They “ate, slept, made love, raised children, and tried to keep body and soul together by finding ways to make a living.” Those were the words of the late, great Wall Street Journal deputy editorial page editor George Melloan in his excellent and essential 2016 Great Depression memoir, When the New Deal Came to Town.
Melloan was describing life in Whiteland, Indiana in a decade commonly viewed as the worst economically in the U.S.’s modern history. And while Melloan in no way glossed over the myriad of errors the federal government made in the 1930s on the way to a sluggish economic decade for the United States, his book was a reminder of two things: First, an economic slowdown in the U.S. is an economic boom most anywhere else. Second, even in the bad times (by American standards) people go on living. They certainly did in Whiteland.
Melloan’s book frequently came to mind while reading German cultural journalist Harald Jahner’s very good and very important new book Vertigo: The Rise and Fall of Weimar Germany. With Vertigo, Jahner (my review of his fascinating previous book, Aftermath: Life In the Fallout of the Third Reich, can be found here) “deals in the feelings, moods and sensations produced by the political attitudes and conflicts of the age.” In other words, people managed to eat, sleep, make love, and progress despite the shocking stupidity of the country’s first democratic government that was founded in Weimar after WWI. Jahner helps answer the question of how people coped as they were robbed, which is why Vertigo is so important.
At the same time, it’s maybe useful to explain why I in particular was so interested in Vertigo. Stated simply, the policy errors made with regard to money were uniquely foolish. If you’re reading this review you likely know what’s being alluded to: German monetary authorities tragically and cruelly devalued the mark to something quite a bit less than paper (roughly a four billionth of a dollar) in the 1920s, and this shameful act of stupidity commands the reader’s attention over and over again. Just the same, those fascinated by the most famous currency devaluation in world history are likely less aware of what life was like amid the devaluation, and beyond. Enter Jahner with a book looking to show the human side. But before we get to Weimar Germany, it’s important to discuss Jahner’s discussion of the war that preceded Weimar.
What’s very interesting up front is that the fighting in a sense continued within Germany after the Versailles Treaty. Jahner indicates that brutal as WWI (Germans referred to it as “the 1914 War”) was, returning soldiers “felt deprived of an honourable end to the war.” As such, they arguably took out on the people a cessation that was not marked “by a dramatic defeat.” Unlike so many wars defined by near total devastation of property in the country that surrenders, “no enemy had invaded” Germany, and “not a single roof tile had been destroyed in Germany.” Yes, vertigo. Germany had surrendered, but Germany was still intact. Ok, but why the ongoing war within?
Jahner indicates that perhaps because the war was so hideous, and precisely because it was marked by “a horrific escalation of military killing” of the “tanks, artillery, technology, and unimaginable quantities of ammunition” variety, not to mention the introduction of poison gas, returning soldiers perhaps felt short-changed by the lack of resolution to what was so awful. After so much sacrifice they wanted something, and this revealed itself through attacks on their own as they “hunted down individual passersby, whom they suspected of being revolutionary workers and intellectuals, draft dodgers and traitors.”
Except that there was more. Jahner puts it so well in suggesting that the returning soldiers “were no longer fit for life in peace” so wrecked were they by the war. Jahner deduces from All Quiet On the Western Front that even the men who survived the gruesome fighting were dead inside. Jahner quotes All Quiet author Erich Maria Remarque directly to the chilling tune of “We are dead men with no feelings,” who “are able by some trick, some dangerous magic to keep on running and keep on killing.” Both Jahner and Jahner quoting Remarque brought to mind two things: first, how sickeningly awful war must be today given the leaps of technology that make the extermination of human beings even more artful, if the latter can be credibly said. Along these lines, an op-ed published in the Wall Street Journal from a few months ago, and that was written by a doctor who had treated Ukrainians, indicated that the wounded in Ukraine are suffering in hideously awful new ways that the weapons of old weren’t capable of.
Second, Jahner and Jahner quoting Remarque brought to mind yet again how sickeningly wrong (and dangerous) economists are with their near monolithic view that the killing, maiming and wealth destruction that defines war somehow has a growth upside. Economists owe the world and their broken profession an effusive apology for believing so deeply in what’s so blatantly incorrect. People ARE the economy. War EXTERMINATES people, while also rendering so many worse off alive than dead. Jahner writes of 700,000+ invalids in Germany “hobbling and begging in the streets,” of men with “missing noses, half-destroyed faces, figures dragging themselves along on roller boards…” War is easily the best description of economic decline precisely because rather than working together in specialized fashion, the people are killing one another, and ruining one another.
In his description of how much more advanced war-fighting became during WWI, Jahner wrote of how what had been known as “’the art of war’” had turned “into a competition of pure military capacity.” About the previous sentence, everyone reads a different book, but I took from this what I believe to be true: military capacity is a function of economic genius born of individuals freely doing. The latter isn’t an endorsement of war or government spending as much as it’s an assertion that economically free people are some of the most productive people. As a consequence, people in unfree but commodity-rich (think oil) parts of the world don’t represent a challenge to free countries like the United States. Commodity wealth has limits exactly because the wealth is of the earth. It’s a known. Conversely, wealth of the mind is limitless such that the war-fighting capacity of nations full of prospering humans will always be much greater than that of nations “gifted” with mineral wealth. The latter is something for oil rich nations to keep in mind, but it’s also something for “energy independence” obsessed Americans to keep in mind.
Germany’s first democratic government was led by Friedrich Ebert. Wait, you mean you didn’t know Friedrich Ebert led Germany after the war? If the question reads as flippant, it’s meant to be. As Jahner puts it, Ebert “did not leave a great mark on posterity.”
Ebert wasn’t just bland, he was demotic. Translated, he was of the people. Neither high born nor possessing tons of pretense as to act high born. Someone who didn’t leave much of a mark rates discussion in light of another anecdote provided by Jahner. He writes about the “near-universal horror and revulsion” felt by the people upon seeing a photo of their head of state and Germany’s defense minister standing in the Baltic Sea, “half-naked” in their swimming gear. Yes!
There’s this desire among politicians to be like us, to do as we do. Think back to Mitt Romney expressing like for cheesy grits, or the endless politicians who visit fairs, barbecues, and fast food restaurants to reveal their normality. Call it dumb politics, and in this case Donald Trump isn’t the dumb politician. Notice how he nearly always wears a suit. He’s not one of us despite his longstanding love of McDonald’s. More than most will admit, Trump is just being himself while politicians are posing.
The view here is that voters don’t want to see themselves in politicians. They want to look up. Applied to the oh-so-pedestrian Ebert, Jahner writes that “Postcards were printed showing the representative of the new regime looking a bit like a cartoon character in his ill-fitting swimming trunks and next to him, by way of comparison, the dignified representatives of the old regime: Kaiser Wilhelm and his field marshal, Paul von Hindenburg, both in full dress uniform with rows of medals. The caption above the picture: ‘Then and now.’” That’s it! Dear politicians, no one’s buying your act. Act the part. Those who live in “Real America” aren’t nearly as impressed with it as you think, and certainly don’t want those who presume to lead them adopting their ways. Love or hate Trump, he dresses up. He’s genuine in ways that the vast majority of politicians are not.
What about the love market in the aftermath of the tragic war? Keep in mind that this was well before the internet. Also keep in mind that Germany had lost so many of its eligible men to the horrors of war.
Which meant the men who were alive and functioning had options. They would place ads offering themselves up, albeit with demands. “Twin brothers want to marry into a well-run grain business.” Can you imagine!? Well, yes. In Jahner’s words, ads like the previous one sound “a bit direct today, but it might not have been entirely senseless at the time.” After the death of 2.4 million German soldiers, Jahner indicates the marriage market was skewed heavily in favor of men.
What about the economy? The easy response to what’s about to be written is that Jahner is a “cultural journalist” tasked with writing about the economy. Such a view is silly. See the previous discussion of economists, and their horridly obtuse belief that war grows the economy. In other words, economists don’t gain much insight from being economists. Applied to the non-economists in Jahner, the perception of your reviewer that his economic analysis is wanting within the book has nothing to do with his own profession, and much to do with the sad fact that economics to this day is stalked by endless fallacy.
In Jahner’s case, he writes that the post-WWI German economy was good, at least at first. On its face, this makes sense for precisely the reason that most economic analysis from trained economists does not make sense. Pointing out the obvious, instead of killing and maiming one another, the surviving German males were back to producing in various ways. People are economic growth. Wars kill people.
Where Jahner goes off track is in his assertion that the German economy boomed because “the Reichsbank simply printed out more money.” According to Jahner, the printing took place to the tune of 45 billion marks in 1919 versus 2 billion in 1913. To be clear about what Jahner writes, it’s frequently what economists write, including allegedly “free market” members of the Austrian School. Obsessed with central banks, it’s their norm to say that “money printing” has economies on “sugar highs,” and that’s what Jahner seems to be implying here. Except that there’s no basis for such an assertion.
Interestingly enough, Jahner unwittingly explains why there’s no basis. Fast forward to p. 271 of Vertigo, Jahner very correctly observes that “a lack of investment means less work.” Precisely. There are no companies and no jobs without investment first, which is a reminder that allegedly “printed” or unstable money is never an economic accelerant and by extension it’s always a retardant. Investment is the purchase of future income streams and returns in whatever currency is put to work, which explicitly indicates that currency devaluation is a tax on investment. Always.
After which, “sugar highs” borne of “money printing” presume enormous amounts of market stupidity whereby those most sensitive to currency error (those who earn and invest those currencies) would somehow be fooled by devaluation, and in being fooled, would put wealth to work in pursuit of returns. No. Currency mischief never brings with it an upside.
Still, there was the question of massive amounts of German debt, along with debt for the other countries that had participated in the war. Jahner notes that “all nations were equally convinced that they were going to win the war.” Which explains something. Governments allegedly reliant on “money printing” to fund their activities is a falsehood wrapped in a misnomer. At the same time, think about what Jahner was saying. The countries in the war thought they were going to win, which means they borrowed on this presumption. Jahner writes that post-WWI the German state was “98 billion marks in the red, even without the victors’ demands” that emerged at Versailles.
These details similarly require mention as a corrective to the notion that government debt drives inflation, as in currency devaluation. Logically it doesn’t. Seriously, who with title to money would buy future income streams (debt) in that same money if the borrower of the money (in this case, the German state) intended to devalue it? No chance. Just the same, there were investors who felt Germany would win, thus making the loan more of a possibility. In other words, printing presses didn’t fund German war debt, but the presumption that Germany would win (and get back to work after winning) did. Debt is but the accession of resources now in return for the return of resources in the future, plus interest. The purchase of German debt turned out to be a bad investment. Per Jahner, those who loaned money to the Kaiser for the war effort “felt cheated.”
They felt cheated because rather than pay off the debt, Germany defaulted. That’s what devaluation is. Jahner cites Keynes as saying what most economists do to this day, that governments use inflation to confiscate wealth “secretly and unobserved.” Nonsense. The people know. They’re the market. They know sooner than anyone when they’re being cheated, and they did in the 1920s as the cost of a pound of rye bread rose to a thousand billion marks.
Except that it didn’t really rise in marks. And it didn’t simply because debased money by definition ceases to circulate, and it ceases to circulate exactly because producers buy the production of others with their own. German marks didn’t facilitate the exchange of production for production exactly because no one was accepting marks in return for goods, services and labor.
Taking the above truth to its logical endpoint, Jahner gifts readers with the brilliant anecdote of a German handing a homeless person a wad of 100 mark notes, only for the homeless person to throw the wad back while telling the would-be benefactor, “you can keep that crap for yourself.” Stop and think about the previous anecdote for a moment.
It’s crucial to contemplate as a corrective of modern Austrian School thought about “money printing,” and the absurd notion that government spending by Congress is an effect of a generous Fed. It’s amazing even the ignorant could believe something so at odds with reality. What makes it extra strange is that the disciples of Ludwig von Mises are thought to be very smart. The view here is they are, but for their mindless perversion of money.
Governments have no resources, period. So to presume that governments can form central banks that will in turn fund governments vandalizes common sense. More realistically, if Congress were reliant on the Fed for “money,” then it wouldn’t have much money to spend. Production buys production, always.
Applying all of this to Germany, it wasn’t just the homeless who were no longer accepting marks. No one would. Jahner reports that amid the mark’s collapse, “the daily rise of the dollar was usually the most important news of the day.” Translated, “money printing” doesn’t inject money into any country economy, rather “printed” money rapidly ceases to circulate. The value of the dollar was the most important news simply because per Jahner, “anyone who had been paid in reichsmarks had to convert them into a stable currency as quickly as possible.” Jahner adds that “All over Berlin there were ‘dollar booths.’” Well, yes.
Bad money is always and everywhere replaced by the good. It’s markets at work. Producers want equal value for what they bring to market. Please keep this in mind as libertarians at the Cato Institute who should know better clamor for Argentine “dollarization.” Why? Why overlay a law or “legal tender” on what’s already reality? It’s not necessary. Germany in the 1920s explains. Money in circulation isn’t a central bank or government phenomenon as the myriad of monetarists inside Cato imagine, rather money in circulation is quite logically a highly efficient market phenomenon that governments or central banks could never centrally plan as the monetary types at Cato similarly imagine.
All of which speaks to why even if readers only intend to read Chapter Two of Vertigo (titled “When Money Dies”), that it will be time well spent. As the mark collapsed, the market result of this thievery was rapid fire as the economy dollarized on its own. No central planning needed. None of this is to defend what happened, but it is to say that markets work. And in working, they make rather plain that there’s nothing remotely stealth about inflation.
Yet with devaluation (inflation) there’s always so much more. And Jahner delivers. While he doesn’t make the direct connection, it’s accepted wisdom among the various economic religions that the fastest way to overturn society is through inflation. Which heaps further discredit on Keynes’s observation that governments thieve wealth stealthily with inflation. No they don’t. People know they’re being stolen from, and it radicalizes them.
Just the same, and as with every government error, different people react differently to the theft. In Jahner’s words, “inflation rewarded the resourceful, not the virtuous.” No doubt. If “buy and hold” is accepted wisdom, and if it’s the stuff of the virtuous, stop and contemplate what holding on did to the virtuous in the early 1920s. To say they were ripped off brings new meaning to understatement.
Conversely, think of those who leaped into dollars ahead of the collapse, or those who exchanged their titles to money for land, art, rare stamps, or name your hard asset representing physical wealth that exists as an inflation hedge. While it’s difficult to gauge timing of certain things within Jahner’s book, he notes that amid economic struggles “the narrative of the Jewish global conspiracy” started to “spread its evil and seductive poison.” This is something to contemplate with the endpoint of Jahner’s book, and possibly a clue about where he intends to take his reporting talents next: 1933 through Hitler’s suicide. For now, the view here is that absent the monumental theft that is devaluation there’s no market for someone as odious as Hitler, nor is there acceptance of the genocidal horrors that Hitler foisted on Germany to its everlasting detriment. Except that there was more.
It’s not just that devaluation brings on societal rage that’s a consequence of theft, it’s the human side. Jahner writes that “Some kind of dowry was seen as an economic requirement for marriageability.” Except that subsequent to the mark’s evisceration care of government (always government, people please wake up), dowries were erased too such that parents had no say in the matter. In other words, parents weren’t just robbed of savings, they were robbed of their ability to be the best parents they could be. Don’t worry, it gets worse. And it does whether you’re a puritan or a libertine.
Part of “the idea” behind a dowry was that it drove the incentive for females to save themselves for the wedding night. No longer. As Jahner puts it, with hyperinflation “saving is pointless. Don’t think of tomorrow, all that matters is today.” What was true about saving money was applied to sex. And it wasn’t just sex of the theoretically legal kind. Jahner adds that to the Americans, British and French, “Germany became a discount sale for prostitution.” Economists who sickeningly claim that devaluation makes exports cheaper naturally gloss over that what they theorize has nothing to do with reality: devaluation raises the cost of every input that goes into creating a product or service, but as evidenced by the surge of prostitution among the German people, it does cheapen the people. And then it ended.
Which on its own is a crucial bit of history that economists most of all should be required to learn. That is so because hagiographers of Paul Volcker (1927-2019), Janet Yellen, and so many more buy into their claim that “whipping inflation” always and everywhere caused by governments involves desperately hard work by governments, governments putting people out of work lest the economy grow too much, and governments intervening in the price of credit to lower inflation as though inflation is an effect of boys and girls acting badly. No, inflation once again is devaluation. It’s nothing else. Governments do it. That’s it.
At the same time, the ending of inflation is quick, easy and to the betterment of the people precisely because the people don’t earn money, they earn what money can be exchanged for. Which means they’re always rendered better off by quality money. There’s no sacrifice or agony to ending inflation. How could an end to government theft be agony or “painful” as the various economic religions imagine? Applied to Weimar Germany, on November 20, 1923 Germans received one rentenmark for 1 trillion in paper marks. The rentenmark was “backed by gold and foreign currencies,” and from this return to sanity pain wasn’t the result, rather “an incredibly powerful” boom ensued.
What’s interesting about this, and what will presumably always remain unknown, is which drove which. To be clear, quality money is the stuff of growth simply because growth is the stuff of quality money. As in wherever there’s production there’s always quality money circulating to facilitate the exchange of the production. That’s why “dollar booths” sprung up everywhere amid the evisceration of the mark. Contra the monetarist school that’s excited far too many libertarians, governments and central banks don’t “supply” money on the way to growth, rather good money is an effect of growth. The Germans never stopped producing amid the mark’s devaluation, and evidence supporting the previous claim can be found in the U.S. dollar’s circulating in Germany.
It can also be found in Jahner’s very interesting book. Money is an effect of production, not an instigator of production as Milton Friedman imagined, and that disciples of Friedman like Steve Hanke and John Greenwood contend to this day. Even amidst war, devaluation and post-devaluation, the German people managed. And evolved.
Jahner reports that from 1914 to 1933, the number of office workers in Germany doubled. One of the drivers of this evolution was the telephone. At first calls were connected by an operator who brought callers together by taking a cable at a central office and plugging it in. Gradually the latter was automated, but as opposed to putting people out of work it actually led to much more of it. As Jahner describes it, “The more phone calls people made, the more work they made elsewhere.” Production explodes when people work together and communicate.
Better yet, the expansion of the workforce included women. The guess here is that some of this had to do with the war and all the pointless loss of men, but the bigger truth is that people are capital. They don’t take jobs as much as their production, and crucially their production with others, multiplies work. This yet again lifted women. Jahner writes that “Never before had so many women had so much money of their own.”
Car ownership expanded too as work did. Jahner notes that while right after the war “private cars were still an absolute luxury,” between 1924 and 1932 German ownership of the automobile soared from 132,000 to 497,000. Sadly, but not surprisingly, traffic deaths rose with the arrival of the car, including 5,867 in 1928. About the number, it would be fascinating to calculate how many fewer of those deaths would have taken place alongside the same number of cars if driverless technology, brakes, rear cameras and other driver-assistance that exists today existed then.
A la Melloan in Whiteland, people were dancing. Jahner writes that “Any account of the Weimar Republic without mention of the dance phenomenon would be hollow.” And there was money behind the phenomenon indicating yet again that life and progress went on even as government error resulted in roadblocks. Performers including Josephine Baker came to Berlin to entertain a seemingly moneyed city.
There was even talk of a shortened work week of the five day kind, which “would be imported from America.” What’s amazing looking back was the “widespread sense” within German thought leaders “that people wouldn’t know what to do with all of their leisure time.” Of course, to many the very notion of a shorter week was a non-starter. Jahner quotes Alexander Plasch as saying that “the five-day week is out of the question for Germany, and does not even merit discussion.”
If Vertigo has weaknesses, some are probably rooted in Jahner being German and writing about people and happenings that an American would frequently lack context about. It’s also probably true that whether economist or cultural journalist, Jahner was reporting rather than analyzing. Which is fine. At the same time, the German economy took another dive in the early 1930s. Jahner indicates something like 4.5 million Germans were put out of work by the decline, and the reader is not unreasonably expected to tie the troubles in Germany to those of the United States.
It’s a fair point from an historical perspective, and it’s similarly fair in light of how awful economic analysis is, but it’s important to point out that economic troubles in the U.S. were a direct consequence of Herbert Hoover, then FDR, mindlessly intervening in the recovery that is recession, and in the process prolonging the pain. Economies are once again just people, and since they are, there was no reason to expect “contagion” all the way in Germany based on what was done in the United States. No doubt the Weimar government made errors of its own, but Jahner doesn’t report them as errors. He writes with wonderment that the economy “continued to plunge in spite of all manner of efforts and measures” that included “protective tariffs.” Jahner adds that an “overstretched social welfare system” restrained the government from doing more. Jahner’s analysis presumes that government intervention is the source of economic sustenance, but the 1930s in the U.S. alone reveals quite the opposite. But Jahner won’t be blamed here for writing as he did. These are the things economists believe, and the bet is that he happened on more than a few economists who spun the economic decline in 1930s Germany in the way that Jahner wrote on it.
Did the economic decline give rise to Hitler? It’s difficult to conclude otherwise with or without Jahner’s book. Voters are adults and adults not infrequently have kids. Which means economic decline is terrifying, and it’s arguably the health of those promising something better. Notable with Germany is that Jahner writes that “The fear of falling radicalized the middle class and drove them toward the National Socialists.” But it wasn’t just the middle classes. Jahner is clear that Hitler oddly attracted the upper classes and aristocrats too. Toward book’s end he writes that “many people voted for Hitler because so many others did.” Which is a tragedy.
What’s next from Jahner? He’s now published a book about WWII’s aftermath, along with one about the democratic Germany of the 1920s, and that ultimately gave the world Hitler in 1933. Hopefully 1933 and until the war is next as a way of helping readers understand what Germany became under Hitler. There will never be full understanding, but ideally from the government errors under Weimar Germany more people can see that “government error” is a redundancy, which is precisely why democracy shouldn’t be the goal, but instead constitutional republics that strictly limit the power of national politicians to do much of anything. If Germany’s national political class had been constrained in the 1920s, it’s difficult to contend with even a crooked face that Hitler could have ever emerged.
