when money dies the nightmare of the weimar collapse

The exact way in which the consequences come due varies from case to case the hyperinflation made famous by Weimar Germany and, more recently, Zimbabwe is only one of the options, and there are good reasons to think that this isn’t the most likely outcome just at the moment. Once a country starts covering its debts by way of the printing press, the collapse of its currency and its economy is pretty much a foregone conclusion. There may be an example somewhere in the long history of finance when a country has done this without facing catastrophic economic consequences in the fairly near term, but I don’t happen to know of one. Although the specific asset prices that are now rising are different from last time, the possibility of damaging declines when bubbles burst is worryingly similar.īut John Michael Greer has a different concern about the US “printing money to pay its bills”: These risks should be clear after the recent crisis driven by the bursting of asset price bubbles.

The greatest danger will then be to leveraged investors, including individuals who bought these assets with borrowed money and banks that hold long-term securities. Like all bubbles, these exaggerated increases can rapidly reverse when interest rates return to normal levels. He notes that expectation of the policy has already lowered long-term interest rates, depressed the dollar and upped equity and commodity prices – and that these consequences create real risks:

Well, Marty Feldstein at Harvard University reckons that it’s “a dangerous gamble with only a small potential upside benefit and substantial risks of creating asset bubbles that could destabilise the global economy”.

Wondering what the implications are of QE2 (as in Quantiative Easing mark II, not Her Majesty) in the US – whereby the Fed will buy up long-dated government bonds of maybe up to a trillion dollars or so?

When money dies the nightmare of the weimar collapse