Tuesday, November 15, 2016
The ill-fated Weimar Republic of post-WWI Germany is frequently used as an example of what happens when government inflates the national currency to an unsustainable degree. The above photo is an example illustrating what has come to be known as "wheelbarrow money". The thing is, in the case of Weimar Germany, it wasn't exactly the case: once 1922 legislation forced the privately owned but publically controlled Reichsbank to become privately controlled as well, the mark's dramatic devaluation soon began, a result of the private controllers putting the printing press into overdrive and flooding the markets with currency. The change in control also permitted currency speculators to obtain highly leveraged financing to short sell the mark!
The solution to this national disaster was provided by Hjalmar Schacht, Currency Commissioner and President of the Reichsbank at the time and later Minister of Economics (1934-1937) under Hitler. Schacht looked to the American Greenbackers, US advocates of national monetary sovereignty whose history will be explored in a later post. Schacht tightened banking regulations and made it more difficult to obtain credit for speculation. The next step in recovery of monetary sovereignty was taken by Hitler, who fired Schacht for failing to issue a governmentally issued and truly national currency. This currency, issued as bonds rather than pure "scrip", did not cause the inflation predicted by those who supported and still support the past, present and future ruinous non-sovereign system.
Foreign trade was restored by what amounted to an end-run around the great international financial powers: Hitler resorted to barter while busily rebuilding Germany from a defeated and broken nation hobbled by a reparations debt that amounted to a value three times that of all property in the nation into an industrial powerhouse that was the envy of the Depression-era West. Unfortunately, Hitler was a megalomaniac and a madman not content with having led the rebuilding of his own nation but determined to achieve complete autarky through expansion by conquest.
A frequent criticism of the concept of autarky is that for all practical purposes it is not attainable without state expansion by military conquest, given that no single nation has all the resources required to be self-sufficient. This is a valid criticism; trade between nations is necessary for their overall prosperity. The question is to what extent can a nation become self-sufficient and maintain and/or increase its material prosperity? Subsidiarity comes into the picture when one begins to ask to what degree does material prosperity equate with the overall well-being of its populace: at what price cometh “prosperity”?
The impracticality of autarky then leads to further questions. Is national monetary sovereignty a practical solution to the now out of control indebtedness problem? Does applying the principle of subsidiarity in national, state and municipal governments have a beneficial effect on the overall well-being of the citizenry and is it a genuinely practical possibility? The answers to these and other questions will be sought in future posts.
What do you believe and why?
Posted by The Subsidiarity Institute at 4:47 AM