I don't buy the Weimar thesis, but wdik?
When Germany couldn't pay its war debt...it printed money. Our only way out is to intentionally crash the world system. This will lead to war...they are hoping for debt forgiveness. Silly liberals.
WE will need very, very strong leaders in 2013. Let us pray for wisdom in our nation's elections.
The Weimar thesis is absolutely correct. The Weimar Republic’s turbo-inflation was a direct result of the German financing of World War I. Whereas the British were able to externalize their war debt (and also bundle the debt of their allies France and Russia) by selling bonds on the New York market, the Germans were frozen out of that market. The Germans wound up “selling” their staggering war debt to themselves, mostly in the form of short-term two to five year notes. Having lost the war, there was nobody around who wanted to buy their notes and as a result, the Weimar Republic had to monetize the notes as they came due in the early 1920’s. And so they inflated the currency to write it off the books; signs of this inflation were apparent in the German economy as early as 1916.
When our average annual deficit was around $400 billion, there was enough excess capital on the world markets to absorb that much debt, and China, Japan and Saudi Arabia were purchasers. However, when 0bama’s congress quadrupled the annual deficit to $1.6 Trillion, there wasn’t enough money in the world to absorb the debt. Thus, we had to “sell” it to ourselves, thus internalizing and now monetizing it.
In other words, over the last five years we went from the British model of finance to the German one. And it is no coincidence that we have QE2 ending shortly before we reached the debt limit, and it’s no coincidence that QE3 is beginning as we begin another round of “borrowing” now that the government has several trillion dollars more to play with. Also, if you look at the amounts of money involved in the various QE versions, it happens to coincide with the amount of money needed to cover the deficits that the foreign markets won’t or can’t absorb.
The only advantage we have over Weimar is that with the advent of electronic transactions, we don’t actually use the paper anymore so you can keep the wheelbarrow in the garage and not take it to the bank.
“I don’t buy the Weimar thesis”
A major instigator of WWII and “Weimar” hyperinflation was that Germany owed more than it could sanely repay. We’re setting up for the same situation, with no alternatives.
Consider that near-100% taxation would _still_ require deep (>30%) spending cuts across the board just to stop the hemorrhaging and begin long-term debt elimination, we may be able to tread water for a while but there is no satisfactory exit strategy. Reality is: we can’t raise taxes enough to pay the bills, we can’t cut spending enough to balance the budget without the peasants revolting, and there is no viable combination/compromise of both.
The solution for such a situation, as Weimar found out and we’re about to, is:
1. Hyperinflation: satisfy all commitments in letter (if not spirit) by just printing money. We owe $15T and rising fast, so the only letter-of-law-and-contract solution is to print more currency. The gov’t owes you a dollar? here’s a dollar; it won’t buy a loaf of bread like you expected when we made the contract, it will only buy a slice now, but that’s your loss for agreeing to fiat currency instead of X-backed currency.
2. War: the “have not” creditors and entitlees will revolt for the agreed-on currency being devalued, and the “haves” will resist the confiscation of their wealth. War is the only outcome. Either the government dissolves, leaving creditors & welfare recipients unpaid and anarchy ensues until “might makes right” & “by right of conquest” ensues, or the government entrenches and kills creditors & confiscates existing wealth by force.
Anything wrong with this thesis? I hope so.