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

Stabilization came only when the abyss was plumbed. At the end of 1923, Germany no longer faced the false choice between unemployment and bankruptcy, for she had both. When the new Rentenmark, equal to one old gold mark, was introduced and trusted, food flowed into the towns and cities again. Many could not afford it.

This terrible tale of the ravages of inflation rings warning bells for less virulent forms of deficit financing.

It emphasizes, first, governmental predilection for the quick fix of printing money. With the banknotes of the Mississippi Bubble, the assignats of the French Revolution or the paper promises of Weimar, the addiction grew, each extra dose of the drug irresistible because circumstances seem exceptional. Will QE2 be the last of the series?

It shows how readily confidence in money evaporates; and the public's distress when virtues like thrift and honesty become folly. Is it plausible for a bank to concern itself with employment (surely a government's worry) as well as financial stability?

It explains how inflation casts its shadow before it. Havenstein continually proclaimed his intentions, with inevitable results. The mere prediction of QE2 by the Fed, and talk of an inflation target, sent the dollar tumbling across the world, with knock-on effects on every commodity and currency.

It warns how fighting an internal crisis with the two-edged sword of cheap money may be interpreted as malevolence by foreign trading partners.

Worried by growing inflation, the Bank of England is this week having second thoughts about its QE2. Although main-street banks have released little of the GBP200 billion QE1 into Britain's wider economy, there are signs of its recovery. It is an interesting contrast to a Federal Reserve worried about deflation.

Both countries have low interest rates and few choices for economic stimulation. Nevertheless, lack of alternative seems poor justification for a neo-Keynesean measure whose effectiveness is evidentially so opaque and when the risks of unintended consequences across the world are so disturbing. While economic opinion is divided, confused taxpayers must understandably fear that more fuel may be being poured into a tank already full, threatening a costly, futile and dangerous global spillage.

Adam Fergusson has been a member of the European Parliament, a special adviser at the Foreign Office, a consultant on European affairs for international industry and commerce, and a political adviser during Margaret Thatcher's government.


Become a fan of TheStreet on Facebook.

3 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 17,356.87 +288.00 1.69%
S&P 500 2,012.89 +40.15 2.04%
NASDAQ 4,644.3120 +96.4780 2.12%

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