Troubled Greece: Fears of 'First Domino' to Fall as Austerity Is Counted a Failure

THE GUARDIAN: Greek's leftist party Syriza says recovery depends on a renegotiated bail-out and access to European structural funds

The soup kitchen opens at noon but long before then the queues start to form in the hot Athens sun. A couple of streets away from where sardines, red mullet and squid are piled high in the fish market, those down on their luck line up. While elsewhere life goes on seemingly as normal, students, jobless people, single parents and pensioners swallow their pride and wait patiently. They get two meals a day, at midday and 5pm. This is what a depression looks like.

At first blush, Greece seems no different from any other developed country. People sit in the city centre cafes sipping their iced coffees; yellow taxis cruise the streets; the shops are open for business. But different it is, and it is not hard to spot the signs that this is an economy that has contracted by 20% since the downturn began three years ago and that it is still falling.

You don't need to know that spending in the shops is down by a sixth over the past year; it is obvious from the empty cabs and those shops open but with no customers. You don't need to know that the official unemployment rate is well above 20% and youth unemployment is nudging 50%: it's obvious from the young men idling on street corners and openly dealing drugs.

Greece is broke and close to being broken. It is a country where children are fainting in school because they are hungry, where 20,000 Athenians are scavenging through waste tips for food, and where the lifeblood of a modern economy – credit – is fast drying up.

It is a country where the fascists and the anarchists battle for control of the streets, where immigrants fear to go out at night and where a woman whispers "it's like the Weimar republic" as a motorcycle cavalcade from the Golden Dawn party, devotees of Adolf Hitler, cruises past the parliament building. Graffiti says: "Foreigners get out of Greece. Greece is for the Greeks. I will vote for Golden Dawn to remove the filth from the country." » | Larry Elliott, economics editor | Thursday, May 31, 2012

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The Federal Reserve Copies Weimar Hyperinflation

The Weimar Republic 1923

Adam Fergusson: Inflation Lessons for the UK
THE TELEGRAPH: Adam Fergusson's 1975 book on hyper-inflation in the Weimar, When Money Dies, has become a cult read among Europe's top financiers after the Sage of Omaha Warren Buffet is said to have recommended it. He tells Robert Miller where parallels could occur if inflation were to take hold in Britain.

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The Death of Paper Money
THE TELEGRAPH: As they prepare for holiday reading in Tuscany, City bankers are buying up rare copies of an obscure book on the mechanics of Weimar inflation published in 1974.

Ebay is offering a well-thumbed volume of "Dying of Money: Lessons of the Great German and American Inflations" at a starting bid of $699 (shipping free.. thanks a lot).

The crucial passage comes in Chapter 17 entitled "Velocity". Each big inflation -- whether the early 1920s in Germany, or the Korean and Vietnam wars in the US -- starts with a passive expansion of the quantity money. This sits inert for a surprisingly long time. Asset prices may go up, but latent price inflation is disguised. The effect is much like lighter fuel on a camp fire before the match is struck.

People’s willingness to hold money can change suddenly for a "psychological and spontaneous reason" , causing a spike in the velocity of money. It can occur at lightning speed, over a few weeks. The shift invariably catches economists by surprise. They wait too long to drain the excess money.

"Velocity took an almost right-angle turn upward in the summer of 1922," said Mr O Parsson. Reichsbank officials were baffled. They could not fathom why the German people had started to behave differently almost two years after the bank had already boosted the money supply. He contends that public patience snapped abruptly once people lost trust and began to "smell a government rat".

Some might smile at the Bank of England "surprise" at the recent the jump in Brtiish inflation. Across the Atlantic, Fed critics say the rise in the US monetary base from $871bn to $2,024bn in just two years is an incendiary pyre that will ignite as soon as US money velocity returns to normal. >>> Ambrose Evans-Pritchard | Sunday, July 25, 2010

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Obscure Book by British Adviser Becomes Cult Hit After Warren Buffett Tip
THE SUNDAY TELEGRAPH: An obscure book about the collapse of the German economy in the 1920s has become cult reading among leading financiers, after a tip from billionaire investor Warren Buffett.

Mr Buffett, known as the Sage of Omaha because of his shrewd investments, apparently told friends that When Money Dies illustrated what could happen today if European governments attempt to spend their way out of the downturn.

Written in 1975 by Adam Fergusson, a one-time adviser to Tory minister Lord Howe, the book charts how the German economy was ruined by hyperinflation after the Weimar government allowed public spending to run out of control.

The collapse of the Weimar Republic cleared the way for Adolf Hitler’s Nazis to seize power in 1933.

After Mr Buffett tipped off a Dutch financier friend about the wisdom of Fergusson's analysis, his book became the talk of right-wing blogs and economics websites, with copies changing hands for up to £1,600.

Old Street Publishing, a small British publisher, has rushed out a new edition to meet demand. >>> Matthew Moore | Sunday, July 11, 2010

Weimar 1923 May Have More Lessons than US 1932
THE TELEGRAPH: Are we heading for another Great Depression?

Many baffled forecasters are asking just that, and studying what the US did wrong after the stock market crashed in 1929. But the more relevant policy errors might have been those made earlier across the Atlantic - in Weimar Germany from 1919 to 1923.

Policymakers have learned from the US mistakes. This time around, there has been no shrinkage of the money supply and no repetition of President Hoover's increase in tariffs in 1930 and income taxes in 1932. On the contrary, money supply has expanded rapidly while fiscal policies have been expansionary and protectionism limited.

But look at the Weimar government. Suffering from the trauma of defeat in the First World War and the burden of reparations, it was too weak to raise taxes. It ran large budget deficits instead. Interest rates were kept far below the rate of inflation, while money supply expanded rapidly. About half of government expenditure was funded by newly printed money. >>> By Martin Hutchinson, breakingviews.com | Wednesday, April 1, 2009

Dr Paul’s Walls: German Hyperinflation

The Dawning of a New Dark Age – Paperback (US) Barnes & Noble >>>
The Dawning of a New Dark Age – Hardcover (US) Barnes & Noble >>>