When Money Dies: The Nightmare of Deficit Spending, Devaluation, and Hyperinflation in Weimar Germany by Adam Fergusson

(New York: Public Affairs, 1975), 256

This is a moral tale. It goes far to prove the revolutionary axiom that if you wish to destroy a nation you must first corrupt its currency. Thus must sound money be the first bastion of society's defense. (xiv)

The history of hyperinflation in Weimar Germany is packed with lessons for us today. The central idiot-villain is Rudolf Havenstein who as head of the autonomous Reichsbank, and dismissing any quantitative theory of money, turned and kept the printing presses on full tilt and sent the currency into a nosedive.

Inflation is not the only part of the story, but does indeed play a central role in the fate of Germany—and by unfortunate extension the fate of the rest of the world. There are other causes and roots of decay in the turmoil of World War I. And there are other villains: Ludendorff the militaristic reactionary, Stinnes the plutocratic profiteer, Raymond Poincaré the vengeful victor, and of course Hitler the power-hungry demagogue. These are moderated by Lord D'Abernon's British voice of reason, and Hjalmar Schacht's stabilizing reforms.

In many ways World War I and World War II were part of the same unresolved conflict, and Germany's inflation is a chain that binds them together. Indeed it is difficult to imagine the the rise of Hitler and the Holocaust in an alternate history with sound money and reasonable monetary policy. Inflation aggravates all evils and is a principal agent of moral decay.

When reading about Chamberlain in 2020-10-19-Last Lion—Defender of the Realm it is difficult to not feel a great sadness at how easily the calamity of World War II could have been averted. One leaves a reading of When Money Dies with a similar feeling about Havenstein's monetary policy and Poincaré's vengeance.



Chapter 1: Gold for Iron

Summary: The German hyperinflation of 1923 brought great suffering, and had its roots in the monetary policy of Karl Helfferich going back to start of war in 1914.

Chapter 2: Joyless Streets

Summary: The inflation and suffering in Austria—as told by the film "The Joyless Street" and the diary of Anna Eisenmenger—foreshadowed that to come in Germany. Some of the quotes from her diary sound eerily similar to things I hear today in 2021.

  • >'Yes, but mine are government securities: Surely there can't be anything safer tha nthat?' 'My dear lady, where is the State which guranteed these securities to you? It is dead.' (21)
  • "Gambling on the stock exchange had become the the fashion—the only way to avoid losing all one's money and perhaps to add to it." (24)

Chapter 3: The Bill Presented

Summary: Germany's economy was in dire straights in 1920/21 as it struggled with massive debt, rising prices, and huge reparations payments it would never be able to make except at a level of taxation leading to revolution, all under threat of sanctions or occupation.

Chapter 4: Delirium of Milliards

Summary: The mark started to lose value as the government was squeezed by reparations bills, unable to tax, and overpowered by the industrial lobby, and assassinations led to further loss in confidence. Germans speculated in foreign currency, moved their capital out of the country to avoid taxation, and rushed to buy goods before prices rose or stocks were depleted. This fueled animosity toward those who profited from the situation, and inevitably the Jews.

  • >I hardly know a single German who is not speculating in foreign currencies. (47)
  • >We cannot be very far from a panic. As soon as inflation ceases to increase and deflation sets in, there will be the devil to pay. –D'Abernon (51)

Chapter 5: The Slide to Hyperinflation

Summary: Hyperinflation (50% in a month, or 600% annualized) arrived in mid-1922 and brought social unrest, moral degradation, and fear.

  • >Inflation finished the process of moral decay which the war had started. (77)

Chapter 6: Summer of '22

Summary: German leadership was blind and ignorant at the impact of monetary inflation on the economic collapse. The speed of inflation caused prices to go up before monthly wages could be adjusted. And the holocaust finds its roots in the search for a scapegoat for this disaster.

  • >It requires handcuffs to stay the hand which turns teh crank of the printing press. –D'Abernon (82)

Chapter 7: The Habsburg Inheritance

Summary: Hungaray reached some measure of stability from Hegedüs' reforms, but this quickly reversed when they tried to fix exchange rates, leading to speculation, unemployment, inflation, nationalism, and anti-semitism.

  • "Whereas in 1914 it required 80 hours of work to buy a suit of clothe and in 1919 141 hours, by July 1922 381 ours were needed." (107)

Chapter 8: Autumn Paper-chase

Summary: Germany continues to slide as the Reichsbank continues printing at full tilt and Germans can barely buy necessities to survive. The "bale of last straws" was Poincaré's invasion of the Ruhr and the subsequent loss of a significant fraction of Germany's population and industrial and agricultural base.

  • "only the country people were surviving in Germany in any comfort: anyone who lived off the land had the readiest access to real value." (108)
  • >Brains have no longer a marketable value. (110)

Chapter 9: Ruhrkampf

Summary: Germany, under Dr. Havenstein at the Reichsbank continued printing money in greater amounts and allowed her gold reserves to dwindle to fund imports of coal and food. Workers demanded to be paid daily to keep up with inflation.

  • "Fate seemed to have asigned to France 'the historic role of welding the divergent forces of our people into unity again and again'" (Tirpitz on the Anglo-Saxons, 129)
  • >Inflation is like a drug in more ways than one. It is fatal in the end, but it gets it votaries over many difficult moments. –D'Abernon (135)
  • >...foreign students bought up whole rows of houses out of their allowances (140)
  • >The desperation of the masses is being exploited by radical agitators from both Left and Right. (151)

Chapter 10: Summer of '23

Summary: Hyperinflation continued, with prices printed daily now in the newspapers. Unrest became increasingly violent and riotous, and Cuno was pushed out of office as Chancellor.

Chapter 11: Havenstein

Summary: Havenstein of the Reichsbank is the fool-villain of this tale. He did not believe in a connection between the money supply and price levels or exchange rates, and saw his duty as supplying enough paper as medium of exchange to meet the demands of the mark's tumbling purchasing power. National unity dissolved and was replaced with the extremes of Hitler, Communism, and looting. Finally a military dictatorship was declared.

  • "No situation, however, was so bad that summer that Dr. Havenstein could not make it worse." (170)
  • >Germany is a Republic but the Reichsbank is a Monarchy! (172)

Chapter 12: The Bottom of the Abyss

Summary: "Inflation is the ally of political extremism, the antithesis of order" (201). The country continued to fall apart politically with von Kahr in Bavaria, outrage of the socialists, lawlessness in the Rhineland, and victories by the communists and Hitler. Men cared not for democracy when basic needs were unmet and looked for any strong hand. Ignorance, greed, and cowardice led to dictatorship, hunger, and bloodshed.

  • >Economic distress is leading the people to me much more amenable to authority as representing the only hope of salvation from the present state of affairs. (189)
  • "Inflation is the ally of political extremism, the antithesis of order" (201)

Chapter 13: Schacht

Summary: Germany is saved by Havenstein's death and the stopping of the money printing, and Hjalmar Schacht's elevation and switch to the Rentensmark. The Rentensmark was a confidence trick, but it worked and farmers released food in exchange for it to the starving cities. Sanity was returning—including a balanced budget in March 1924, but the reckoning with reality was still ahead.

  • "There was no way whereby printing money could keep anyone in his job any more. The choice had simply become between unemployment and financial chaos or unemployment and monetary discipline." (214)

Chapter 14: Unemployment Breaks Out

Summary: Stability was restored but at the cost of high interest rates, bankruptcies, and unemployment. Food was now abundant and cheap but still largely unaffordable. Hyperinflation had massively redistributed Germany's capital.

  • >All who were not clever enough to hoard the forbidden stable currencies or gold have, without exception, suffered losses. (224)

Chapter 15: The Wounds are Bared

Summary: The insidious consequences of inflation persisted long after the recovery, and ultimately sowed the seeds for future conflict in World War II. Inflation permanently warped people's views and attitudes toward money and debt, destroyed the middle class, and led to a widespread moral breakdown.

  • "As the old virtues of thrift, honest and hard work lost their appeal, everybody was out to get rich quickly, especially as speculation in currency or shares could palpably yield far greater rewards than labor." (236)
  • "Inflation profiteering had consisted of borrowing paper marks, converting them into goods and factories, and then repaying the lenders with depreciated paper. Deflation profiteering consisted of selling everything available for the new stable marks and—in this period of the tightest imaginable credit—lending the proceeds at extravagant rates of interest." (239)

Chapter 16: Epilogue

Summary: Inflation reminds us that the world wars were a single story. And this story teaches us about the importance of sound money and its purpose in serving a free society.

  • Continuity from World War I to World War II"More than any other thread that links the two world wars, the history of the inflation is a reminder that for the nation which supremely promoted both of them, the second was merely an extension of the first, reinforcing the adage that the deeds of battle are planted in peace treaties. Inflation for Germany was an unwitting part of the process of stoking the emotional boilers for a resumption of hostilities when the power to wage war returned." (248)

Source: Cory


  • All Quiet on the Western Front (12, 256)

New Words

  • milliard: one thousand million (vii)
  • autarky: economic independence or self-sufficiency (9)
  • hinterland: an area surrounding a town or port and served by it (17)
  • prise: use force in order to move, move apart, or open (27)
  • Putsch: attempted coup (28)
  • desiderata: something that is needed or wanted (50)
  • debenture: an unsecured loan certificate issued by a company, backed by general credit rather than by specified assets (741)
  • vertiginous: causing vertigo, especially by being extremely high or steep (94)
  • vitiate: spoil or impair the quality or efficiency of (109)
  • votary: a devoted follower, adherent, or advocate of someone or something (135)
  • gaol: Anglo-Norman French of "jail" (144)
  • ostensibly: apparently or purportedly, but perhaps not actually (146)
  • penurious: extremely poor; poverty-stricken (156)
  • derisory: ridiculously small or inadequate (166)
  • coup d'état: a sudden, violent, and unlawful seizure of power from a government; a coup (186)
  • spoliation: the action of ruining or destroying something (207)
  • interregnum: a period when normal government is suspended, especially between successive reigns or regimes (214)
  • revanchism: a policy of seeking to retaliate, especially to recover lost territory (247)

Created: 2021-12-16
Updated: 2021-12-20

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