Weimar charts

[bart]

<center>Germany, during the Weimar Republic & the hyperinflation

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We hope you enjoy and/or are educated by the following chart pictures of the Weimar hyperinflation. We were surprised with various parts of the data, including how volatile gold actually was and also how relatively stable that a coal miners (a very key profession at the time) wages were when measured via real purchasing power. One other aspect we noticed was that the actual economy, as reflected in both the stock market valued in dollars and the copper price, peaked well before the actual hyperinflation was over in November 1923

Of course, the loss in actual purchasing power of the mark to being worth less than a billionth of its original value shows clearly, and also brings to mind the classic picture of paying for goods with a wheelbarrow full of money. Its unlikely to the extreme that anything closely similar to it could ever happen in the U.S., but its also not impossible for the dollar to suddenly lose a large percentage of its value in a short time similar to what happened in Argentina (http://www.nowandfutures.com/us_argentina.html) in 2001-2.



http://www.nowandfutures.com/images/weimar_cost_of_living.png

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http://www.nowandfutures.com/images/weimar_wholesale_price_index.png

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http://www.nowandfutures.com/images/weimar_goldmarks_in_papermarks.png
<center>Click here (http://www.nowandfutures.com/grins/gold_mark3.jpg) to see an image of a gold mark.</center>
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http://www.nowandfutures.com/images/weimar_stocks.png

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http://www.nowandfutures.com/images/weimar_real_wages_ruhr_coal_miner.png

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http://www.nowandfutures.com/images/weimar_marks_dollars.png

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http://www.nowandfutures.com/images/weimar_currency.png

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http://www.nowandfutures.com/images/weimar_tbills.png

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http://www.nowandfutures.com/images/weimar_trade_union_unemployment.png

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http://www.nowandfutures.com/images/weimar_copper1914-1923.png

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Data from "The Economics of Inflation" (http://www.amazon.com/Economics-Inflation-Routledge-Library-Editions-Economics/dp/0415313929/sr=8-1/qid=1161878930/ref=pd_bbs_1/002-6446164-9280821?ie=UTF8&s=books), by Constantino Bresciani-Turroni


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http://www.nowandfutures.com/images/WeimarHouseholdExpenditures1912_1923.png


http://www.nowandfutures.com/images/inflation_1918-1924_weimar_and_other_countries.png



A duplicate of http://www.nowandfutures.com/weimar.html

[$#*]

Thanks bart. This was very interesting. The copper price data doesn't sound right though. Is it possible there was another external factor influencing the decrease in the price of copper? I remember I've seen somewhere in a book a chart with the gold price expressed in Italian lira for the same period and it was also very volatile. Couldn't have been a local european cause for gold volatility?

[we_are_toast]

Great stuff bart. I like your charts, but am not knowledgeable enough to make a good interpretation of what the charts might mean. I would be interested in a short description of why you think the chart is worth posting.

I'm surprised that the stock market rose in dollars during a period of hyperinflation. Maybe the U.S. dollar was inflating at the same time but just a different rate?

[bart]

Thanks bart. This was very interesting. The copper price data doesn't sound right though. Is it possible there was another external factor influencing the decrease in the price of copper? I remember I've seen somewhere in a book a chart with the gold price expressed in Italian lira for the same period and it was also very volatile. Couldn't have been a local european cause for gold volatility?

The copper price trend very late in the hyperinflation bothered me too, and who knows about data quality... but it is from the same source as most of the other charts.

Additionally, my partial interpretation for it is that real economic activity drops off severely late in an extreme hyperinflation. A similar trend also shows in the stock market value, although it lagged copper. Also keep in mind that official price records frequently don't match actual or black market prices.
And even the cost of living in gold skyrocketed in the last 2-3 months as Germany was truly falling apart.

[bart]

Great stuff bart. I like your charts, but am not knowledgeable enough to make a good interpretation of what the charts might mean. I would be interested in a short description of why you think the chart is worth posting.

I definitely plead guilty about not adding much opinion or interpretation on many of my charts. Finster has gotten after me numerous times on it over the years.

Part of it is that almost no matter what I say, someone will disagree and some quite vehemently... and I'm just mostly into data and factual presentation. Another part of my reasoning is that my general preference is to have others draw their own conclusions since that's the best way to actually learn.
Its also tough for me to know what questions or confusions someone else may have, so I just wait for them to be expressed and then wing it from there, and perhaps even add to or change various existing charts. That's what happened a few months ago when I posted some unemployment charts that showed both U3 and U6 unemployment rates, and there was much confusion... and I edited and changed the existing charts, plus made a few new ones in an attempt to clarify the area more.


That said, I did actually add the first two paragraphs about a month after the page was initially published with some of my personal reactions to seeing the raw facts.
The relative consistency of coal miner wages stood out a lot (truly critical professions do ok in a hyperinflation), as well as the relative wild variations in the gold price (reminiscent of both the '70s and more recent price gyrations).

One other observation - the rate of growth in both currency and TBills did move quite a bit from the end of WW1 until roughly mid 1922 (very roughly about 10x), but from mid 1922 on it was truly outrageous.

Lastly, it may help to review the The U.S. and Weimar Germany, troubling similarities, update (http://www.itulip.com/forums/showthread.php?t=4333) thread.

I'm surprised that the stock market rose in dollars during a period of hyperinflation. Maybe the U.S. dollar was inflating at the same time but just a different rate?

The simple answer is that almost everything goes up in a hyperinflation as everyone is scrambling for something that will stand a chance of holding some value.

Dollar value data is rather sparse from that period but the data that I do have shows that it was losing some value, but it was a very minor factor.
Note that the official and government controlled exchange value is what is being charted in the one showing the price ratio between marks and dollars, but the real value loss in the mark is shown much better in the chart showing gold marks vs. paper marks.

[$#*]

Additionally, my partial interpretation for it is that real economic activity drops off severely late in an extreme hyperinflation
That is a very interesting point. One may consider that a hyperinflation is eventually stopped by the fall in real economic activity that creates it's own deflationary event.

[bart]

That is a very interesting point. One may consider that a hyperinflation is eventually stopped by the fall in real economic activity that creates it's own deflationary event.

Indeed, and this applies somewhat too:

"The uniform, constant, and uninterrupted effort of every man to better his condition . . . is frequently powerful enough to maintain the natural progress of things toward improvement, in spite of the extravagance of government, and of the greatest errors of administration."
-- Adam Smith

[we_are_toast]

That is a very interesting point. One may consider that a hyperinflation is eventually stopped by the fall in real economic activity that creates it's own deflationary event.

This looks kind of like Poom-Ka. I'm wondering if this hyperinflation event might be a little more unique than we might want to believe. It would really be nice to have an historic example that we could use as a playbook, but maybe it's wishful thinking. Maybe each one of these extreme economic events is unique enough where we can learn not to repeat the mistakes of the past, but we'll need to be smart enough to develop new solutions to solve each new crises.

[jtabeb]

This looks kind of like Poom-Ka. I'm wondering if this hyperinflation event might be a little more unique than we might want to believe. It would really be nice to have an historic example that we could use as a playbook, but maybe it's wishful thinking. Maybe each one of these extreme economic events is unique enough where we can learn not to repeat the mistakes of the past, but we'll need to be smart enough to develop new solutions to solve each new crises.

New theory

ka-POOM-KA?

[$#*]

New theory

ka-POOM-KA?Ka-Ka-Poom sounds more appropriate

[kingcopper]

It makes me wonder...Can the gov. continually manipulate in this most electronic age without hyperinflation, without a ka-poom? The gov. seems set for a circle-jerk! The sheep around me seem content to live a lie.:(