Ferdinand Foch, the French General in charge of the Western armies in WW I said of the treaty to end the Great War; “It isn't a peace; it’s a 20 year truce.” He was wrong by days.
General Pershing, commander of the American forces in WWI didn't want an armistice. He told the British and French that Berlin must be captured in battle or the Germans would convince themselves that they didn’t lose the war; thus a new war would have to be fought again.
Tragically, both men were prophetic. And the Treaty of Versailles ending the war made WWII possible. This harsh treaty's also what led to the financial disaster of German hyper-inflation that wiped out Germany's middle class. This and the Great Depression brought Hitler to power.
How bad was the German inflation after World War I? Germans in restaurants paid for meals before they ate. If they paid afterwards, the price would often have doubled. Eventually one dollar traded for a trillion marks, the German currency. Before the war, one dollar was traded for 5 marks.
The cause of the hyper-inflation was that the German government had to buy dollars on the open market to pay war reparations; reparations so huge that they had to print currency day and night, sometimes only one sided bills for the need was so great. This wasn't ordinary central bank foolishness.
So it's a myth that hyper-inflation's caused by just printing a lot of money. Hyper-inflation in currency is caused by the vast printing of money where extraordinary circumstances (such as having to pay extreme war debt) beyond the control of the nation dictate monetary policy, or by the vast printing of money because of extreme socialism with socialism destroying productivity from over regulation and wealth confiscation.
This is why you haven't seen currency hyper-inflation in modern America. You don’t get hyper-inflation in money (20 % inflation or more) by a slip by central banks, though inflation, or deflation its opposite, also happen in other places not thought of by ordinary folks when incompetent governments error. It happens outside the money supply and can be just as destructive and the people never even understand how it was they were destroyed.
For instance, why are our present day interest rates at .1 % ? Answer: The government filled the banks up with money because of the banking crisis. The banks have so much money now they don’t need yours, so they pay you practically nothing on savings. This is interest rate hyper-deflation.
You see, the high inflation or deflation has to come out somewhere when you have a perfect storm of political errors. As long as it stays out of the money; however, the politicians don't care because they can blame someone else.
In this case, the Fed put interest rates low so troubled banks would not collapse, since the Fed's discount rate dictates rates at which banks borrow money from each other. The Fed also indirectly sets the interest rate you get on savings. It wants you to spend your money or invest it in stocks, so it has allowed no safe haven that pays you even mediocre interest rates so that you can park your money with peace of mind in these uncertain times.
Yet, even with almost non-existent interest rates, the exact opposite's happening from what the experts predicted regardless of Fed policies; for the Fed didn't count on one thing; a President and Congress so incompetent that the people and businesses would rather put their money in savings accounts or even mason jars, regardless of how much they're getting ripped off, than spend it and not have cash for the bad times.
But cheer up, Europe and Asia's politicians are even more corrupt than ours. This means money that was earned not inflated into existence is flowing from overseas to us which is fueling a potential economic boom.
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By Jeffrey Ruzicka
Jeffrey Ruzicka is a retired executive of a small company that specializes in industrial water treatment. He lives happily with his wife in Western Pennsylvania and is a contributing writer to Nexxt
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