An early rendition of the “Money printer go brrrr” meme? (1897)

Visualizing History

United States Annual Consumer Price Inflation Rate (1790 – 2019)

Source: Global Financial Data

From the Archives

The Theory of Inflation: A Critical Examination of a Ruinous Popular Fallacy (1873)

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Sunday Reads

For all of the facts and statistics, a large portion of markets and finance is driven by narrative. We often see this when a particular group attempts to commandeer prevailing narratives or fears to prove their point. In these cases, History is these group’s favorite tool. The most ironic part is that the historical parallel does not even have to be – and rarely is – accurate. For example, any time there is a speculative bubble in something deemed “unworthy” of such speculation: Tulip Bubble.

But what if the modern speculation is in equities, and not some type of commodity like tulips? What about the fact that Tulip Mania has been grossly exaggerated due to inaccurate information in Charles Mackay’s famous book? Doesn’t matter. Every modern speculative bubble is *exactly* like Tulip Mania. Tulip speculation is crazy, right? If you wouldn’t buy Tulips at high prices, why would you buy (insert asset)? Roasted.

Also, every market crash should be compared to the Great Depression. There have never been any other market crashes in history. Don’t even bother looking it up.

Recently, another one of these tiresome narratives has started rearing its head: Hyperinflation in Weimar Germany. As Tracy Alloway and Joe Weisenthal noted on an excellent recent episode of Odd Lots on this very topic:

“Whenever the government is engaging in fiscal or monetary expansion, people like to invoke the history of Weimar Germany and how soon we might all go around transporting dollars in wheelbarrows.

So, for the doomers that are warning of hyperinflation stemming from monetary and fiscal policies enacted in response to COVID-19, Weimar Germany is their ol’ faithful for convincing others. Yet, just like the blatant flaws in comparing Tulip Mania to any asset exhibiting signs of speculation, there are obvious issues with comparing the United States today to Weimar Germany, or making any insinuation that we are approaching a Weimar-like state.

We will deeper into those problems later on, but first, let’s enjoy this ludicrous anecdote from the Weimar era.

The Zero Stroke

In hindsight, one comedic outcome of the Weimar hyperinflation years was the “Zero Stroke” disorder that plagued Germans who had to write endless amounts of zeroes in transactions as the Reichsmark depreciated. Here is an article from The Reading Eagle in 1923:

And another article from Time Magazine in 1923, titled “Cipheritis”:

“The last return of the Reichsbank gave the total German note circulation as 92,844,720,742,927,000,000 marks, nearly 93 quintillions.

With the price of bread running into billions a loaf the German people have had to get used to counting in thousands of billions. This, according to some German physicians, brought on a new nervous disease known as “zero stroke,” or “cipher stroke,” which may, however, be classed with neuritis as cipheritis.

The persons afflicted with the malady are perfectly normal, except “for a desire to write endless rows of ciphers and engage in computations more involved than the most difficult problems in logarithms.”

Lastly, here’s a chart showing how German stocks did during this period:

“During Weimar the German population started to speculate in stocks. From When money dies: “Speculation on the stock exchange has spread to all ranks of the population and shares rise like air balloons to limitless heights…… The population was now engaged in evading taxation and devoting their money to speculative purchases…. Shares in respectable concerns which had paid a 20% dividend, were pushed higher and higher till the final holders could not expect a return of even 1%.”

The next chart shows the performance of the German stock market in marks and USD. It is clearly visible that that the stock market did not fall measured in marks, but was more volatile in USD. We we’re not able to find data for property, but believe the chart would have shown a similar pattern (ie. prices up in nominalterms, but not necessarily in real terms). In addition, we believe that ‘unique’ property would have held its value better compared to the overall market.”


Now, let’s dive in!

US Inflation Over 200 Years: The Performance of the Federal Reserve

Federal Reserve Act Signed into Law | Federal Reserve History

Woodrow Wilson signing the Federal Reserve Act into law.

Why This is Relevant:

The Federal Reserve is one of the investment industry’s favorite punching bags. Whether the market is up, down, or flat, there will always be investors’ complaining about Fed policy, and what they should have done differently. This paper looks at 200 years of United States history through the lens of inflation, and assesses the performance of the Federal Reserve. Their findings are quite interesting.


“This paper uses historical US inflation data covering over two centuries, to examine the impact of the establishment of the US Federal Reserve on average US inflation and inflation uncertainty. We find that the founding of the Fed is associated with both lower average US inflation and inflation uncertainty. However, inflation uncertainty was higher during recession times when the Fed was in charge of monetary policy, possibly due to the uncertainty about the type of monetary policy (accommodating or not).

Critically, these results are not driven by the post-1980 period, where the Fed policy is characterized by the dual mandate. Other important results are that the Gold Standard period is associated with both lower inflation and inflation uncertainty, and that banking and stock market crises are a positive determinant of inflation uncertainty. The two world wars and the US civil war are associated with both higher inflation and higher inflation uncertainty. In addition, we find that the central bank has responded to increasing inflation uncertainty in a stabilizing manner in support of the Holland hypothesis.”

Visualizing History:

Notable Quote:

“The recession years have been associated with higher inflation uncertainty, both before and after the founding of the Fed. The positive and statistically significant sign of ξ3 indicates that inflation uncertainty is higher during recessions that happened following the founding of the Fed. This is a very important result as it shows that, even though the Fed years have been associated overall with lower inflation uncertainty, this does not apply during recessionary times.

In fact, during recessions, inflation uncertainty was higher when the Fed was in charge of monetary policy. It may be the case that inflation uncertainty was higher during recessions after the founding of the Fed because the public faced increasing uncertainty whether the Fed would follow or not an accommodative monetary policy.”


The Inflation King: Hugo Stinnes

H. [i.e. Hugo] Stinnes (LOC) | Bain News Service,, publisher… | Flickr

Why This is Relevant:

While hyperinflation was a disastrous experience for 99% of Germans during the inter-war years, Hugo Stinnes – dubbed “The Inflation King” – thrived. As another article on Stinnes stated:

“Prior to the Weimar hyperinflation, Stinnes borrowed vast sums of money in reichsmarks. When the hyperinflation hit, Stinnes was perfectly positioned. The coal, steel, and shipping vessels retained their value.

It didn’t matter what happened to the German currency – a hard asset is still a hard asset and does not go away even if the currency goes to zero. Stinnes’ international holdings also served him well because they produced profits in hard currencies, not worthless reichsmarks. Some of these profits were kept offshore in the form of gold held in Swiss vaults.

That way, he could escape both hyperinflation and German taxation. Finally, Stinnes repaid his debts in worthless reichsmarks, making them disappear. Not only was Stinnes not harmed by the Weimar hyperinflation, but his empire prospered and he made more money than ever.

He expanded his holdings and bought out bankrupt competitors. Stinnes made so much money during the Weimar hyperinflation that his German nickname was Inflationskönig, which means Inflation King. When the dust settled and Germany returned to a new gold-backed currency, Stinnes was one of the richest men in the world, while the German middle classes were destroyed.”


“Wheelbarrows with bundles of money, severely undernourished children, once-prosperous members of the middle class queuing in front of pawnshops—the collective memory of the German inflation is full of moments that highlight and condense the humiliating effects of an economic and social devaluation. Yet at the other end of the social spectrum, inflation produced scenery that contrasted garishly with the experience of millions of Germans. For a small number of people, inflation meant the opportunity to amass enormous wealth and economic power in just a few years.

These were the “kings of inflation,” as Paul Ufermann called them in his 1924 collection of biographical portraits. Ufermann’s list contains famous industrialists such as the steel magnates Otto Wolff and Alfred Ganz, the department store owner Rudolf Karstadt, and a number of young profiteers such as Richard Kahn and Hugo Herzfeld, whose fortunes were almost exclusively linked to speculations on the stock market. Yet towering above them all, the giant among the “kings of inflation,” was the industrialist Hugo Stinnes.

Visualizing History:

Notable Quote:

“Yet his ingenious entrepreneurship can only partially explain Stinnes’s economic success. While other industrialists, especially in heavy industries, also profited from the increasing currency depreciation, nobody understood the mechanism of inflation as well as Hugo Stinnes.

He ruthlessly took advantage of credits, often from government and other official sources, and successfully speculated in the progressing depreciation of the German mark. In addition, he had major holdings abroad, which provided him with a considerable stream of highly valuable foreign currency.

Stinnes never denied that he welcomed the inflation as an effective means to expand his industrial empire, and he legitimized his action by pointing out that the creation of employment through a booming inflationary economy had precedence over price stability and the security of savings.


The Invention of Inflation-Indexed Bonds in 18th Century America

Liberty: Don Troiani's Paintings of the Revolutionary War - Museum of the American Revolution

Why This is Relevant:

Following the fiscal and monetary policies enacted as part of the COVID-19 response, many investors are increasingly concerned about the prospect of rising inflation. While Treasury Inflation-Protected Securities (TIPS) were first auctioned in 1997, the concept of inflation indexed bonds has existed in the United States since our nation’s founding. In this article, Robert Shiller discusses the history of inflation-indexed bonds, and their relation to the Revolutionary War.


“By the late 1770s, when these first inflation-indexed bonds were conceived and designed, the U.S. War of Independence was in a difficult stage. In 1779, the British Army had just captured the state of Georgia and had taken Charleston South Carolina. The eastern seaboard of the United States was blocked by the British Navy. The morale of the United States Army was low: They were poorly fed, poorly clothed, and often sick. The morale was so low that, as we now know, there were actual army mutinies in 1780 and 1781. There was real concern in 1779 that it would be impossible to keep an army if something were not done to address the loss of value of their pay. The invention of indexed bonds came in response to this very real and dangerous crisis.

Visualizing History:

The World’s First Inflation-Indexed Bond 

Notable Quote:

“The world’s first known inflation-indexed bonds were issued by the Commonwealth of Massachusetts in 1780 during the Revolutionary War. They were issued to US soldiers as deferred compensation for their service, and were called depreciation notes or soldiers’ depreciation notes. While there are earlier examples of measures to compensate people for their money’s loss of purchasing power, this appears to be the first time that a debt contract specified payments formally to a price index, and in this historic bond it was a consumer price index.”


Uncertainty and Hyperinflation: European Inflation Dynamics after World War I

Germany's World War I Debt Was So Crushing It Took 92 Years to Pay Off - HISTORY

Why This is Relevant:

At the first signs of inflation, many are quick to reference the Weimar experience post-WWI. This paper looks at the broader inflationary experiences of European countries that had fought in the Great War. While Germany’s situation was undoubtedly worse, things were not rosy for the others, either.


“The physical and political destruction wrought by WWI traumatized Europe and had economic reverberations long after the official peace treaties were signed. Both the victors and the vanquished faced massive costs of reconstruction, uncertainty regarding political borders and tax revenues, and extended negotiations over war reparations. Europe thus faced an environment of heightened uncertainty that deeply affected economic expectations and outcomes.

We develop a methodology utilizing country-specific events that shows uncertainty to be an important driver of the inflation dynamics for GAPH, but much less so for other European countries. We show how uncertainty over reparations increased policy uncertainty in both France (as a receiver of reparations) and Germany (as a payer). However, the effects of uncertainty were significantly greater for Germany and contributed to the country’s inflationary spiral that led to hyperinflation…

Finally, our findings relate to the work of Cole and Kehoe (1996; 2000) and subsequent by other scholars showing that financial crises that threaten a country’s ability to repay its debt may quickly become self-fulfilling, and lead to a debt crisis. The parallel to fiscal policy and inflation expectations in the interwar period is clear. If economic agents believed that GAPH debts could not be repaid as long as budget discipline was non-existent, then tipping into hyperinflation becomes self-fulfilling. Further analysis of the fiscal conditions of these countries at the monthly level and their relationships with our uncertainty measure should be a fruitful direction for future work.”

Visualizing History:

Notable Quote:

“Figure 3A [above] shows the German RV series and highlights how the events of 1923—the year in which Germany tipped into hyperinflation—clearly increased uncertainty to new heights. The occupation of the Ruhr Valley and the tense continuing negotiations around reparations raised RV uncertainty by up to 550 times the benchmark.

Weimar Republic Hyperinflation through a Modern Monetary Theory Lens

A basement of a bank full of banknotes at the time of the Mark devaluation during the economic crisis in Weimar Republic (Germany), 1923. 

Why This is Relevant:

MMT and Weimar Hyperinflation… this is sure to ruffle some feathers….


“The hyperinflation in Weimar Germany in 1922-23 has become the poster child of mainstream economists – and especially the monetarists- when presenting the benefits of constraining governments by the rules of ‘sound finance’. Their narrative presumes that governments are naturally inclined to spend beyond their means and that, if left to their profligate ways, inflation ‘gets out of hand’ and leads to hyperinflation in a continuous, accelerating, unstoppable catastrophic collapse of the value of the money.

In contrast to this ubiquitous mainstream analysis, we recognize a fundamentally different origin of inflation, and argue that inflation requires sustained, proactive policy support. And, in the absence of such policies, inflation will rapidly subside. We replace the erroneous mainstream theory with the knowledge of Modern Monetary Theory (MMT) identifying both the source of the price level and what makes it change. We are not Weimar scholars, and our aim is not to present a comprehensive historical analysis. We examine the traditionally reported causal forces behind the Weimar hyperinflation, along with the factors that contributed to the hyperinflation and to its abrupt end.

The purpose of this paper is to present our view of the reported information from an MMT perspective. In that regard, we identify the cause of the inflation as the German government paying continuously higher prices for its purchases, particularly those of the foreign currencies the Allies demanded for the payment of reparations, and we identify the rise in the quantity of money and the printing of increasing quantities of banknotes as a consequence of the hyperinflation, rather than its cause.”

Visualizing History:

Notable Quote:

“The Weimar inflation, as is necessarily the case, was driven by the German government’s policy of paying continuously higher prices to provision itself, thus continuously redefining the value of its currency downward. Once that policy changed, and the government limited its direct and indirect deficit spending, and ceased to continue paying higher prices, the price level stabilized. Inflation necessarily requires a state policy of continuously paying higher prices when it spends, and inflation ceases when that policy ends.”