What Does 2008 America Have in Common With 1920's Germany?

After the defeat of Germany and her allies at the close of World War I, the Treaty of Versailles specified that Germany was entirely at fault for having started the war, and therefore liable for all of the damage resulting from it. In the interwar years (1919-36, between WWI & WWII) the German Republic or Weimar Republic as it is now called, began paying economy-crushing war reparations. After some downward revisions, these reparations were levied at the then-astronomical sum of 132 billion Gold Marks, equivalent to approximately 200 billion of today’s US dollars.

Even though Germany had until 1984 to pay off this debt, the Great Depression combined with the greed of unscrupulous speculators and some international shenanigans over the Ruhr district made payment impossible. Left with no alternative, Germany began printing money at a ridiculous pace to meet its debts. This rapid expansion in the German money supply grossly devalued the mark and resulted in hyper-inflation. The mark dropped in value from approximately 40 per US dollar in 1920 to around 18,000 per US dollar in early 1923. By late 1923, the German paper currency was nearly worthless at something like four trillion to the dollar. In that year a pound of bread cost three billion marks, a glass of beer was four billion marks and a pound of meat cost a whopping thirty-six billion marks! (I’m not kidding, look it up!) It was literally cheaper for a German to burn his currency in his furnace than to use it to buy fire wood! And the entire mess was jump-started by some idiot who thought printing more money would pay the bills.

The crisis was eventually resolved by the issuance of a new German currency (The rentenmark, fixed in value and backed by real estate) and the later repudiation of the war reparation debt by a twisted little man with an absurd little mustache named Adolf Hitler.

Right now you’re asking yourselves “Where the hell are you going with this, Terence?”

Well, I’ll tell you where I’m going: I happen to have in front of me an article from the November 26th Edition of the NY Post that I’d love to share with you. (See “Start the Presses” by Paul Tharp p. 35.) It appears, according to the article, that the US Treasury plans to print some eight-hundred billion dollars in extra cash to buy a bunch of bad loans and mortgages, etc. According to Mr. Tharp, this will bring the total bailout package - past, present and yet to come - to eight point two trillion dollars. This is a staggering sum. (I'm not even sure what that many grains of sand would look like! We didn't even learn numbers like that when I was in school!) With the endless parade of corporations and industries coming to Washington with their hands out for cash, eight hundred billion may just be the beginning.

Not to sound alarmist, but is any of this starting to sound familiar? (Hint: YES!) This situation could easily spiral out of control.

But wait, it gets worse…

To keep up with the increasing demand for cash, the government is planning, according to Tharp, to expand two huge printing facilities which are already spitting out cash at full capacity.

But wait, it gets even worse…

To add insult to injury, the government is turning to a Swiss firm, KBA-Giori, SA to do the upgrade. The Treasury wants to contract with the Swiss giant to provide everything from labor to software and everything in-between on the project. Our President-Elect claims to want to create jobs for Americans through public works, etc… I submit that squashing this Swiss deal and keeping technical jobs like this at home should be his first priority.

Our money is one of those basics that helps define us as a nation. I prefer that it be made by Americans. I also prefer that it not be devalued into the toilet by overproduction, especially because some high-ranking idiot never took macro-economics or a history course. If however, we are going to be asked in the near future to endure hyper-inflation and struggle to the grocer’s with wheelbarrows full of cash, it should not be too much to ask that we at least be able to say that the money itself is the product of American industry.

We’ll be lucky if the dollar has half its current value by this time next year.