Monetary Lessons from Weimar Germany

Once the inflation genie escapes from the bottle, it is extremely difficult to put it back.

Samuel Gregg March 9, 2022  

As night follows day, any significant outbreak of inflation in Western economies eventually involves an invocation of the hyperinflation experienced by Germany 100 years ago. Since mid-2021, people ranging from tech billionaires to bitcoin enthusiasts have been asking: are we headed for a Weimar hyperinflation moment?

It is not that German hyperinflation was the most severe in history. The inflation apocalypse that engulfed Zimbabwe in 2007 was considerably worse. The German case, however, attracts attention for two reasons. First, it occurred in a modern developed economy. Second, the hyperinflation experience severely damaged the Weimar Republic’s credibility in many Germans’ eyes, thereby contributing to Hitler’s rise to power.

History, Cicero reminds us, is the magistra vitae. It provides us with a repository of experiences from which we can learn and then apply the lessons to our present dilemmas. The parallels between the unraveling of Germany’s financial system in the early-1920s and today’s inflation outbreaks are far from exact. But understanding what happened in Germany does provide us with insights into our current inflationary challenges.

From World War to Monetary Chaos.........To Read More...