During the five years of inflation, price stability, and hyperinflation in Germany
after World War I, three factors determined the growth of the money supply.
First, the Reichsbank freely issued money in exchange for whatever government
or corporate debt the private sector did not wish to hold at the official discount
rate. Second, the government persistently ran large deficits. Political instability
and the inflation itself prevented taxation adequate to pay for social programs,
subsidies to the railroad and businesses, and reparations to the Allies. The third
factor was expectations of inflation, which, as they became more pessimistic, led
people to hold less and monetize more of the outstanding stock of debt. Thus, the
money supply was partly endogenous and partly dependent on government fiscal
policy. The monetary policy of the Reichsbank, although essential to the inflation
process, was a constant and passive one until stabilization at the end of 1923.
Part three is simply people realising what the buggery’s going on. Part two, yes, there really is a limit to how much of the UK economy you can collect in tax. Not sure that anyone’s ever managed to get it consistently above 40% of GDP or so. And part one does look amazingly like the BoE printing cash to buy those National Investment Bank bonds, doesn’t it?
Part one also looks like normal QE to me.
Assignat
reparations to the allies? What a tool.
Right from the start, this was a lie. The 132bn gold marks that the public were told about were put into various categories and in reality, Germany only had to pay 2 of the categories, totalling 50bn gold marks. And pretty rapidly, this got rescheduled, and rescheduled until Germany was paying almost nothing.
Germany received more money in US state aid in the 1920s than what they were supposed to pay back.
@TW
Perhaps you might consider the p.o.v. of those who believe that the State should create money but see the Murphy scheme as a disaster .The Labour Party new thinkers would have been better hooking up with Martin Wolf whose recent FT article “Two cheers for Jeremy Corbyn’s challenges…” goes as far as dish outs of newly created money straight to the public .As he is the premier exponent of Land Value Tax in the world IMO , you two have something in common,not that you dare mention it on here.
Instead of the fatuous right wing bullshit, you should be attacking Murphy from the left (where the conservatives are tacking anyway). Murphy is wibbly wobbly compared to Wolf on LVT where Wolf has ready-to-go plans.On the monetary question Wolf declares Strip banks of power to create money!
This the quarter from which fire at Murphy should be directed.
Otherwise it all sounds like petty jealousy.
@ DBC Reed
Sometime you should consider that money is merely a means of exchange and that producing food clothing housing and other stuff that people want to buy is what matters. Martin Wolf is very self-important but “sometimes it is also important to be right”
The government giving newly minted money direct to the public? What a good idea. I shan’t bother getting up to go to work – no point really.
Osborne on TV news: moving on to ground vacated by New Labour. So we have two kinds of Labour in government and opposition.No place for old-fashioned market forces Conservatives.
Tim seems to have overlooked the fact that the money supply (both central bank issued money and private bank issued money) have been increasing year on year since WWII. Yet mysteriously we haven’t had continuous hyperinflation since WWII.
That will be incomprehensible to the robots who chant “inflation” every time the words “print” and “money” appear in the same sentence.
@ Ralph
This shouldn’t be a surprise. Since WW2 we’ve also had an increase in the population and nominal and real GDP.
As long as money supply isn’t growing dramatically faster than real GDP you wouldn’t expect significant monetary driven inflation.
@ Ralph
What Tyler said, and also:
When I started work in 1975 inflation was 24%. It may not have been hyperinflation, but it certainly felt like ‘rampant’ inflation to me.
I am younger than Mr Corbyn, and I can remember it, so he should too (though his background is far more ‘monied’ than mine).
Yes I remember my first job and the complaints over our meagre 9.5% pay rise, I believe inflation was down to the 10-12% range at that point.
BniC,
You’ve just reminded me – when I was an Army apprentice in ’75/’76 we received a monthly pay rise to try to keep up with inflation.