July 26th, 2008

Is it 2000-03, 1987, 1972-74, 1930-34 or 1920-23 Weimar Republic?

Which of the above economic and market calamities most resembles today’s experience? I first thought the 1972-74 crash what with spiraling gas prices, dollar devaluation, burgeoning deficits, weak President, unpopular war’s end, recession (ours is coming).

As readers here know, I’ve been writing about silver and gold as one way to play this soft market for several months (see May 21, June 6, July 11) and started reading opinions from others about precious metals. It’s not so much what these newsletters and blogs say about the current economic climate or the merits of gold and silver as a hedge worries me but the way they say it, the associations keep and the agenda they follow that’s most bothersome. So here’s a mea culpa for my unwitting endorsement and reinforcement of these fascists, bigots and racists.

Lately, with the Fed and the Government flooding dollars in an effort to salvage what almost daily appears to be turning into a collapsing financial system, the situation is actually beginning to look more like 1920-23 with the collapsing German currency and hyperinflation caused by the pressure for them to pay WW I Reparations. Here’s how Wikipedia describes that period (emphasis added):

“Many of the dramatic and unusual economic behaviors now associated with hyperinflation were first documented systematically in Germany: order-of-magnitude increases in prices and interest rates, redenomination of the currency, consumer flight from cash to hard assets, and the rapid expansion of industries that produced those assets….An attempt was made by Germany to buy foreign exchange, but that was paid in treasury bills and commercial debts for Marks which only increased the speed of devaluation….international reparations conferences including one organized by U.S. banker J. P. Morgan. When these meetings produced no workable solution, the inflation changed to hyperinflation…reparations accounted for about one third of the German deficit….Other scapegoats included bankers and speculators (particularly foreign), both of which groups had, in fact, exacerbated the hyperinflation through the normal course of their profit-seeking .…. inflation did, however, raise doubts about the competence of liberal institutions, especially amongst a middle class who had held cash savings and bonds. It also produced resentment of bankers and speculators, many of them Jewish, whom the government and press blamed for the inflation.”

In short, the goldbug and silverbug sites are essentially describing the events over the past several months as if the economic situation was increasing reflecting German 1920-23 hyperinflation — and perhaps (yes, I confess I’m reading between the lines) even longing a return to that bygone, fascist era. I was going to insert some quotes as evidence but thought better of doing so for fear of further spreading their poison.

I, too, am terribly worried about the US economy and the stock market but I’m even more anxious about the extreme-right picking up ever more uninformed, gullible converts that could possibly lead to increasingly more radical rhetoric and actions. You might say that “it can’t happen here” but it won’t only if we are alert and attuned to its potentiality and stamp it out before it even has a chance to take hold.

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