Inflation: The German Experience

Double-digit inflation is a new experience for this generation of Americans. Until now, that sort of annual increase in the cost of living was considered a foreign phenomenon, attributable to incompetent economic planners, military dictators, defective central governments, or loose morals. Today we realize that inflation is not due to loose morals but to loose monetary policies. The first modern country to learn that sad lesson was the Germany of the 1920s. We may not be on the same road, but we are headed in a similar direction.

Just as Lyndon Johnson thought that the United States was rich enough to afford guns and butter when the Vietnam War escalated, the German administration was reluctant to tax the public to anywhere near the extent necessary to fight the First World War. The government assumed the hostilities would be over in a “lightning campaign.”

GK

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Gerald Krefetz

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Double-digit inflation is a new experience for this generation of Americans. Until now, that sort of annual increase in the cost of living was considered a foreign phenomenon, attributable to incompetent economic planners, military dictators, defective central governments, or loose morals. Today we realize that inflation is not due to loose morals but to loose monetary policies. The first modern country to learn that sad lesson was the Germany of the 1920s. We may not be on the same road, but we are headed in a similar direction.

Just as Lyndon Johnson thought that the United States was rich enough to afford guns and butter when the Vietnam War escalated, the German administration was reluctant to tax the public to anywhere near the extent necessary to fight the First World War. The government assumed the hostilities would be over in a “lightning campaign.”