Counter Argument to Austrian basis for Hyperinflation

Wednesday, May 20, 2009

What actually drove the [1920s Germany] wartime inflation into hyperinflation, said [Hjalmar] Schacht, [the currency commissioner for the Weimar Republic], was speculation by foreign investors, who would bet on the mark’s decreasing value by selling it short.

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If Schacht is to be believed, not only did the government not cause the hyperinflation but it was the government that got the situation under control. The Reichsbank was put under strict regulation, and prompt corrective measures were taken to eliminate foreign speculation by eliminating easy access to loans of bank-created money.

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There is, however, something else going on today that is disturbingly similar to what triggered the 1923 hyperinflation. As in Weimar Germany, money creation in the U.S. is now being undertaken by a privately-owned central bank, the Federal Reserve; and it is largely being done to settle speculative bets on the books of private banks, without producing anything of value to the economy.

Web of Debt: Time to get out the wheelbarrows? Another look at the Weimar Hyperinflation, Ellen Brown, May 19th, 2009, http://www.webofdebt.com/articles/hyperinflation.php.