What can policymakers learn from 1923?

WEIMAR LESSONS

The most extreme example of quantitative easing in an advanced economy took place in Weimar Germany in the early 1920s. In 1913, a year before the First World War broke out, a paper mark and a gold mark were the same thing.

Four of them were worth a dollar. Ten years later one dollar would buy four trillion – four million million – of them. This simple graph (below) shows that progress. It is on a logarithmic scale. Were it on a mathematical scale it would go through the roof of this building. Hyperinflation is generally held to start in the month when inflation first reaches 50%, a rate of 600% a year.  For Germany that happened in May 1922. In our present financial turmoil, it is worth reflecting on the unpredictability of ordinary people and what they may do when they lose their trust in their mone...