Magazine article The Spectator

Overnight Trillionaires

Magazine article The Spectator

Overnight Trillionaires

Article excerpt

The Downfall of Money:

Germany's Hyperinflation and the Destruction of the Middle Class by Frederick Taylor Bloomsbury, £25, pp. 432, ISBN 9781408839911 In Germany in 1923 money was losing its value so fast that the state printing works could not keep up. The work had to be contracted out to 130 different printing firms, all churning out marks with the lifespan of mayflies.

Only ten years earlier, the mark had been as good as gold. Then Germany had set out to fight a short war and send the bill to the losers. This had worked well the last time round: after the 1870 war, France had handed over 5 million gold francs, not to mention two provinces. But the 1914 war turned out to be longer and far more expensive, and Germany had to pay its own way - which meant borrowing - and the Reichsbank, as a wartime precaution, had taken the mark off the gold standard. In the end there were losers all round.

Frederick Taylor tells the story.

The years of war saw the mark lose three-quarters of its purchasing power. The years of peace saw the process speed up, as the borrowing continued, and at first it had its friends. 'I am not afraid of inflation, ' said Walther Rathenau, tycoon and minister, later murdered by two proto-Nazis. 'People are wrong when they say that printing money is bringing us to ruin. We ought to print money a bit faster, and start construction works.' He has his followers today.

Soon enough, money was being printed so fast that prices were rising by 50 per cent month on month. Beyond that point it fails in its function as a store of value or a medium of exchange, and becomes the losing card in a game of Slippery Ann. …

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