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What provoked WWII ?
NOTICE ARCHIVE - 28/03/2019

Maximilian Bern had saved up 100,000 German marks for what should have been a modest, but comfortable retirement. But in 1923, he withdrew every last cent, and spent it all on one purchase: a subway ticket. He rode around his city one last time before returning home, and locking himself in his home, where he died.

 

He didn’t kill himself. He starved to death… simply because he could no longer afford food. A single egg at the market would cost millions of marks, more than Maximilian Bern had saved over his entire life.

 

This was one of the most famous episodes of hyperinflation, certainly in modern history. In the wake of World War One, Germany (known as the Weimar Republic) was completely broke. The War to end all Wars had bankrupted them; and on top of losing the war, Germany was forced to make ‘reparation payments’ to the victors, including France, the UK, etc.
That took Germany’s overall war debt to impossible levels. So in a feeble attempt to keep the economy afloat and meet its war debt obligations, the German government printed massive amounts of paper money.

 


Prior to World War I, one US dollar was worth 4.2 German marks. By 1923, a single US dollar was worth 4.2 TRILLION marks.
Back in Germany’s hyperinflation days around 1920, there were a handful of sophisticated people who saw the writing on the wall. They knew that the government could never pay its debts, and that they would print money and debase the currency. They set up their investments in a way to actually profit from hyperinflation. Normally they borrowed vast amounts of German marks and poured them into hard assets. They also kept gold in Switzerland, and made investments in foreign markets. When hyperinflation hit, they were able to pay back debts with massively devalued German mark while the acquired hard assets weren’t affected by the hyperinflation. They held their value.

 

For a handful of people, business and investmens flourish in times of financial turbulence. For workers and taxpayers, the suffering has no limits. This is just a reminder that in financial markets or global economy, there are always a few winners and plenty of losers. And when these two groups distance themselves in extreme distance, the conflict starts.

 

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