This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

QE2: History Lessons From Germany

By Adam Fergusson, author of When Money Dies

NEW YORK ( TheStreet) -- Through the printing press, the Weimar Republic conducted the most extreme policy of quantitative easing in history. The German mark, 4 to the $1 before World War I, stood at 20 when it ended. Gathering momentum, it eventually plunged in November 1923 to 4 trillion to the $1.

At that point the nominal value of the ocean of circulating paper reached 93 quintillion (a figure with 18 noughts). The mark was dead. Such headlong debauchery of a currency in an advanced economy teaches us something today.

Then as now, the objective was to reduce unemployment and thus avoid unrest and political unpopularity. Revolution was in the air. A defeated army was disbanding. Dr. Rudolf Havenstein, president of the independent Reichsbank, made it his task to supply industry with all the credits and the government with all the wages and salaries needed for national recovery and survival.

Havenstein pursued it relentlessly, convinced that his titanic money-printing triumphs had no connection with the depreciation which accompanied, and later anticipated, them. Unchallenged, he blamed that on the economic crisis, international speculators, the fear of Bolshevism, the social disorganisation of a truncated country (the Treaty of Versailles had cost a defeated Germany all her colonies, Alsace-Lorraine and the industries of Upper Silesia), the Allied blockade, the massive war reparations payable in gold and in kind, and finally, in the spring of 1923, on the Franco-Belgian invasion of the Ruhr to retrieve those payments. The Kaiser's regime, which had hoped in 1914 to pay for a short war not with taxes but the spoils of victory, had certainly left its Socialist successor a baleful legacy.

As a way of ensuring full employment, printing money was successful from the start. And what a success! Private industry, much of it converting from a war footing, expanded rapidly and happily to mop up the limitless credit the Reichsbank and the currency-issuing regional banks made available. Exports boomed, for with such low manufacturing costs they undercut all competition (and in 1920 contributed to a slump in France and Britain, and afterwards to the beggaring of France and other neighbors).

Shipbuilders in Hamburg, automobile makers, steelworks in the Ruhr -- all flourished. Profits were outrageous. New enterprises sprouted: as inflation speeded up, the loans which had launched them could be repaid with trivial amounts of foreign earnings or the price of a tram ticket. Often these foreign earnings, if not hoarded abroad, were invested in new factory buildings which produced nothing but boosted the construction industry enormously.

1 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,890.34 +85.54 0.48%
S&P 500 2,071.99 +1.34 0.06%
NASDAQ 4,762.7540 -2.6260 -0.06%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs