Weimar and discovering the case against austerity

Having recently been criticised by someone who considers that the history of the Weimar Republic means that the government can never print money, and that governments should more properly follow the advice of sober bankers, I countered that the Reichstag was actually private at the time so it was not the government printing the money but a private bank. Even more surprisingly it seems the bank printed much of this money for its own and others’ speculative purposes.

Of course rampant inflation for whatever reason is never good for government but this was not the actual doing of any government. And Hitler, as the supposed consequence of this inflation, had good ideas on money and of course, although he did not invent them, Germany’s autobahns remain a monument to these ideas.

Perhaps more importantly, my researches, quite by accident, turned up a lucid, hard-hitting indictment of austerity from 1940.

“The notion that the level of production should be controlled by monetary considerations belongs to a very primitive and superstitious stage of social evolution. Indeed, there are few savage tribes that would accept it as it is accepted in Britain today. Suppose that in some very backward island, a shell standard of money prevailed. Assume also that some malicious or half-witted creature managed to acquire half the shells in the island and to drop them into the water beyond recovery. The chiefs and witch-doctors would have to hold a council of emergency. But if the rulers of that island decreed that because half the money of the community had been lost, hunting and fishing and tilling must now be reduced by fifty per cent, there’d be a hot time in the old town that night. In such a simple state of society, the criminal absurdity of the proposal would be obvious to the meanest and most untutored intellect. Yet a policy which the most undeveloped savage tribe would reject as nonsense has been accepted by the British people as a sacred ritual for many years. Thus, of course, international finance, by restricting supplies and causing shortage, can produce whatever conditions of marketing that may be most profitable to itself. If there is one truth against which the Old School of Finance is fighting today, it is the supreme verity that production of goods should be based on the needs of the people, the only limit being the limit of natural resources and raw materials. Since the dawn of human history, the great struggle of man has been to wrest from Nature by force and cunning the means of life and enjoyment. It was only when the blessings of modern democracy made their appearance one hundred and fifty years ago, that he was told, in an arbitrary manner, that his efforts must be slackened and regulated henceforth by the private interests of an infinitesimal proportion of the world’s population.”

This is such sensible stuff that I was very surprised at the author’s identity.

Lord Haw-haw himself.

William Joyce ‘Twilight over England’ (1940) (pdf p53ff)

Reading on, there is some rather less savoury stuff, but what is written above contains irrefutable logic.

His last two phrases describe Neoliberalism, which as we now know, was only temporarily set back by the outcome of the second world war.


  1. Bruce Gray -

    What most people get wrong about hyperinflation is the fact that printing money is a response to hyperinflation not a cause. It is also a rare event in that there have only been 56 instances in recorded history and has never occurred in a modern functioning democracy.

    Hyperinflation requires extreme conditions on both the demand and supply sides of the economy. There are generally three conditions required for hyperinflation:
    1) Significant loss/collapse of the productive capacity and tax base on an economy due to war, natural disaster, civil/political unrest, corruption, etc.
    2) Inability to obtain needed goods/services or service debt in sovereign currency (Weimar Germany had to pay reparations in gold)
    3) Excessive deficit spending to service debt and/or prop up aggregate demand in excess of productive capacity to forestall recession.

    As long as the productive capacity of an economy can expand there is no risk for inflation due to “money printing”. In fact a growing economy requires a growing money supply. There is no logical reason for any sort of austerity policy when there is slack in the economy. The sole reason for austerity is to promote private bank money creation, which of course leads to massive transfers of wealth from the private sector to the financial sector and ultimately debt deflation and recession.

    1. Peter May -

      Thank you – I’ve learnt a bit more today…

  2. Steve Glanvill -

    Line four.
    The Reichbank was private at the time….

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