One on inflation, and four on Germany’s reunification

As a student of economics, I think I’ve read one article too many on Germany’s inflation. In fact, one of the many joys of writing this blog has been discovering how bad inflation was in other parts of the world: the version of economic history that I have studied has underplayed this.

(Name four countries that experienced hyperinflation: Germany! Zimbabwe! Venezuela! Uhhhhhh…..)

But that being said, learning more about Germany this month wouldn’t be complete without at least one article about it’s hyperinflation. And the reason I enjoyed the one I excerpt from below is because while it is full of interesting anecdotes about the period of hyperinflation, it also speaks about how it all ended – and with what consequences. And a fun fact which you may have not known earlier: the root of the word credit means to believe. That’s modern finance, in a nutshell.

Obviously, though the currency was worthless, Germany was still a rich country — with mines, farms, factories, forests. The backing for the Rentenmark was mortgages on the land and bonds on the factories, but that backing was a fiction; the factories and land couldn’t be turned into cash or used abroad. Nine zeros were struck from the currency; that is, one Rentenmark was equal to one billion old Marks. The Germans wanted desperately to believe in the Rentenmark, and so they did. “I remember,” said one Frau Barten of East Prussia, “the feeling of having just one Rentenmark to spend. I bought a small tin bread bin. Just to buy something that had a price tag for one Mark was so exciting.”

All money is a matter of belief. Credit derives from Latin, credere, “to believe.” Belief was there, the factories functioned, the farmers delivered their produce. The Central Bank kept the belief alive when it would not let even the government borrow further.

The political “give” that was needed to get the political, economic, cultural and civilizational “take”, in an interesting article from DW. The set of links at the bottom of this article are also worth a read. (Note that I have added the WIkipedia link to the 2 Plus 4 Agreement, it is not there in the original).

The 2 plus 4 Agreement, also called the Treaty on the Final Settlement with Respect to Germany, recognized all European borders established after World War II, resolving this outstanding dispute once and for all. Bonn and Berlin’s signatures to the treaty meant that a newly reunited Germany would recognize national borders as they stood, not as they once were. Coupled with the reduction in military concentrations, the acceptance of current borders was a significant step toward an enduring peace in Europe at large.

An unusually short excerpt by my own standards, but this is the last sentence in the Wikipedia article about German reunification. It deserves to be read in the full, the entire article, especially if you were under the impression that reunification in Germany was relatively quick, painless and that there was much happiness all round.

The absorption of eastern Germany, and the methods by which it had been accomplished, had exacted a high price throughout all of Germany.

But there is an argument to be made that it was worth it, because one way of thinking about it is this: West Germany purchased access to culture by sharing economic prosperity, while East Germany purchased access to economic propserity by sharing culture. Costs matter, but maybe, just maybe, culture trumps economics?

“On average, people in the East are less successful, less productive and not as wealthy. Materially speaking, they’re less happy,” Seemann said. “But that’s exactly why cultural diversity in the eastern states plays a more important role than in the West. People in eastern Germany are aware that there are things which are more important than making money and paying taxes. They see the arts as a creative process of ‘togetherness.’ We need to strengthen this consciousness, because that’s the only way to ensure culture and society continues to thrive — regardless of where we stand economically in the years to come.”

Note that there are links at the bottom of this article about whether lessons from German reunification can apply to Korea. Alas, the article says no. I am an Indian, so double the alas for me, please.

And finally, a reminder that these things take time! This article is about the reunification of not Germany, but of the German language. Note that the East Germans had to adapt, and not the other way around. Maybe, just maybe, economics trumps culture?

The former East and West Germany have grown closer together in many areas over the past 26 years. At the same time, some differences are still marked precisely by the former border between East and West, such as economic strength, family structure and wealth. Furthermore, stereotypes about Wessis and Ossis have still not been consigned to history. According to a study carried out by the Berlin Institute for Population and Development, it will take another generation before German unity is firmly anchored in people’s minds. It has, however, long been reflected in the way they speak.

Etc: Links for 14th June, 2019

  1. “But here is a simple truth that many of us seem to resist: living too long is also a loss. It renders many of us, if not disabled, then faltering and declining, a state that may not be worse than death but is nonetheless deprived. It robs us of our creativity and ability to contribute to work, society, the world. It transforms how people experience us, relate to us, and, most important, remember us. We are no longer remembered as vibrant and engaged but as feeble, ineffectual, even pathetic.”
    Ezekiel J. Emmanuel on how long he wants to live. Worth reading to ponder questions of mortality and what it means to each of us. Also worth reading up on: memento mori.
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  2. “Indeed, the German hyperinflation was not even the worst of the twentieth century; its Hungarian equivalent, dating to 1945-46, was so much more severe that prices in Budapest began to double every 15 hours. (At the peak of this crisis, the Hungarian government was forced to announce the latest inflation rate via radio each morning, so workers could negotiate a new pay scale with their bosses, and issue the largest denomination banknote ever to be legal tender: the 100 quintillion (1020) pengo note. When the debased currency was finally withdrawn, the total value of all the cash then in circulation in the country was reckoned at 1/10th of a cent. [Bomberger & Makinen pp.801-24; Judt p.87])”
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    I wasn’t aware of what the topic of this essay is about – which is not contained in the excerpt above. Somewhat shamefully, I wasn’t even aware of the Hungarian episode quoted above! Read more, sir, read more!
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  3. “Consider the first time a right-handed player tries to dribble with the left hand. It’s awkward, clumsy. Initially, the nerves that fire off signals to complete that task are controlled in the front cortex of the brain. Over time, with countless repetitions, those nerve firings become more insulated. The myelin sheath builds up. Eventually, less effort is required to use that left hand, and the brain processes it as second nature.The same is possible with pressure, according to neurologists. With repetition, stress can be transformed into fortitude.”
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    Put yourself in pressure situations, and repeatedly. That’s the only way, this article says, to handle pressure. Lovely read!
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  4. “The project in Colombia, a partnership with the nonprofit Conservation International, involves protecting mangrove forests, which can store 10 times as much carbon as terrestrial forests. In its first two years, the program is expected to reduce carbon emissions by 17,000 metric tons, roughly equal to the next decade of emissions from the lidar-equipped survey vehicles that update Apple Maps. “This is rare for Apple to say, but we are telling other companies to copy us on this,” Jackson says.”
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    I have only glanced through this article, and haven’t come close to reading all the entires (a true rabbit hole), but there’s lots of small interesting snippets here about creativity. Not so much, based on what I’ve seen of the “how to be creative”, but rather descriptions of folks who are creative.
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  5. “The (c)rapture I felt was likely a case of “poophoria,” explains Anish Sheth, the gastroenterologist and coauthor of toilet-side staple What’s Your Poo Telling You? “Some have compared it to a religious experience, others an orgasm,” he says. The exact science is unknown, but Sheth thinks the sensation may result from “a slightly prolonged buildup, an overdistension of the rectum, and immediate collapse by passing a sizable stool, which fires the vagus nerve and releases endorphins.” Lights-out pooping, Sheth adds, may “help with a proper rate of exit.””
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    Truly etc., this. The Wired magazine on, well, pooping in the dark.