There is growing fear in Germany that the current debt crisis will lead to inflation. Few can remember the events of 1922–1922 first-hand but everyone is afraid that history will repeat itself.
The Wholesale Price Index was 1.0 in July 1914, 14.3 in July 1921, and 726,000,000,000.0 in November 1923.
Der Spiegel wrote on May 17:
“There is a growing fear that a gigantic wave of debt will soon roll over Europe and the euro-zone countries will deal with it as elegantly and unscrupulously as they have so often done in the past – by allowing inflation to reduce their debts. These concerns are shared by more than just the notorious paper money skeptics who predict the return of hyperinflation.
“Even serious experts like Joachim Fels, a top economist at Morgan Stanley, have no qualms about addressing the likelihood of such a development. Although it is an extreme scenario, says Fels, it certainly cannot be dismissed out of hand. At the very least, the central bank can apparently ‘no longer resist the temptation to use inflation to reduce the mounting public debt.’
“Max Otte, a professor from the German city of Worms who foresaw the crash of the financial markets before others, sees the supposed stability union as already being well on the road towards becoming an inflation union. According to Otte’s calculations, annual price increases of roughly 7 percent would be enough to reduce assets by one-half in just under 10 years. ‘We are eroding the euro from within,’ says the economist, ‘all the signs point towards inflation.’”
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One memory of the time is contained in an imaginary letter written in 1927 from a novel to be published in the fall. This is an excerpt:
“…In its later stages, the sky-rocketing, catastrophic inflation pulled the rug from under everyone’s feet and destroyed the last vestiges of stability. Its symbolism was devastating. At the same time, the experience was in some strange way exhilarating. There was delirious dancing at funerals. In fact, there was delirious dancing on every occasion. We went through a universal dance craze. Everyone felt dizzy in the head, as dizzy as the currency – one dollar worth a trillion marks. It’s convenient that we Germans have the same word – Schwindel – both for dizziness in the head and for, well, swindling, cheating. Since the state was swindling everyone, everyone went schwindlich with dancing. Not only with dancing – there was also a regular erotic explosion. When I think of it now I see scenes of copulation in her mind’s eye. Like a painting by Bruegel.
“In due course, the currency was stabilized, on the surface at least, and so have our love-lives.…”