Yet, the parallels between the German hyperinflation and the current Credit Crisis are astounding, and the likelihood that the eventual outcome will be similar, is very high. The parallels that link this crisis to the Great Depression are far weaker.[1]Would that we were facing a "mere" depression such as that one.
If you think that inflation, hyper or otherwise, isn't in the cards, ask yourself which of the ways will be chosen when the government decides how to finance our enormous public debt. There are three choices: tax, borrow, or inflate. Even the portion of the addled, tra-la-la electorate who voted for the two-year Radicals, Progressives, Communists, Socialists, and Crossdressers block party now in progress will rebel against the high taxes that are inherent in the Dem spending tsunamiganza. And, yes, eventually, the Chinese will tire of buying paper issued by grifters, incompetents and delusional visionaries.
Leaving what course of action open, exactly . . . ?
As with post-WWI Germany, Captain Nemo thinks there will be a recovery here but he sees that earlier German “recovery” as having involved misallocation of economic resources in the form of bailouts to industry. Hence, it was a fake recovery.
Our imitation is the sincerest form of flattery.
In the best of times, government interference in economic decision making is a drag on the economy.[2] When times are very bad, the price of that misallocation is higher:
Germany led Europe in the effort to spend its way out of the post-war depression, while the rest of Europe, with the exception of the former Hapsburg possessions (the former Austro-Hungarian Empire)[,] did NOT follow Germany's lead. . . . Similarly, the USA leads the world in an effort to spend its way out of this depression, and the U.K. is basically following in our footsteps. In 1919, many admired the Reichsbank. Employment rose, unemployment fell...economic output exploded -- or seemed to, at first. No doubt, that will be the case, again, this time as America leads the way into a fake recovery. Most of Germany's recovery amounted to irrational production. The industrial bailouts were improperly allocated and colored by the illicit transfer of wealth that is inherent when a nation chooses to print up new money. The same will be the case with America.And the cronyism that is obvious in our so-called “stimulus” spending -- the Murtha International Airport runway and terminal expansions, the payoffs to autoworker and public sector unions, the money thrown at favored banks and other campaign contributors (think AIG and its contributions to Sens. Obama and Dodd), and the like -- makes clear that the misallocation of resources that has occurred and will occur will be particularly irrational.
All that money that could have gone to rational private investment was taken from private hands and poured onto a roulette table at a party for all the boodle seekers.
The idea that rational, restrained, public-spirited men and women are minding the store is impossible to entertain. The fixation on "health care reform" is Exhibit A for the proposition that our politicians are, instead, as fascinated by trifles as a child is by a tinkling bell.
Notes
[1] "Why Our Credit Crunch Mirrors the Weimar Hyperinflation from 1919-1923." By Captain Nemo, The Death Rattle of Our Economic Order, 4/14/09 (emphasis added).
[2] For a clear and concise analysis of all the ways that government meddling and selling out has distorted the health care industry you cannot do better than to read "American Healthcare Fascialism." By Thomas J. DiLorenzo, Mises Daily, 10/23/09.
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