rektdiomedes

Thread: What Weimar Germany Can Teach Us About The 2020's (Un-Ironically)

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So, 'Weimar Hyperinflation' is often a lazy metaphor for our current fiat regime... 

HOWEVER, at the same time, there is a lot we can learn from studying what happened there...

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This thread is definitely not to suggest that the US/Europe/etc is going see such hyperinflation over the next 10 years... 

However...

The 'extremes inform the means', as they say, and there are a lot of parallels between Weimar and the situation today.

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As a quick recap, 'Weimar Germany' essentially refers to the time in Germany between the end of WWI and the Third Reich, and is generally associated with the 1920's specifically. 

Its most famous feature was the hyperinflation that occurred.

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Much of the money-printing in Weimar was to pay Germany's massive war reparations that were imposed on it after losing WWI. 

Comparing to today... the West has no war reparations costing tons of money...

HOWEVER...

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We have something not mathematically dissimilar...

Which is massive entitlement obligations in the form of government retirement and healthcare to Baby-Boomers that already take up nearly all our tax revenue to service. 

 

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This issue is bad enough in the US, but is vastly more serious in countries like Italy, where extreme sub-replacement fertility has created a situation in which there are far less young people than old people. 

[see Italian demographic pyramid below]

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Another similarity is energy… 

Germany had much of its energy production seized by France.. 

This caused them to end up basically printing money to buy energy from other countries (almost identical to what is going on in Europe today). 

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What's interesting is that at first things seemed good in Weimar. 

The gov used the money printer to make huge investments in infrastructure, public works, factories, etc. 

The stock market was surging.. everyone felt wealthy.. 

It was called "The Golden 20’s”... 

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Since (nominal) prices were surging so much.. 

There was more and more speculation in financial assets, which created a loop of reflexivity… 

..and tons of men quit their ‘real’ jobs or businesses in order to become fulltime ‘traders’… (sound familiar frens?)

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Advertising became a huge part of the economy… with large amounts of people being employed merely to try to better sell products to their fellow citizens…

Consumerism and fashion became huge activities... as everyone felt like they had excess money to spend...

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The 'prosperity' was not equally distributed though...

Those closest to the money printer (in the main financial centers) benefitted the most..

..and the rural/farming/working class fell behind...

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A spirit of Bacchanalia arose in the cities, along w/new transgressive sexual mores... such as male and female homosexuality, child prostitution, cross-dressing, and some of the first ever experiments with 'sex reassignment surgery'. 

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Another interesting fact is that there was massive use of medical-grade cocaine and heroin..

Also...

Prostitution became common even among middle and upper-class young women who were not economically forced into it... not unlike what we see with OnlyFans today..

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Eventually.. everything began to fall apart..

Few long-term decisions were being made because everything was part of the ongoing election cycles with new politicians constantly popping up and making promises to get elected

And ultimately there was collapse/hyperinflation.

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This was utterly brutal for the German people... much like the Great Depression was for those in the US/etc just a few years later...

But why did the US see a 'Depression' and Germany see hyperinflation?

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Well, bc the US did not have fiat currency, we had the gold standard.. whereas Germany was on a purely fiat system, just like the one we have today :)

Germany *could* have chosen austerity... but we humans almost ALWAYS choose the money printer..

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And indeed, while the US saw deflation initially, the Great Depression catalyzed us to basically end the gold standard for citizens (we'd end it entirely by 1971) and didn't stop until WWII pushed us out of it. FDR also devalued the dollar vs gold as well.

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This echoes to today, where despite huge inflation, the ECB are printing money to buy Italian bonds that no one wants, because there is no political will to let the Eurozone implode or impose significant austerity on any countries within Europe. 



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The most salient lesson though is that it was not a straight line to hyperinflation... 

On multiple times, the gov came out acting tough, and the price of gold fell by 80%.. before resuming its march to infinity (in nominal terms)...

I.e., lev-longing gold got you rekt. 

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This very much mirrors the intense volatility of crypto/Bitcoin today, which @lukegromen has called the economy's "last functioning smoke detector"...

And the 'fire' will continue, unless we somehow buck the trend of history and choose austerity.



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This would mean hundreds of millions of Boomers voting to cut their gov benefits, which I think has a 0% chance of happening. 

As a result, debasement until monetary reset is the only option. 

Though likely via 10-50% inflation for 5-10 years vs hyperinflation. 

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Therefore, while I am an idealistic and firm believer that on-chain defi will someday replace the tradfi rails, I also think Weimar informs a fatalistic reason to be bullish on crypto as well, ie speculation/gambling: 



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I also think that gold, some US real estate, some US stocks, and some emerging markets will do extraordinarily well. 

Indeed re: the latter, we may see those who can flee the worst parts of the West do so for greener pastures, just like many fled interwar Germany. 

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Conclusion: Hope you derived some value/etc from this :) 

If so plz rt + follow! 💪🫡

Tagging some frens below:

@phtevenstrong 
@CurveCap 
@Riley_gmi
@Dynamo_Patrick 
@NickDrakon 
@Ceazor7 
@FTMAlerts 
@MrWinstonWolf_ 
@Mark2work
@zerototom
@Prof_Crypto_B 
@CompleteDegen

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Note re: above Weimerica thread: I am a dumb ape, any/all of my macro knowledge comes from geeking out on dozens of videos by:

@LukeGromen 
@LynAldenContact 
@hkuppy 
@noahseidman 
@GeorgeGammon 
@MarkYusko 



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Link to first tweet of thread below:



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Thanks man :) I think they debase us into higher tax brackets and slowly pay down the debt in nominal terms  via negative real rates (like 2% interest rates and 15% inflation, etc)...

You're right though spending increasing so fast hardly anything to stop it...

Yes lots of parallels... also it seems as though the infection is spreading to the rest of the world too... sub-replacement fertility and massive pornography consumption becoming the norm even in a lot of 3rd world countries... though West at forefront still...

Yes, at the very least I think US treasury's will cease to be the reserve asset... and at some point dollar could lose reserve currency status too... at least the monopoly status it has now...