If you have an eccentric uncle in the family who was collecting obscure books about politics 35 years ago, have a look through his bookshelves and see if you can find a copy of When Money Dies, by Adam Fergusson. Because if you do, you have a valuable property. Yesterday there were three copies of this old hardback on sale in the USA, via Amazon, for prices ranging from £525 to £890. The Abebooks site showed two on sale in the UK, one for £575 and the other going at a bargain price of £395.
The book was scarily topical when it was first published in 1975, after the 1973 Arab-Israeli war, when the oil producing nations had got together as a cartel, quadrupled the price of oil and set off double figure inflation in Western economies.
Fergusson, an Old Etonian journalist and political activist, seized the moment to present a graphic description of what happened the last time a developed economy was hit by hyperinflation. His subject was Germany's Weimar Republic, that turbulent democratic interlude between the fall of the Kaiser and rise of Adolf Hitler – and particularly the early 1920s, when the German mark became worthless.
Fergusson went on to be a political adviser to Sir Geoffrey Howe, the Chancellor on whose watch, in the years 1979-83, inflation was beaten, though at great cost. After that, people stopped thinking about what it might be like to live in a society where money could not buy anything worth having – until the US confidence in its economic system was hit by the seismic shock of the banking crisis of 2008. Then old copies of When Money Dies came down from the shelves, the dust was blown off them and people pored over its descriptions of everyday life in Weimar Germany.
Warren Buffett, that great capitalist sage whose prowess as an investor has made him the world's second richest man, is said to have advised a Dutch financier to read the book as a cautionary tale about what could happen if governments run up such excessive debt. No one seems to know which Dutch financier was the recipient of this advice, or when, but the rumour helped push the potential sale price of secondhand copies of Fergusson above £1,000. This month, a small publisher rushed out a new paperback version.
Fergusson, who is now 78, gave an interview to the Daily Telegraph in which he came out firmly behind George Osborne's strategy of getting the government deficit down quickly. "Politically, now is the only time tightening can be done. In a year or so it won't be possible, politically, any more," he said. His views are not surprising, given that what Osborne is doing now is an updated version of what Howe did 30 years ago.
Weimar Germany is not a subject with which the average Briton can claim much familiarity. We all have ideas about the Great War and of the horrors of the Third Reich in 1933, but the only mental images some of us can muster of the 15 intermediate years derive from a visit that the writer Christopher Isherwood paid to Weimar Germany, which inspired his novel Goodbye to Berlin, which became a play, then a musical, then the 1972 film Cabaret. When we think "Weimar", we think Liza Minnelli in a black bowler and scanty skin-tight black outfit. It was a time when German culture flowered, throwing up names like Bertold Brecht, Kurt Weill, Thomas Mann, Hermann Hesse and many more. Those of us who were taught about the period in school also have mental pictures of people taking their wages home in suitcases or covering their walls with paper money because it was cheaper than wallpaper.
Inflation really was that far out of control. In 1913, the mark was worth one shilling. Had anyone wanted to exchange sterling for German currency in 1923, which no one did, they could have swapped a shilling for 1,000,000,000,000 marks. The wisest German politician of that era, the Foreign Minister Walter Rathenau, called it "the delirium of billions".
"A billion comes easily and trippingly to the tongue, but no one can imagine a billion," he said. "Does a wood contain a billion leaves? Are there a billion blades of grass in a meadow?"
Mercifully, the German hyperinflation had particular causes which are not likely to be repeated. During the war, the Kaiser had suspended the normal rules restricting bank loans and allowed the banks to lend money they did not have, which they generated by printing more banknotes. After the war, German industry was left severely damaged and the country was ordered to pay huge sums in reparations to the victors. Prices went up, and state and local authorities were given permission to print more and more money. To save paper, money of ever higher denomination was printed. The first 500 million mark notes went into circulation on 1 September 1923.
There was money, money everywhere, but it bought nothing. People rushed to spend their wages as soon as they had them in their hands, knowing that their value was depreciating by the hour. It was said that if you paid 5,000 marks for a cup of coffee, it would cost 8,000 marks by the time it was drunk. There were stories of thieves stealing suitcases full of money, dumping the money and keeping the cases. Unable to spend money, people resorted to barter, swapping paraffin for clothes, or clothes for food, or paying for a cinema ticket with a lump of coal.
Educated Germans did not accept that the flood of paper money was a cause rather than a result of inflation, which they blamed on foreign exchange rates. Others blamed profiteers, particularly the small number of rich Jews like the talented Walter Rathenau, who was killed by a right- wing assassin in 1922. In Bavaria, where Hitler was wandering around with a head full of unpleasant fantasies, the state government made gluttony a criminal offence. Anyone seen eating in a manner likely to cause the hungry to riot could be fined 100,000 marks.
The Weimar Republic has not had a good press, and too many of the people who lived through it were glad to see it replaced by the rule of a messianic strongman who promised to restore Germany's standing in the world. This is a shame, because had the economy been stable, this could have been a model democracy. The German Social Democratic Party was in power several years ahead of the British Labour Party. The Weimar Constitution, formally proclaimed on 11 August 1919, protected freedom of speech and of the press, declared that men and women were equal under the law, recognised the bargaining rights of trade unions, and granted free voting rights to all Germans over the age of 21. The Reichstag was one of the first parliaments elected under proportional representation. The constitution could almost have been written by Nick Clegg.
But there was a nasty undercurrent of political violence already simmering in Germany in 1919, as its defeated army was demobilised and thousands of young men went from the trenches to the dole queues. Another historian of those years, Eric D. Weitz, remarked in his 2007 book, Weimar Germany – Promise and Tragedy, that "people desire security – protection of their lives and of their economic well-being. When a democratic system cannot provide those basic requirements, even the best democrats may edge away from it and look to more authoritarian solutions." That lesson from Weimar is as relevant to the modern world as the fiscal one that captivated Buffett.
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