of efforts to renegotiate the actual German reparations duty over
Speaker 1: the course of the nineteen twenties. Every year or two,
Speaker 1: all of the major diplomats in Europe meet to try
Speaker 1: and move this figure down a little bit from wherever
Speaker 1: it was set the year before. And in fact this
Speaker 1: happens right right before the hyper inflation. The British interviewed
Speaker 1: and said, look, is thirty three billion dollar figures crazy,
Speaker 1: Let's let's set it's at something about equal to the
Speaker 1: pre war GDP level of twelve and a half billion.
Speaker 1: But even this is a very large number for a
Speaker 1: country that is in the thrives of revolution to be
Speaker 1: trying to trying to meet um in terms of how
Speaker 1: how it's paid. This is the sort of you know,
Speaker 1: loose era of the gold standard. The gold standard comes
Speaker 1: apart during World War One, but there is an understanding
Speaker 1: that the world is going to get back on gold.
Speaker 1: So you know, what is it denominated in. It's it's
Speaker 1: denominated in currencies that are expected to be fixed to
Speaker 1: gold at fixed exchange rates, but are not quite there yet.
Speaker 1: And so the understanding the true value of these numbers
Speaker 1: becomes a little bit of a you know, a metaphysically
Speaker 1: uncertain endeavor. But there is a consensus, and not just
Speaker 1: on the left here, that that the figure is is
Speaker 1: too high, and that that consent has a sort of
Speaker 1: political significance that impacts the way currency traders who you
Speaker 1: have these sophisticated, uh speculative currency markets that develop after
Speaker 1: the war. Because the gold standard has been broken and
Speaker 1: these currencies are not fixed to a certain amount of gold,
Speaker 1: traders and and and markets are are relying on these
Speaker 1: kinds of political judgments and and opinions as as they
Speaker 1: make their you make their investments. Before the war, the
Speaker 1: mark trade was was fixed at about four to one
Speaker 1: to the dollar. By the end of the war it's
Speaker 1: about sixty five to one. So Germany has relied on
Speaker 1: a policy of deliberate inflation to finance it's war machine.
Speaker 1: All of the governments did to some extent, but Germany
Speaker 1: was was the most extreme um, so you know that
Speaker 1: the dollar has has inflated quite a bit over the
Speaker 1: course of the war two. So sixty five to one
Speaker 1: against the dollar is sixty five to one against an
Speaker 1: inflated dollar. But by really, for whatever reason, the international
Speaker 1: community has has come to a consense is that that
Speaker 1: Germany is stabilized, and so the the the sort of
Speaker 1: wartime and post war inflation that keeps going up and
Speaker 1: up and up plateaus. And you you have for a
Speaker 1: few months, in about six months in n it looks
Speaker 1: like it looks like things are going to be okay.
Speaker 1: There's about two billion dollars in international investment that comes
Speaker 1: into into Germany through you know what we would today
Speaker 1: called markets, and and this is it looks like things
Speaker 1: are going to be okay. But then over the course
Speaker 1: of nineteen one you have a series of political developments
Speaker 1: which caused all of that foreign investment to evaporate and
Speaker 1: you start seeing, um, the the inflation take off again.
Speaker 1: The point I want to emphasize is that there are
Speaker 1: a lot of decisions that are made by the German
Speaker 1: government that you can criticize. If you end up in
Speaker 1: a situation of hyper inflation. It's not because your your
Speaker 1: finance ministers have done everything wonderfully, but they are in
Speaker 1: a very difficult predicament. And most of the problems that
Speaker 1: I think we associate with, the most of the problems
Speaker 1: that are that are most directly responsible for this hyper
Speaker 1: inflation are political problems that are reflected then in market confidence,
Speaker 1: not uh not problems with say, you know, the quantity
Speaker 1: of currency in circulation or the velocity of money or
Speaker 1: things like that. So I'm really glad you brought up
Speaker 1: the political charmoil point because I think, um, a lot
Speaker 1: of people tend to forget that Germany was absolutely terrified
Speaker 1: of communism in you know, the late well in the
Speaker 1: nineteen twenties. A lot of people think they just kind
Speaker 1: of went straight to Nazism or you know, fascism, But
Speaker 1: actually there was this huge, huge ideological debate um that
Speaker 1: went on for years in a real tug of war
Speaker 1: in power. So how do you think that played out
Speaker 1: in terms of the government spending. So they're running up
Speaker 1: a big deficit. A big chunk of that is going
Speaker 1: on reparations, which you just outlined very well. What else
Speaker 1: were they spending on? So it's what we would today
Speaker 1: call social social welfare spending in the In nineteen twenty
Speaker 1: nine one Germany moves to an eight hour work day,
Speaker 1: so people are working less than than they had been. Um,
Speaker 1: they start paying unemployment benefits to people who don't have jobs.
Speaker 1: And during the sort of heavy inflation era right after
Speaker 1: the war nineteen y where all the countries of the
Speaker 1: world are having heavy inflation, not hyper inflation, uh, the
Speaker 1: unemployment rate is very high. So there's a lot of
Speaker 1: people who you know, are having trouble paying their bills
Speaker 1: and making ends meet. And they're offering healthcare and food
Speaker 1: relief to the sick and the poor. And there are
Speaker 1: a lot of sick and poor people in Germany. The
Speaker 1: Allied blockade at the end of the war probably killed
Speaker 1: four thousand people through star vation. And in the cities,
Speaker 1: in particular in Germany and Austria, you have a lot
Speaker 1: of hunger and just very very serious destitution, uh, in
Speaker 1: a way that I think people living in European cities
Speaker 1: today have trouble imagining. So the material conditions are really
Speaker 1: quite severe, and they are spending quite a bit of
Speaker 1: money on these things. But the the government, which is
Speaker 1: sort of a center left government, feels like it doesn't
Speaker 1: have a choice. It it feels like it's political coalition
Speaker 1: will fall fall apart if it doesn't find some way
Speaker 1: to materially support all of these citizens. The threat, for
Speaker 1: most people is perceived as being from the left more
Speaker 1: so than than from the right. I think in the
Speaker 1: in the ruling elite. At first at Paris, people forget
Speaker 1: Canes before he became this this you know, sort of
Speaker 1: hero for American liberalism. His his chief ally at the
Speaker 1: Paris Peace Conference was the man named Herbert Hoover. Uh
Speaker 1: and Herbert Hoover, of course, would become sort of this
Speaker 1: Bettan noir in the Great Depression. But in nineteen nineteen
Speaker 1: they agreed that there was this terrible threat from both
Speaker 1: the left and the right of authoritarian violence if there
Speaker 1: wasn't some way to feed and clothe the people of
Speaker 1: of the of Germany, that this this sort of Soviet
Speaker 1: Hoover was particularly worried about the Soviet tide um sweeping
Speaker 1: across Germany. Cames was a little more worried about a
Speaker 1: right wing tide, but there was a consensus that authoritarianism
Speaker 1: was coming if the sort of moderate liberal democracy couldn't
Speaker 1: couldn't prove that it worked with with with citizens in
Speaker 1: the streets. So they're paying a lot on these social
Speaker 1: welfare things, and and they may they may be paying
Speaker 1: too much. I mean, the the inflation that takes over
Speaker 1: before things get really out of control. By ninety two,
Speaker 1: I think prices increase about forty times. I mean, this
Speaker 1: is this is not you know, a slight amount of
Speaker 1: inflation that that we're talking about. But you know, the
Speaker 1: the coalition in Germany, you have very conservative members of
Speaker 1: of the Reichstag, people like Hugos stins Stein's I get
Speaker 1: my German pronunciation mixed up, but this is like a
Speaker 1: coal baron who's saying, your lives are worth more than money.
Speaker 1: If we don't, if we the only the only choice
Speaker 1: we have for for keeping this government together is to
Speaker 1: inflate the currency. We just we can't, you know, we
Speaker 1: we don't have the productive power right now after this
Speaker 1: war to to to make this happen with ordinary wealth.
Speaker 1: So you know, we joked in the beginning about how
Speaker 1: every time there is a stimulus here KUEI whatever, people
Speaker 1: invoke comparisons to why my hyper inflation. But one difference
Speaker 1: it sounds like is you know we might get inflation here.
Speaker 1: I mean, there are many differences, but we might get
Speaker 1: inflation here as a potential cost of doing stimulus or
Speaker 1: whatever it sounds like. Then it was not seen as
Speaker 1: a potential cost, but that was the deliberate strategy that
Speaker 1: that was. Inflation was seen as the path out, as
Speaker 1: opposed to perhaps an acceptable cost of something else we
Speaker 1: want to achieve, which is how people would probably characterize
Speaker 1: current US macro policy. Yeah. I think in the current context,
Speaker 1: people who declare with absolute certainty what they think the
Speaker 1: consequences of running these multi trillion dollar seems programs are
Speaker 1: going to be. I think that certainty is difficult to
Speaker 1: take seriously. But the the idea that there is, you know,
Speaker 1: a risk that's worth taking seems to be the the
Speaker 1: assessment from from people who are supportive of these these packages.
Speaker 1: They're not saying, you know, we're certain to get double
Speaker 1: digit inflation if we do this, so let's do it
Speaker 1: because double digit inflation is good and that's the best
Speaker 1: outcome we can hope for. Um. You know, I think
Speaker 1: Ratha now, shortly before he was murdered, just a matter
Speaker 1: of hours, he's in this this big meeting, they're talking
Speaker 1: about the budget, and he says, our economy is is
Speaker 1: like a city that's surrounded by an army and the
Speaker 1: only way out is to is to break through the
Speaker 1: lines somehow, And it's going to be really costly, and
Speaker 1: we're gonna lose a lot of soldiers if we break
Speaker 1: through this line, but it's the only chance we we have.
Speaker 1: So that's how he feels about the hyper inflation. This
Speaker 1: this is not great, but it's what we've got and
Speaker 1: if we don't do it, we're going to be destroyed. Uh.
Speaker 1: And you know, maybe he was wrong, but the political
Speaker 1: judgment at the time, Uh, they don't have a whole
Speaker 1: lot of good options. And of course brath Now is
Speaker 1: literally assassinated by right wing death squads hours after making
Speaker 1: that comment. So the the parallels, there just aren't a
Speaker 1: lot of parallels politically between what's happening in Weimar, Germany
Speaker 1: and any of the crises that we've seen, certainly in
Speaker 1: the United States and in the decades since. But the
Speaker 1: the devastation that results from the hyper inflation is so
Speaker 1: severe that I think people thinkers from this time are
Speaker 1: are are scarred by it in ways that are are
Speaker 1: are hard to understand, and for for people who didn't
Speaker 1: live through it. Can you talk a little bit about
Speaker 1: how um class played into inflation, because I'm sure people,
Speaker 1: you know, different segments of society and the political sphere
Speaker 1: had different opinions, um about this policy and inflation. You
Speaker 1: mentioned Hugostons just then as someone who was, you know,
Speaker 1: sort of fighting for full employment. But you know, it's
Speaker 1: also true he was a huge industrialist, and I think
Speaker 1: conglomerates did pretty well during an inflationary era. So some
Speaker 1: people have argued that he was basically just talking out
Speaker 1: of self interest because if he got inflation, it would
Speaker 1: benefit him. So I'm just curious, like, how did the
Speaker 1: different segments of society feel about this policy, Like if
Speaker 1: you were going to look at the middle class, the
Speaker 1: upper class, and the lower class, can you segment it out.
Speaker 1: I don't know if if class in Germany at this
Speaker 1: period of time translates as obviously to us in our
Speaker 1: own momentum as I think we might intuitively want it to.
Speaker 1: I think your your point there, though, that that someone
Speaker 1: like Dennis is talking his own book is almost almost
Speaker 1: certainly true. Um, it certainly is true. But I also
Speaker 1: think a lot of these people, you know, people have
Speaker 1: a tennessee to believe things that benefit right, um, and
Speaker 1: and Cennis is otherwise the conservative, So you you do
Speaker 1: have these these kind of conservative thinkers thinking this, this
Speaker 1: could be smart policy even you know, and and and
Speaker 1: good for me if you look at the unemployment rate
Speaker 1: though during this kind of fortyfold increase in prices that
Speaker 1: happens in nineteen twenty two, and and here we are
Speaker 1: not talking about the hyper inflation, but with forty fold
Speaker 1: increases in prices, I mean, this is an enormous, enormous
Speaker 1: inflationary period, but this is not anywhere near what's going
Speaker 1: to happen in nine. But over this period, wages are
Speaker 1: basically keeping pace with price increases, so people don't feel
Speaker 1: materially poor. The people who are really getting screwed are
Speaker 1: people who have large holdings of assets that are demarcated
Speaker 1: in in the mark um. And even then, if you
Speaker 1: can dump your marks for something else, and you know,
Speaker 1: if you can trade them for gold or other currencies, um,
Speaker 1: you can live pretty well. There's there's a remarkable phenomenon
Speaker 1: of foreigners living in Berlin at this period of time
Speaker 1: where because the prices in marks are just going totally crazy,
Speaker 1: if you have a lot of foreign currency, you can
Speaker 1: live like a total king if you're hanging out in
Speaker 1: in in the Winmar world, which was just you know,
Speaker 1: despite all the violence, a really culturally vibrant, vibrant place.
Speaker 1: But the unemployment rate is is for the first time
Speaker 1: in several years since the war has has basically come
Speaker 1: down to a reasonable level. You don't have the high
Speaker 1: joblessness in Germany during this period that you have, say
Speaker 1: in in Britain, and Britain's basically having suffering from double
Speaker 1: digit unemployment from the end of the war to the
Speaker 1: outbreak of World War two. Same thing in France. So
Speaker 1: so you have an inflationary problem that is that is
Speaker 1: hurting German investors, but for ordinary people trying to go
Speaker 1: to work, it's it's kind of annoying to have to
Speaker 1: keep track of prices, but but wages really are keeping
Speaker 1: a pace and and people are working, so it doesn't
Speaker 1: feel like a material disaster in the moment. And I
Speaker 1: think that that alleviates a lot of the political pressure
Speaker 1: to adopt, you know, what we would consider a more
Speaker 1: sound or fiscally responsible budgetary position, because economically it's it
Speaker 1: seems to be working for most people. So this gets
Speaker 1: to h and you talk about this in your book,
Speaker 1: like this early stages of it. There is a lot
Speaker 1: of um extreme inflation, but wages are roughly keeping track
Speaker 1: and also unemployment is low. So when does it become
Speaker 1: this sort of hyper inflation of legends cash and wheelbarrows,
Speaker 1: words like numbers like quadrillion being thrown about, like when
Speaker 1: does that start to again and why. There's a very
Speaker 1: clear break that happens when the French government decides to
Speaker 1: occupy the rural valley. And this is territory you know,
Speaker 1: in the border between France and Germany. It is the
Speaker 1: industrial core of the German economy. That's where all of
Speaker 1: the mining and industrial wealth of Germany is. And under
Speaker 1: the Treaty of Versailles that ended World War One, if
Speaker 1: Germany fails to make its reparations payments on time, on schedule,
Speaker 1: then France will get the right to take over this territory.
Speaker 1: And Germany misses its reparations payments even under the lower
Speaker 1: negotiated figures of the of the Reparations Commission. In these
Speaker 1: further efforts from the British government to lower even the
Speaker 1: reparations commissions amount, that the German government misses the payment
Speaker 1: and France essentially invades, and when that happens, you have
Speaker 1: a total loss of international confidence in the mark. It
Speaker 1: happens very quickly, uh. You start seeing the mark uh
Speaker 1: instead of big sixty five or or a thousand to one,
Speaker 1: It starts being measured in millions against the dollar. And
Speaker 1: this continues in part because of the political situation, in
Speaker 1: part because of the German government's choice to finance the
Speaker 1: campaign of what they call passive resistance to the occupation,
Speaker 1: which basically means paying a lot of money to people
Speaker 1: who don't want to leave the real value because you
Speaker 1: know once the French troops will arrive. So Germany had
Speaker 1: been running about a seven fifty million a year budget deficit.
Speaker 1: That doubles to one point five billion dollars a year um.
Speaker 1: Again a large deficit, but you know, about ten percent
Speaker 1: of of pre war h G d P a little
Speaker 1: more than ten percent, so so not something completely ludicrous,
Speaker 1: but they are they are going deeper into into the
Speaker 1: deficit territory than they already were, and of course they're
Speaker 1: having forty fold price increases beforehand. So I don't think
Speaker 1: when I say, I don't think it's completely ludicrous, it's
Speaker 1: it's a very large deficit um. But it's not like
Speaker 1: you can dollar for dollar ce. Okay, this currency issuece
Speaker 1: led to this amount of inflation. There is a huge
Speaker 1: loss of confidence in the political project of of Waimar Germany.
Speaker 1: And then there's no reason that the the the government
Speaker 1: is giving to have any confidence in their willingness to
Speaker 1: abate from inflationary policies as as that that collapse is happening.
Speaker 1: So the German government invades the mark just immediately spirals
Speaker 1: out of control and it and it just goes into
Speaker 1: complete crazy crazy land. After this, it's I think it
Speaker 1: they stop measuring when it gets to about a trillion
Speaker 1: to one sometime in n marks two dollars. So it's
Speaker 1: it's a political collapse, is what happens. And you have,
Speaker 1: of course the Beer Hall pushed from from Hitler and Ludendorff,
Speaker 1: which is more famous than the the uprising in Hamburg.
Speaker 1: But but politically the government is just is just wiped
Speaker 1: out and and they have to essentially start over. I
Speaker 1: think one important factor here, uh is it's not just
Speaker 1: one important factor, but an important factor here is is
Speaker 1: the way that this is viewed internationally. The hyper inflation
Speaker 1: is not in the moment viewed as just merely an
Speaker 1: extreme act of recklessness by the German government. There is
Speaker 1: an immediate effort to renegotiate the Treaty of Versailles and
Speaker 1: lower the reparations obligations to Germany. When this happens, and
Speaker 1: the French invasion is viewed as as politically illegitimate um
Speaker 1: not just within Germany, but by the Americans and by
Speaker 1: the British government. And that's that's really quite something, because
Speaker 1: of course, the Americans and the French and the British
Speaker 1: were allies during the war. They crafted the peace treaty,
Speaker 1: and France was really just abiding by the terms of
Speaker 1: the treaty. Germany didn't make good on its reparations, and
Speaker 1: France said, okay, well we're gonna We're gonna go in,
Speaker 1: and all of France's allies abandoned it and and basically
Speaker 1: say Germany is in the right here. We've we've got
Speaker 1: to to renegotiate this. And the renegotiations become known as
Speaker 1: as the Young Plan, and it's it's it's officially performed
Speaker 1: by a couple of JP Morgan bankers, but they're really
Speaker 1: acting as sort of deputies for the U S. Born
Speaker 1: policy establishment, and this this changes the way that the
Speaker 1: Germany is governed, and so the politics change and and
Speaker 1: the currency can be can be stabilized, but first you
Speaker 1: you basically have to have a completely new international political
Speaker 1: regime and consensus um that replaces the old one and
Speaker 1: and and that until that happens, Germany cannot be stabilized financially.
Speaker 1: So I have what might be a dumb question just
Speaker 1: before we get into you know what actually resolved this
Speaker 1: inflationary episode. But during the worst of the price increases,
Speaker 1: how were people actually keeping track of prices? Because you know, nowadays,
Speaker 1: if you think about inflation, we've got a bunch of indicase, obviously,
Speaker 1: but also if the cost of your cup of coffee
Speaker 1: like increased tenfold while you were drinking it, I think
Speaker 1: everyone would you know, probably photographed their receipt and put
Speaker 1: it on social media and talk about it, and we'd
Speaker 1: have almost instantaneous knowledge that inflation was happening. But I
Speaker 1: can't really imagine what it was like back then, Like
Speaker 1: how did people actually monitor, you know, how quickly prices
Speaker 1: for things were changing. They couldn't, is the answer. I think.
Speaker 1: Over the course of you could you could you could
Speaker 1: go into the grocery store one day and say, okay,
Speaker 1: well this is how much you know, a bag of
Speaker 1: flower costs, and the next day it's even higher. Um It,
Speaker 1: just the money became became worthless, and so you had
Speaker 1: you had people. You had huge theft and looting problems
Speaker 1: where people just steal from stores and then go into
Speaker 1: um i would are sometimes referred to as flea markets.
Speaker 1: But you basically had barter in the streets where ordinary
Speaker 1: people trying to make ends meet, We're having to trade
Speaker 1: goods for goods instead of paying with with wheelbarrows full
Speaker 1: of cash. I mean, workers were still being paid in
Speaker 1: these giant stacks of money, but you couldn't really do
Speaker 1: anything with them. I mean you're talking about millions of
Speaker 1: marks to you know, to pay for a sandwich or
Speaker 1: something at a diner. I mean, how how do you
Speaker 1: get that stuff across the counter? But you just can't.
Speaker 1: So so you do have this this this kind of
Speaker 1: funny wheelbarrow thing, but that's mostly workers taking their cash
Speaker 1: home from work that they then can't do anything with
Speaker 1: the actual terms of commerce. The commerce becomes a barter
Speaker 1: system and and you have you have a total breakdown.
Speaker 1: You know, I asked at the beginning, um, if you
Speaker 1: had heard of a zero stroke, and you said, no,
Speaker 1: I don't even know. I'm like, I'm not totally convinced
Speaker 1: this is real. Like, even though apparently it was written about,
Speaker 1: it still seems kind of crazy. You could get why
Speaker 1: this was like such a i mean obviously such a
Speaker 1: scarring thing that it still dominates discourse till this day.
Speaker 1: And of course we know the Germans to this day
Speaker 1: remain sort of like famous for their commitment to more
Speaker 1: like a hard money approach. I mean it was just
Speaker 1: you know, complete societal devastation, yes, and it was humiliating
Speaker 1: to people in Germany. I mean, the national pride was
Speaker 1: was completely They just lost a war, which was you know,
Speaker 1: people don't like to lose wars, and and now they
Speaker 1: were sort of an international laughing stock. They they couldn't
Speaker 1: even they couldn't even run a monetary economy. And Germany
Speaker 1: had been prior to the war, you know, the if
Speaker 1: not the industrial powerhouse of Europe, one of the two
Speaker 1: alongside Britain. It was it was, you know, a major
Speaker 1: rising superpower in world affairs, and and suddenly it's it's
Speaker 1: just a complete, a complete mess and and you know,
Speaker 1: you have people on the streets, you know, talking about
Speaker 1: exchange rates and and concerned with these things that have
Speaker 1: nothing to do with the course of ordinary life and
Speaker 1: a prosperous society. Uh so, yeah, it's it's a it's
Speaker 1: something that I mean Freacher Hide never forgets it. He
Speaker 1: carries this with him for for the rest of his life.
Speaker 1: And and it's it's not just you know, the blow
Speaker 1: to national pride is not just on the right. It's
Speaker 1: it's not just people like Hitler. People like Hitler are
Speaker 1: able to to to rise to power because there is
Speaker 1: a widespread feeling of of of resentment and and humiliation
Speaker 1: across German society. It makes it very difficult for social
Speaker 1: democracy in in its sort of more moderate modes, to
Speaker 1: to sustain itself. So before we get to the legacy
Speaker 1: of ymar hyper inflation, can can we go through what
Speaker 1: exactly ended it? Or like how did it all come
Speaker 1: to a halt, Because it's not like the government just
Speaker 1: sat by waiting for this to pass. They did actively
Speaker 1: try to do things to mitigate it, and so did
Speaker 1: the international community, as you already mentioned by you know,
Speaker 1: looking at reparations and lowering them, So what worked and
Speaker 1: what didn't, it's an international fix. And then and then
Speaker 1: there's there's essentially a wipeout of the currency and a
Speaker 1: starting from scratch. So the German government never stops its
Speaker 1: campaign of passive resistance. So it's it's one point five
Speaker 1: billion dollar or deficit is continuing, and the idea that
Speaker 1: the French occupation is illegitimate um is held across the
Speaker 1: political spectrum in Germany. Nobody wants, No politician wants from
Speaker 1: any any party wants to be caught saying, you know,
Speaker 1: they don't support resistance to this unlawful thing that the
Speaker 1: French government has not even though of course it's it's
Speaker 1: perfectly legal under international law. What what happens is a
Speaker 1: new currency, but a new currency with a new political milieu,
Speaker 1: which is the Young Plan UM. And the Young Plan
Speaker 1: is essentially a program of of issuing large loans to
Speaker 1: France and Germany, uh so that both France and Germany
Speaker 1: stopped complaining about the terms of the treaty. The reason
Speaker 1: German reparations are so high during the war is partly
Speaker 1: just you know, Victor's sort of excess, but also because
Speaker 1: there's really serious damage that's been done, particularly in France,
Speaker 1: and so there's there's a very expensive project of of
Speaker 1: rebuilding that needs to take place, and the French economy
Speaker 1: has been damaged in such way that's hard to do
Speaker 1: with domestic capital. So getting money from Germany helping it's rebuild,
Speaker 1: having France then pay its war debts to Britain, the
Speaker 1: United States, the United States ends up with all this money.
Speaker 1: At the end, the obvious player to support Europe through
Speaker 1: this period is the United States. And so with the
Speaker 1: Young Plan, I think there's a two hundred million dollar
Speaker 1: loan to Germany and a one billion dollar loan to France.
Speaker 1: And this matters not only financially because Germany can then
Speaker 1: afford to start, you know, actually meeting obligations with money
Speaker 1: that isn't printed out of thin air. Um, it matters
Speaker 1: symbolically because the United States has come in and said, okay,
Speaker 1: we get it. We need to support Europe here and
Speaker 1: if we don't, everything will fall apart. And so this
Speaker 1: buys several years of relative economic stability in Europe. Um
Speaker 1: and you you have this this system where essentially the
Speaker 1: United States lends a lot of money to Germany through
Speaker 1: different channels, Germany pays you know, some form of reparations
Speaker 1: duties to France and to Britain, and then Britain pays
Speaker 1: the war debts that it's accumulated over the course of
Speaker 1: nine to nineteen nineteen to the United States, which then
Speaker 1: has all this money which it lends back to Germany.
Speaker 1: So this cycle of funds keeps going and basically until
Speaker 1: you have financial crises that that unwind it and uh,
Speaker 1: and then you have the Great Depression. You have twenty
Speaker 1: years of economic dysfunction, but a relative period of stability
Speaker 1: here once the United States steps in and says we're
Speaker 1: going to pay to keep your up afloat. So in
Speaker 1: the in the folk history of Weimar Germany that gets
Speaker 1: told on the Internet through memes, it's like Germany printed
Speaker 1: a bunch of money and then that was really terrible,
Speaker 1: and uh, then the Nazis came to power because that
Speaker 1: was so terrible And doesn't sound like there's actually the
Speaker 1: correct sequence of things. When do in this sort of
Speaker 1: like the sequence of things, what are the conditions prior
Speaker 1: to you know, sort of between the massive hyper inflation
Speaker 1: and then what you described, and then the conditions that
Speaker 1: did in fact sort of precede the rise of the Nazis.
Speaker 1: It's a long period of time. Uh So, it's it's
Speaker 1: hard to it's hard to classify it as one particular thing.
Speaker 1: But i'm our Germany has its ups and downs like
Speaker 1: the rest of um of Europe over this period. But
Speaker 1: the second half of the nineteen twenties is much more
Speaker 1: prosperous and much more stable than the first half. It
Speaker 1: is the financial turmoil of the early nineteen thirties that
Speaker 1: really unwinds things and and brings the Nazis to power.
Speaker 1: In nineteen thirty you have a huge run on a
Speaker 1: bank called Credit on Stalt in Vienna. And Credit on
Speaker 1: Stalled is a very large, politically connected bank. It's it's
Speaker 1: got people from all of the big European banking families
Speaker 1: on the board. It's not so much the size that matters,
Speaker 1: by the sort of prestige of the institution. If this
Speaker 1: bank could fail, think about what this means for the
Speaker 1: Austrian economy. And on the gold standard, of course, if
Speaker 1: government spend too much, they can run out of gold
Speaker 1: and their currency can be destroyed. And there's a few
Speaker 1: year that is sparked among investors when Credit on st
Speaker 1: Stealth fails in nineteen thirty that the Austrian government is
Speaker 1: going to spend so much money supporting its banking system
Speaker 1: that they will no longer be able to support gold convertibility,
Speaker 1: and so people start dumping Austrian bonds and an Austrian currency.
Speaker 1: You have a run on the shilling that quickly spreads
Speaker 1: to a run on the German mark. Because, of course
Speaker 1: the economies of Germany and Austria are closely intertwined. So
Speaker 1: the idea that Austria won't be able to meet its
Speaker 1: obligations creates fears that Germany will will support it and
Speaker 1: not be able to meet its obligations, and this eventually
Speaker 1: spreads to a run on the British pound for similar reasons,
Speaker 1: so the idea of being a British foreign investment in
Speaker 1: Germany will will make the British untenable. So you very quickly,
Speaker 1: over the course of nineteen thirty have a total collapse
Speaker 1: of the entire international financial system. In this sort of
Speaker 1: latter stage of the gold standard. This by the nineteen thirties,
Speaker 1: everybody's back on gold. It's not working super well, but
Speaker 1: it hasn't been a disaster. But suddenly, with this financial crisis,
Speaker 1: everybody's wrecked and the gold standard is gone, and you
Speaker 1: have a period of absolutely crushing deflation that takes over
Speaker 1: across all of Europe. That there has been deflation for
Speaker 1: much of the nineteen twenties, but it accelerates dramatically in
Speaker 1: nineteen thirty and nineteen thirty one with the collapse of
Speaker 1: the European financial system. This is also happening in the
Speaker 1: United States after the big precipitous event in the United
Speaker 1: States is the crash of the stock market in ninety nine,
Speaker 1: which most financial historians now I think except is connected
Speaker 1: to the financial crisis thirty one in Europe. But these
Speaker 1: these events are are basically doing away with the banking
Speaker 1: system's ability to meet that the industrial demands of society,
Speaker 1: and so you have terrible deflation that takes hold and massive,
Speaker 1: massive unemployment, and the period that we now know we
Speaker 1: not think of as the Great Depression sets in. And
Speaker 1: and that's that's where that's where Hitler comes from. Economically,
Speaker 1: you know, there's all sorts of other cultural things happening
Speaker 1: in Germany, and the anti Semitism is obviously very well known,
Speaker 1: but but the economic grounds there there is widespread misery
Speaker 1: in Germany at this period of time, but it's a
Speaker 1: different kind of the misery is similar, but it's a
Speaker 1: different cause than than in Um in nineteen three. You've
Speaker 1: gone from hyper inflation to very severe deflation Ino. So
Speaker 1: you've mentioned this a couple of times already, But this
Speaker 1: idea that the whole Um episode had a really big
Speaker 1: impact on a lot of economists at the time, and
Speaker 1: these economists, of course went on to have a really
Speaker 1: big impact on economics itself for you know, decades to come.
Speaker 1: But can you walk us through the legacy of ymar inflation,
Speaker 1: like how did it actually end up shaping and impacting
Speaker 1: economic thought and policy afterwards? I think it's a really
Speaker 1: complicated question because economics is always kind of moving by
Speaker 1: fits and starts in different directions. At the same time,
Speaker 1: I think it causes a kind of a kind of
Speaker 1: crisis within the sort of liberal broad enlightenment liberal tradition
Speaker 1: that had not been anticipated ahead of the war. So
Speaker 1: people like Hyak and Canes were very much simpatico in
Speaker 1: nineteen twelve nineteen thirteen. I think they had very similar
Speaker 1: views of the world. Hyak was enamored with the glories
Speaker 1: of the sort of pre war Austrian Empire. Canes Is
Speaker 1: is very taken with the glories of the British Empire UM.
Speaker 1: But they have very divergent reactions to what happens. From
Speaker 1: three onward, they even agree on, you know, with what
Speaker 1: is that, they even agree with the problems with the
Speaker 1: Treaty of Versailles. But but from the hyper inflation moment
Speaker 1: on they take totally different interpretations of of what has
Speaker 1: gone wrong and what needs to be fixed. Kines comes
Speaker 1: to believe that governments need to support their economies in
Speaker 1: order to prevent the kind of pullical chaos that has
Speaker 1: unfolded in Germany, and how it comes to believe that
Speaker 1: it's this irresponsible spending of the German government on the
Speaker 1: social welfare programs which invited the catastrophe to begin with.
Speaker 1: So they have totally opposite views of what the source
Speaker 1: of the the hyper inflation was. And of course, you know,
Speaker 1: data and things like this are nowhere near as precise
Speaker 1: um as they are today. And even today, you know,
Speaker 1: the exact same set of data can spark wildly divergent
Speaker 1: interpretations from people in economics UM. But both both Highkan
Speaker 1: Kines have have I think pretty um compelling stories to
Speaker 1: tell about about what went wrong. I mean, the German
Speaker 1: government did spend an enormous amount of money. It was
Speaker 1: on social welfare programs. And Uh. If you are inclined
Speaker 1: to believe that, you know, we we live in a
Speaker 1: hard world and um inequalities is kind of a fact
Speaker 1: of nature, not a not a political choice, then it
Speaker 1: looks like the German government was was reckless and doing
Speaker 1: things that that were irresponsible. If you believe that the
Speaker 1: economic possibilities for our grandchildren, as Kine's once said, are
Speaker 1: quasi utopian, uh, and that in fact the world is
Speaker 1: richer than it's ever been before and it has the
Speaker 1: capacity to improve life for everyone in it, UM, then
Speaker 1: I think it's easier to believe that this was a
Speaker 1: you know, a political disaster rather than an act of
Speaker 1: excessive kind heartedness. UM. Within the the sort of debates
Speaker 1: of the of the nineteen thirties, Hiak has a lot
Speaker 1: of allies in in the British sort of economic establishment. Um.
Speaker 1: He's not really a famous guy in in the nineteen thirties.
Speaker 1: He becomes famous in the nineteen forties with a political
Speaker 1: book called The Road to Servedom. But the real economic
Speaker 1: leader of this school of thought that we've come to
Speaker 1: associate um with high is a guy named Lionel Robbins,
Speaker 1: and he's the the London School of Economics. And Robbins
Speaker 1: is someone who espouses views that I think we would
Speaker 1: today associate with with Milton Friedman or um Or Or
Speaker 1: or Friedrich Hyake. And he's constantly fighting with Kaine's over
Speaker 1: over public work spending and whether it's it's possible to
Speaker 1: create economic growth through public works or through budget deficits,
Speaker 1: and within Britain, by the end of the nineteen thirties,
Speaker 1: Robbins is basically recanted and said, you know, Caines was right,
Speaker 1: and this view that that we come we come to
Speaker 1: call neoliberalism is really consigned to a tiny kind of quirky,
Speaker 1: oddball um intellectual minority. And it's not until the nineteen
Speaker 1: seventies that this school of thought becomes dominant again. And
Speaker 1: that's largely due to a lot of really impressive sort
Speaker 1: of social work that that Hyak does, organizing people who
Speaker 1: see the world the way he does, and and help
Speaker 1: having them, you know, write papers and write books and
Speaker 1: and tell stories about how the economy works that are
Speaker 1: similar to his own worldview. So one last thing. But
Speaker 1: I know we've talked a lot about whether or not
Speaker 1: this period of history has any relevance to the financial
Speaker 1: and economic system right now. But and you've been quite
Speaker 1: clear that you don't really think it does. But is
Speaker 1: there anything that you think we have in common now
Speaker 1: with um? This is a really dark question with the
Speaker 1: Weimar Republic, And it's a good question. I'm glad you asked.
Speaker 1: Yeah you financially no, but politically yeah, I do worry. UM.
Speaker 1: It's one of the reasons why I wrote UM the
Speaker 1: Biography of Canes. When I did, I felt like after
Speaker 1: the financial crisis, there's a difference between an economic crisis
Speaker 1: that's brought on by the quick collapse of a banking
Speaker 1: system and one that's brought on by, you know, a
Speaker 1: world war. UM. So they're clearly differences. But I do
Speaker 1: think we we live in a moment where we have
Speaker 1: authoritarian violence rising not only the United States but around
Speaker 1: the world, which makes it uh, and we're we're kind
Speaker 1: of reluctant to see the international dimension to that, to
Speaker 1: that crisis. It plays out in the United States through
Speaker 1: the the the patterns of of history that have that
Speaker 1: have been here. So UM, the American version of it
Speaker 1: is different than the British version, or the or the
Speaker 1: German version. But there's obviously a rising tide of authoritarian
Speaker 1: um thought and authoritarian violence around the world right now,
Speaker 1: and the the outbursts of violence in the United States
Speaker 1: are the sort of outbursts that looking backwards, if something
Speaker 1: terrible happens, you would say, ah, that was clearly a precursor.
Speaker 1: I think the Capitol Hill riot on January six is
Speaker 1: an extremely extremely dangerous event um that most of us
Speaker 1: don't want to think about because it's the implications of
Speaker 1: it as as a sort of twenty one century which
Speaker 1: event are, are really terrifying. But we do have a
Speaker 1: lot of right wing resentment in the United States right now,
Speaker 1: and and and we are not unique to that. That
Speaker 1: was true in the nineteen twenties and thirties to UM
Speaker 1: the rise of fascism in Germany um was not an
Speaker 1: isolated event. It played out according to a set of
Speaker 1: historically contingent German proclivities in Germany. But you also saw
Speaker 1: it in Italy, you also saw it in France, in France,
Speaker 1: in Spain, and you saw less successful versions of it
Speaker 1: in in France and the United states. I mean, when
Speaker 1: when FDR came to power in two uh, there was
Speaker 1: an enormous amount of violence in in American society, UM,
Speaker 1: and it wasn't obvious that the political project was going
Speaker 1: to hold together. I hope that that's not where we're going,
Speaker 1: but I think it would be silly to pretend that, um,
Speaker 1: there there aren't some overtones of that of that era
Speaker 1: in our own time. Now. I'm glad you asked that, Tracy.
Speaker 1: Could I think that was a very important, very important answer,
Speaker 1: Zach Carter, Thank you so much for coming back on
Speaker 1: odd Luck. Thanks so much for having me, and good
Speaker 1: luck with the release of the paperback. Thank you so much. Thanks.
Speaker 1: That was great, Tracy. I I actually thought your question
Speaker 1: at the end was the best there because I do think,
Speaker 1: like setting aside um this sort of y mar question
Speaker 1: for a second, like whenever I think about, like, you know,
Speaker 1: what to worry um or what could cause hyperinflation, I
Speaker 1: do think it's exactly sort of that and what what
Speaker 1: Zach pointed out, which is like it's probably not going
Speaker 1: to come because oh we're like you know, spent some
Speaker 1: x amount of billions more than we should have. It
Speaker 1: seems much more likely to come because, like something political,
Speaker 1: it just causes people to lose faith in the existing system. Yeah,
Speaker 1: I guess inflation is always and everywhere a political problem, right, Yeah,
Speaker 1: I actually think I think, I know I'm being serious.
Speaker 1: I know that sounds flippant, but I think there's a
Speaker 1: lot of truth to that. And yeah, and I think
Speaker 1: also this idea that Zach was talking about that you know,
Speaker 1: Germany didn't just go out and decide to run a
Speaker 1: massive deficit for the sake of it and to screw
Speaker 1: over all the people. It owed money too, in the
Speaker 1: form of reparations, although that was of course part of it,
Speaker 1: but a big part of the government spending also came
Speaker 1: from these social programs which were targeted at, you know,
Speaker 1: achieving full employment, helping people live a better life, and
Speaker 1: also trying to make people happy to try to dampen
Speaker 1: down that political turmoil, right that. Yeah, Like it's really
Speaker 1: the entire combination. So the hard currency debt, uh, the
Speaker 1: the collapse. I mean, one of the things that people
Speaker 1: talk about is like to get true like inflation or hyperinflation,
Speaker 1: you need some sort of like supply side disruption. And
Speaker 1: so of course you had the war itself, and then
Speaker 1: the French invasion after the debts weren't paid, so that
Speaker 1: further diminished the German industrial capacity. You have the domestic
Speaker 1: political turmoil, and Zach laid out all of the various
Speaker 1: assassinations and uprisings and things that were happening uh during
Speaker 1: this period. So it really was like a it was
Speaker 1: a unique stew of very bad things that happened that
Speaker 1: that caused this episode. Yeah, but again, like the thing
Speaker 1: that comes through from that conversation is that inflation is
Speaker 1: a political choice sometimes, although you can spin out of control. Yeah, right,
Speaker 1: Like the one thing it's not is just a function
Speaker 1: of all we want to run expansionary physical policy, Like
Speaker 1: there could be like the political situation that forced Germany
Speaker 1: to have to choose but been paying its external dads
Speaker 1: and domestic dad's, Like there were there were aspects of that,
Speaker 1: but it's clearly not just a sort of like you know,
Speaker 1: it's not a simple it's not a policy. It's not
Speaker 1: a simple policy thing. Um on that note, shall we
Speaker 1: leave it there, Yeah, let's leave it there on that
Speaker 1: happy Now, this has been another episode of the All
Speaker 1: Thoughts podcast. I'm Tracy Alloway. You can follow me on
Speaker 1: Twitter at Tracy Alloway and I'm Joe wi Isn't Thought.
Speaker 1: You can follow me on Twitter at The Stalwart. Follow
Speaker 1: our guest Zach Carter. He's at Zach de Carter and
Speaker 1: check out his book The Price of Peace, Money Democracy
Speaker 1: in the Life of John Maynard Keynes, paperback out April.
Speaker 1: Follow our producer Laura Carlson. She's at Laura M. Carlson.
Speaker 1: Follow the Bloomberg head of podcast, Francesca Levi at Francesco Today,
Speaker 1: and check out all of our podcast at Bloomberg under
Speaker 1: the handle at podcasts. Thanks for listening to