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Will it really be a Weimar situation?
 
gunnerrat Views: 1,411
Published: 12 years ago
 
This is a reply to # 1,335,353

Will it really be a Weimar situation?


Germany was making reparation payments, so there was a shortage of cash for the people. So they printed more. The key is that the workers got wage hikes to offset the rate of inflation. This created a wage spiral that went out of control. Workers would have to leave work during the afternoon to buy bread (they were paid often during the week) because they couldn't afford it after work because the prices had gone up.

I don't see a wage spiral here in America. Too many people will have lost jobs.

I think it will depend on what the government does. Obama has promised to run mega deficits to fund public work projects and keep people employed. However, as the dollar gets repudiated (China is already slowly selling off its dollar reserves and not interested in financing more debt) the government and corporations will have to spend more to acquire the materials they need. This will bring the hoarded money out of hiding to chase after it. Inflation ensues.

Or, Obama could make the money available for grants to help Americans start business that actually make things, to bring up production so that the money/credit-production equation stays equalized. There would be lots of pain while Americans adapt, but we'd end up with a powerhouse economy like we used to have.

Which scenario would you bet on? Yep, me too.
 

 
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