Another wild day on Wall Street. Was this the way things felt in the months leading up to the Great Crash? Those were interesting times too – so much so that those who lived them must have sensed it self-consciously, just as we do of our own era. Back then, the U.S. was a relative oasis of political and economic stability. Europe enjoyed no such respite, mainly because the peace that had enjoined Germany after the war throttled any chance of returning to prosperity. Onerous reparation terms set the stage for the 1923 German hyperinflation, which in its final weeks saw a doubling of prices every 49 hours.
Could such a thing happen in the U.S.? Probably not, since the will to bring it about does not exist. It is understandable that a broken and dissolute Germany would have been eager to stiff the allies via hyperinflation. But if the U.S. were to pursue the same course, devaluing the dollar to the point of oblivion, we would only be stiffing ourselves. Or rather, our creditors. Just try to imagine what it would be like without them. And vanish for a generation they would, since that is what hyperinflations do – i.e., destroy lenders, and any possible incentive to lend, by turning their receivables into confetti. How much would payments on your $250,000 mortgage be worth when a loaf of bread costs $60,000, and a movie ticket $200,000?
Let’s hope it doesn’t come to that. But whatever the course of events, it seems unlikely that the U.S. will once again act as a stabilizing force in the world. We are, after all, the root of the problem, the largest purveyor, by far, of debt both public and private. As such, the “subprime mess” is as much Germany’s and Great Britain’s problem as it is ours. And so, for that matter, is a U.S. stock market that has begun to flail and gyrate with such extraordinary violence as to spook bourses around the world. With the Winter Solstice only nine days away, it’s the Summer of 1929 all over again – not merely in the U.S., but around the world.
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