Friday, 22 January 2021

The Economic Consequences Of Mr Hickey.

"Come The Revolution!" The key objective of Bernard Hickey’s revolutionary solution to the housing crisis is a 50 percent reduction in the price of the average family home. This will be achieved by the introduction of Capital Gains, Land, and Wealth taxes, and by the opening up of currently RMA-protected real-estate. As revolutionary programmes go, it’s admirably succinct. But, what else would Mr Hickey’s deflationary property revolution bring?
JOHN MAYNARD KEYNES, whose economic ideas are enjoying a modest revival in this time of Covid, was a formidable communicator. He shot to global prominence in 1919, following the signing of the disastrous Versailles peace treaty. His hastily written pamphlet, The Economic Consequences of the Peace, prophesied with considerable accuracy Versailles’ fatal economic impact upon victors and vanquished alike. Six years later, leveraging linguistically off his first great success, Keynes published another pamphlet – The Economic Consequences of Mr Churchill – in which he set forth with equal prescience the price Great Britain would pay for its Chancellor of the Exchequer’s pig-headed decision to resurrect the Gold Standard.

The tragedy enshrouding both of Keynes’ Economic Consequences pamphlets is that their author had been powerless to prevent the disasters whose outcomes he so clearly foresaw. How much better the world would have fared had Keynes’ advice been heeded – both the Great Depression and The Second World War would likely have been avoided. Against entrenched viciousness and ignorance, however, even intellectuals as prodigiously gifted as Keynes find it impossible to make headway. In a battle between reason and passion the smart money has always favoured the emotionally incontinent.

Right now, in New Zealand, for example, feelings are running high on the vexed questions of homelessness and housing affordability. Perhaps the most passionate spokesperson for those currently struggling to house themselves securely is the financial journalist, Bernard Hickey. His call-to-arms on the housing issue has, of late, acquired a decidedly revolutionary tone. Behind his indisputably cogent expositions of the problem, one senses a rising anger, and what can only be described as a ruthless determination to sweep aside what he unabashedly identifies as the economic, social and political forces barring the path to homes for all New Zealanders.

The radicalism of his analysis is certainly not diminishing. In a recent opinion piece he lamented the absence of a clear bipartisan consensus on the measures needed to solve the housing crisis:

“National and Labour aren’t there on a bipartisan approach yet: not even close. They combined in the late 1980s and early 1990s to wage war on double-digit consumer price inflation by giving the Reserve Bank independence and setting a formal target of keeping inflation around 2 per cent. That involved passing acts of Parliament and essentially promising voters they would stick to that 2 per cent. It worked. Expectations changed.”

They did indeed, but only after New Zealanders were required to shoulder the enormous social costs of the economic revolution driven through with unparalleled ruthlessness by Roger Douglas and Ruth Richardson. Was that the sort of transformation Mr Hickey had in mind when he warned listeners to RNZ’s Sunday Morning Show late last year: “Come the Revolution”?

Certainly, Mr Hickey, following the historical precedent of Douglas and Richardson, has already picked out the enemies of the people upon whose necks his revolutionary blade is intended to fall. In the case of Rogernomics and Ruthansia the targets of the economic Jacobins were all those Kiwis too firmly attached to the State’s munificent teats. In Mr Hickey’s case, Madame Guillotine’s guests will be the generation of New Zealanders born between 1946 and 1965 – the notorious “Baby Boomers”. (You know them – they’re the ones with all the houses!)

The key objective of Mr Hickey’s revolutionary programme is a 50 percent reduction in the price of the average family home. This will be achieved by the introduction of Capital Gains, Land, and Wealth taxes, and by the opening up of currently RMA-protected real-estate. As revolutionary programmes go, it’s admirably succinct. But, what else would Mr Hickey’s deflationary property revolution bring?

The answer is, of course, social, economic and political mayhem. Thousands of ordinary middle-class New Zealanders would be ruined. The country’s leading banks would teeter on the brink of failure. Credit would dry up overnight. New Zealand would be plunged headlong into a deep recession. Thousands of “millennial” Kiwis would lose their jobs, closely followed by thousands of redundant Gen-Xers. Poverty would surge upwards to engulf layers of society untouched by deprivation for more than eighty years. In short order, shock and disbelief would give way to unrelenting political rage – and a lust for inter-generational vengeance.

House prices would, however, be halved. By that measure, at least, the economic consequences of Mr Hickey might be adjudged as entirely positive.

This essay was originally published in The Otago Daily Times and The Greymouth Star of Friday, 22 January 2021.


Trev1 said...

I have often wondered at the airtime and column inches devoted to Mr Hickey's ill considered analyses and prescriptions. He really does have a thing about "boomers", was he beaten as a child? Taxing things never makes them cheaper however. The essential step required to address the housing crisis is to make more land available, while preserving key horticultural land like Pukekohe so we can still feed ourselves. The government must grasp the nettle and force Councils to do this. I have heard on the grapevine that Phil Twyford was seized of the importance of freeing up new "greenfield" sites for housing but failed to persuade his Labour Cabinet colleagues. Well, they cannot afford another three years of stagnation on this crucial issue which is the root cause of poverty in New Zealand. They need to get off their arses and act now. The replacement of the mind-boggling RMA should closely follow - if ever a country shot itself in the foot, the RMA is it.

John Trezise said...

The verb is 'prophesied', not 'prophesised'.
Perhaps Chris Trotter, in his next column, will be kind enough to share his alternative plan to house all the people in New Zealand securely, healthily, and affordably; to eliminate poverty and its associated diseases; and to reverse the widening gulf between rich and poor, haves and have-nots.

mikesh said...

I guess one can't make an omelette without breaking a few eggs.

Odysseus said...

The housing crisis is the direct consequence of government policies, but I suppose it's easier to point the bone at the much maligned "boomers". Chief among these has been off the scale immigration over the past 20 years. Pleas to turn down the tap have been rebuffed as "racist". We have ended up with a low wage economy whose infrastructure on so many levels is creaking at the seams and even collapsing eg Auckland's sewers. For the future New Zealand needs to regulate immigration flows in a sustainable manner perhaps by formalising a population policiy with targets that are broadly accepted.

John Hurley said...

So as Warren Buffet said "when the tide is out you see who is swimming naked" as the pack of cards collapses.

Kurt Richenbauer (Austrian economist) used to go on about asset prices "asset inflation isn't wealth creation it simply creates a charge elsewhere in the economy". Put more simply one commentator said "digging holes for others to fill".
This is so sickening. Recently I have been scanning color slides and I see my parents house at Diamond Harbour. Mum didn't work but she did the garden and we had a double section. The houses had ake ake fences all around and gaps so the neighbors could walk between each others houses. Even in the street I live now (a working class suburb) a baby boomer who grew up in it said "everyone knew each other" and all “the kids all played together”.

There's a document REFLECTIONS ON A REVOLUTION International migration, 1986-2016 which highlights Lyndon Johnson's immigration reforms which lead to Trump today (denied by the establishment) . One of our "Rangitira of Immigration" Andrew Trlin noted “it is difficult to avoid the impression that a white NZ policy continues to operate”.

New Zealand’s identity was something that had no support as it was always taken as a given: “people who sell out to foreigners used to be hung drawn and quartered” (I saw someone say to Mathew Hooten). Any defence of a New Zealand identity was lead by Winston Peters, Peter Brown or the National Front while opposition came for politicians such as Jim Bolger (and all since) and academics and the New Zealand media who relish the chance to knock down “racists”. The touchiness of this issue has meant an unwillingness to tackle immigration (and now) even associate that with house prices. The touchiness comes from intuitive recognition that our new society is based on little more that resistance to racism: “New Zealand is a place where everyone gets a fair go”; “America is an idea”.

Michael Reddell says an interlocutor from NZ Initiative admitted that immigration hadn’t had a meaningful effect on productivity. It’s all been a population Ponzi based on continual sugar rushes

Brendan McNeill said...

Happy new year Chris

After reading your column this morning and observing the recent criticism of the PM for her failure to do enough in the areas of social and transitional housing, I have been reflecting upon the limitations of Government.

It appears that after approximately 100 years of the paternalistic Welfare State, many Kiwis have come to believe in a “State without limits”, except perhaps the will to tax the rich, and the middle class sufficiently to deliver social justice for all. It appears Mr Hickey is at the forefront of this cohort; how pleasing to witness your gentle push back.

There are of course limits to what Governments can do. Build even more social houses? Sure, how much would you like us to reduce the health and education budgets to do this? The idea that the State is capable of alleviating all social problems and is responsible for everyone’s economic wellbeing is both dangerous and delusional.

The PM has a responsibility to reset public expectations around the role of the State and its ability to meet every need in society. She won’t do this of course, far better to foster the delusion than engage the public in some overdue reality therapy. In the end however I am backing reality to win.

Patricia said...

But what if all mortgages were halved? Both the Government and the Reserve Bank have the power to do that by the stroke of a pen - keyboard. That would save both the mortgagees and the Banks. After all the so called ‘riches’ of those born between 1946 and 1962 are only paper riches. Of course there would then have to be legislation to stop the whole party starting up again.

Anonymous said...

If house prices halved, exactly who would be seriously affected?

-investors=who cares
-Banks =who cares(supposedly stress tested to cope with a 40% fall)

Homeowners who actually live in their houses with 30 year mortgages should be o.k .Provided of course they have not put excessive debt 'on the house'.

Can MMT simply be described as a surrender to 'too big to fail'?
A reset away from this FIRE economy to a productive one where land is not such a favoured asset class is well over due.

greywarbler said...

Anonymous good thing to be when you come out with simplistic notions like yours, after presumably, reading all of Chris's. Stay Anonymous please or I might want to search you out and throw horse dung at you, you callous number-cruncher. And you're one unable to show humanitarian intelligence and effectiveness in your scenarios to solve the housing problem for the people who need a home to live their actual lives in. Your solution would leave poor persons worse off than they are now, if that is possible. But with you and your kind, anything is possible, it's all just numbers arrayed on a screen or page to you.

As I put up recently - some words from a 70's rock opera - that showed the reality of life for us all, as did West Side Story, two greats in modern music and drama:

From Easy to be Hard -
'How can people be so heartless, How can people be so cruel, Easy to be hard, Easy to be cold.
How can people have no feelings...

Do you care about others and a fair inclusive society with achievable environmental values, that feels good to ninety percent of people? This is the biggest and most important question facing humans today, without doubt. The answer is a snappy 'NO' from many who have been carefully nurtured to put money fantasies and their own desires as the highest goal worthy of consideration.

greywarbler said...

Trev1 The current panacea - someone should make a rap about it! The essential step required to address the housing crisis is to make more land available, while preserving key horticultural land like Pukekohe so we can still feed ourselves

This is still putting fuel on the fire. What we need is to treat housing as an essential resource for the people, and landlords get rafts of requirements requiring compliance, with fines and compounding interest for defaulting on needed repairs and payment of fines. And eventually confiscation in lieu of payment. And immigration should not be a way of earning money by people rorting the system and the people for private gain. It needs limiting with quotas, and not be an Ultimate Game - people desirous of coming here v Immigration with few holds barred.

Housing should be fit for purpose and priced accordingly - so if someone wants the basics there are basic standards and a basic rent to match.

petes new write said...

Lets lease all land from the state and take some pressure off
home ownership.

Berry said...

I saw a comment only in the last few days about the housing situation in 1919 - just about a hundred years ago.......
House rices were 'out of control' and there was a housing shortage and rents were out of control..... I think the liberal government was in power. Ive found it..
Its at:

The remedy was very simple - the Labour govt of Savage - (I think the first Labour govt) went and built more houses. Well who would have thought that such a risky venture such as increasing the supply of houses would solve the problem of there being not enough houses.......................

The solution put forward by Hickey and the deluded commentators from various universities has never worked and will never work. Rent controls will work about about well as the Maximum Retail Price scheme that Muldoon bought in - see below.

Capital gains tax doesnt work to control house prices in the countries that have it and nor will any other tax. I own domestic rentals and I didnt buy them for capital gains. I bought them to pay for health costs in old age.

The Maximum Retail Price scheme of Muldoons was know in the food industry as the MANIIMUM RETAIL PRICE. When such a scheme is introduced the cost of producing something has to be calculated so as to arrive at a realistic cost. Its not just the product cost - but all the associated costs eg: maintenance, upgrades, commissions, accountant and lawyer costs, insurance, rates, etc. And as happened with the food industry THE HIGHEST costs have to be used. This removes any form of competition from the market place. With the MRP scheme the Government had to effectively set the price of everything - a Kg of rice, a Kg of sausages, etc. In almost all cases the set price was higher than most product in the market. The retailers loved it, the producers thought it was great.

So - bring it on - rents will GO UP.......

aberfoyle said...

Keynes,just another capitalist economist, not understanding the Socialist knowing.

Patricia said...

Well, all I know is that I won’t, as a forever Labour voter, be voting Labour at the next election unless something dramatic is done to reduce the inequality in New Zealand. Jacinda has been a wonderful leader when there are crises. But we have to look at the bigger pictures.

Kat said...

Have to laugh at the sheer arrogance but mainly sad ignorance of people who regularly claim boldly that they have some insight, whether believed real or divine, into what the Prime Ministers thinking or decision making process is and what the Prime Minister, will or "won't do".

Note for delusional punters in 2021, be sure and sincere in your knowledge of the Prime Minister before making uninformed disparaging commentary.

Guerilla Surgeon said...

I quite possibly won't vote in the next election, for the first time in my relatively long life. Largely because of the housing crisis and the fact that nobody seems to have the will to do anything about, because they're too afraid of the middle class specifically of landlords. Ardern has already stated she won't take any action that reduces the value of people's houses. It seems to me though that whatever action is taken if it's going to be successful, will do just that. If a lot more houses are built, demand may well equal supply which will decrease the value of existing houses. That seems to be pretty much inevitable to me. National and ACT believe that the market is going to solve the problem which of course in spite of Brendan's dreams isn't going to happen.
I've mentioned my boy before, he's done everything correct – saved a shitload of money, worked all sorts of shitty shifts, forgone much of a social life in order to be able to buy a house. But he's never going to be able to do it under the present system because the price of houses is going up much faster than he can save money. And it's funny because the one of the ideas of the so-called free market economy is that if you work hard and save you will succeed. This is now blatantly untrue. Too many of our kids are unemployed or stuck in low-wage or dead-end jobs through no fault of their own. While the upper middle-class continue to garner an unfair share of the nation's wealth.
I'll say this now, I will vote for anyone – yes anyone – who I think would solve this crisis and enable my son to buy a house. That's how low I've sunk. The only problem is I have no confidence in anyone's willingness or ability to do so.

sumsuch said...

You're attacking to the left of you and not appearing on The Daily Blog. One of the great heroes of '35 social democracy, tell all!

Hickey is a modern hero to me. As Martyn said recently climate change , housing and poverty are the main things.

Chris Trotter said...

To: Berry

Two historical corrections to your comment are required.

First. The party in power in 1919 was the Reform Party under Bill Massey - not the Liberal Party.

Second. The Maximum Retail Price scheme was an initiative of the Third Labour Government of Norman Kirk and Bill Rowling. It was scrapped by Rob Muldoon's National Party in 1976.

It pays to remember, Berry, the old computing abbreviation: RIRO.

Jens Meder said...

Guerilla Surgeon - it is still an unescapable fact that if a house is to be built, someone will have to save, i.e. sacrifice hand-to-mouth consumption potential for it, whether it is to be built by an individual, a company or government.

Young people are still better off by saving up some reserves, because it is still true that from the moment the supply of accommodation exceeds the demand, rents and accommodation prices in multiple flat (high rise) buildings will stabilize, while land prices inevitably increase with increasing demand to live in a certain area.

Would it not be even desirable for more people to live in flats and thereby - with smaller families - contributing to reducing poverty through overpopulation, and demand for the not unlimited supply of land ?

Cheers - Jens.

Nick J said...

GS, same issue for my children, the whole housing market has become a criminal enterprise for those who have the money.

Adern is in a no win position, the only way I see to sort this out is delivery of enough state houses at a rental rate set as a proportion of wage levels. The idea is to set a level of rents that current market prices cannot match, forcing all rents down. If rents cannot match mortgages the landlords will have to sell, which I reckon would "correct" house prices.

Im not hopeful.

Andrew Nichols said...

So who will? Greens?

John Hurley said...

This says it all

we added a million people since 2003

Jens Meder said...

Nick J - if state house rents are not profitable, then the more you build them, the bigger an eventually unsustainable and economically bankrupting and impoverishing burden they
become ?
Or is that not so ?

Cheers - Jens.

Nick J said...

Yes Jens you are right, but as somebody who like yourself was in business have you not heard of "loss leaders"? To get results may require an investment. Government invests heaps of money into ill performing departments, ill thought out social schemes etc. I'm talking basically forcing a "market correction" utilising the tax dollars of the major beneficiaries of house price rises.

Guerilla Surgeon said...

Nick J - if state house rents are not profitable, then the more you build them, the bigger an eventually unsustainable and economically bankrupting and impoverishing burden they
become ?
Or is that not so ?

No Jens it is not.
1.They become part of the infrastructure, not all of which has to be profitable. They could I suppose, break even.
2. They are a social good, and not everything has to be judged on its economics alone.
3.Social housing is provided all over the world, without governments going bankrupt. Just climb off this hobbyhorse Jens, because I'm a little tired of being polite about it.

Jens Meder said...

Guerilla Surgeon - don't lose your cool over discussing a rational, material evidence and not ideologically wishful thinking dependent subject matter.

Well, you are right, that not all infrastructure has to be measurable profits dependent.

But with this statement, are you not admitting - or revealing - that unprofitable infrastructure can only be a limited luxury or emergency help-out that is totally dependent on profits - or enforced savings or surpluses - at the cost of hand-to-mouth consumption potential in other areas ?

So, unless you can come up with an example of a house - or anything on the material level - being built without having to raise capital for it, just "losing your cool" (like Trump?) over the limitations of anything unprofitable does not help us to solve the housing shortage in a sustainable way.

Or please give us and example to question or refute this (rational?) advice or opinion.

Cheers - Jens.

Nick J said...

Indeed GS. As I said to Jens sometimes to get a result can cost. Some losses are worth taking. We sink costs into all sorts of infrastructure that never shows a profit but enables other things. Why not social housing too? Keep poor kids roofed and warm, that saves on the health budget. Make rents cheap saves on welfare payments for rent assistance (and its not subsidising private landlords). Civilised society costs money.

Jens Meder said...

Yes Nick J, to get (achieve) any results beyond what you can achieve with your labor capacity alone, requires the application (investment) of capital which can be created only at the expense of hand-to-mouth consumption potential, e.g. like our taxes we contribute for the desired govt. services.
But just like an individual cannot pay more for unprofitable services than what she/he is able to "reserve" for it, the same applies also to a country's economy.

Without profits (savings) from our own productivity (income) for security reserves and profitable investments we would still be pre stone age cave dwelling hunters and gatherers.

True and relevant, Guerilla Surgeon , or not ?

Cheers for all - we know how to beat poverty, and thereby could afford a more efficient welfare state than what the world has so far - Jens.

E.A.Blair said...

I am guessing that Chris owns his own home.

Guerilla Surgeon said...

"But just like an individual cannot pay more for unprofitable services than what she/he is able to "reserve" for it, the same applies also to a country's economy."

Wrong. I'm not going to go into it in any great detail, because it takes literally hours to show that your casual points are purely wrong. Governments are not individuals, governments can pay for unprofitable services.

greywarbler said...

Jens the world has gone far ahead of the economic ideas you put forward. You talk about the theory of ec. that we are taught at school. But on the back of honest toil and savings and limited credit is built the whole edifice of trading in money itself, and in futures, hedges (with accompanying ditches). Your discourse is a lovely little bedtime tale that could ne read to 8-10 year olds as part of their background learning of what society should be. One should have some noble concepts to hold onto as one goes forth to battle with the hypocritical world which is also hypercritical of those who don't conform to pervasive thinking - the hegemony that surrounds us now.

And NickJ nails it - 'civilised society costs money' which mounts up when added to the 'uncivilised' society concerned with war weaponry, and attack rather than defence policies like this:
For Fiscal Year 2020 (FY2020), the Department of Defense's budget authority is approximately $721.5 billion ($721,531,000,000). Approximately $712.6 billion is discretionary spending with approximately $8.9 billion in mandatory spending. The Department of Defense estimates that $689.6 billion ($689,585,000,000) will actually be spent (outlays).[1] Both left-wing and right-wing commentators have advocated for the cutting of military spending.

COVID-19 and the U.S. Fiscal Imbalance | Cato Institute › publications › policy-analysis › covid-...
Dec 8, 2020 — In July 2019, the Trump administration backed a budget deal that suspended the debt limit for two years, adding $1.7 trillion to deficits over the next 10 years on top of the $1.9 trillion increase from the 2017 tax cuts.

Those obligatory tax cuts for people who desire them and who are wilfully blind about how modern society functions; their smug slogan 'Have your cake and eat it too'. Should we all be held back from our voting opportunities till we have done an elementary course on state economics and ethics?

greywarbler said...

E.A. Blair (the actual or Orwell!) didn't guess. He drew on his wide experience and thought up some likely scenarios disguised as mere stories for those that can handle looking into reality's eyes.

Jens Meder said...

Guerilla Surgeon - if governments were not limited in their ability to pay for unprofitable services, then can you tell us please, what economic problems could there possibly be ?

Don't you know that the printing of money for unprofitable services has its limits beyond which serious inflation generates more poverty than the limitless printing of money can pay for ?

Right? Or please explain, if wrong.

Cheers - Jens.

Nick J said...

Spot on GS. I'd add a bit more. Necessities are by their very nature not optional. Civilised societies recognise that not everybody can pay so they do two things. First socialise the cost, second remove the profit motive. The public health system is an example.

Guerilla Surgeon said...

Jens, I didn't say governments were unlimited in what they could buy, or what unprofitable services they can support. And I can't see how you can get that from what I actually said.
You are correct though, I shouldn't bother you at all – I think I'll just ignore your babblings in future.

Jens Meder said...

Nick J - don't you realize, that without the profit motive - the wish for more (reliable) economic security and consumption potential - we would be still cave dwelling hunters and gatherers depending 100% on what the "free" gifts of Nature are available for us at any given time.
The basic priority for survival is a profit over the energy consumed on living.
Are not demands for more of anything practically only complaints about inadequate benefits or profits ?
Without freely produced or forcefully imposed "profits" for "socialization" there would not be anything to "socialize' , would there ?
Is not the still limited capacity of the public health system a good example (proof?) of the economic limitations of unprofitability ?

Cheers - Jens.

greywarbler said...

I know I am wasting my time trying to insert a new idea into the narrow opening into Jens' mind. But when it comes to destructive inflation, then Germany's has often been cited.
This Wikipedia entry instructs on this - they did it deliberately, used bad economic measures to destroy their economy and cause instability as a means of bringing citizens to their knees so they could 'sell' them the idea that Nazism was going 'to make Germany great again'!

And Muldoon and the inflation that took first mortgages up to 11%.

New Zealand's Muldoon lowers the boom on mortgage rates ... › ...
Nov 16, 1983 — New Zealand's Muldoon lowers the boom on mortgage rates ... 11 percent for a first mortgage and 14 percent for a subsequent mortgage. ... six months ago, had refused to drop them to the levels he thought they should be at. ... June 1982, has slashed the annual inflation rate from 18 percent to 5.4 percent.
(cs is Christian Science Monitor)

Overview on inflation (so we review our own concepts for understanding or error):

further -
Prices and inflation – Te Ara Encyclopedia of New Zealand › prices-and-inflation
Mar 11, 2010 — When the price of oil rose steeply in the 1970s it pushed up the price of transport, and inflation increased sharply. Finance Minister Robert Muldoon tried to control inflation by freezing wages ... In 1989 the government gave the Reserve Bank the task of controlling inflation, by varying the interest it charged ...

Peter Dunne ladelling out commonsense. Don't know whether there are nuggets of gold there or not.
Jan.29/2021 Is the Government now gun-shy on the housing crisis?

Chris Trotter said...

To: Jens

Something for you to think about, Jens.

Our species, Homo Sapiens, has dwelt upon the earth for approximately 200,000 years.

For roughly 190,000 of those years we were hunter-gatherers: "stone age people".

Our impact on the planet was negligible.

Ten thousand years ago we made the transition from hunter-gathering to agriculture, and our impact upon the planet began to grow.

Two-hundred-and-fifty years ago we made the transition from agriculture to industrialism. Our impact upon the planet was now significant and growing.

Seventy years ago we made the transition from an industrial society based on coal to one based on oil, and the planet began to heat up. Our species has become its own worst enemy and is poised to render the biosphere uninhabitable.

This is where the endless quest for surpluses you are constantly promoting on this blog has led humanity.

Has it ever occurred to you that the hunter-gatherers might have had it right the first time?

Chris Trotter said...

To: Greywarbler.

The hyper-inflation of the Weimar Republic was the result of the German Government's attempt to pay its reparations with a failing currency. The French wanted their payments made either in gold or in kind. When the Germans refused to co-operate, the French occupied the Rhur - Germany's industrial heartland - intent on extracting their payments at source - by force.

In response, the workers of the Rhur staged a mass strike. The Government backed the strikers and attempted to support them with their country's rapidly devaluing currency. Not surprisingly, the Mark, unsupported by Germany's industrial production, collapsed completely. People's savings were wiped out overnight. The middle-class was ruined.

At the time, the early 1920s, the Nazis were an insignificant Bavarian ultra-nationalist party. It would be ten years before they were offered power. Their success due almost entirely to the onset of the Great Depression - not the Great Inflation.

Jens Meder said...

Yes Chris, you are right in that had not human will and brainpower taken us to the level of modern mass consumption abilities and practices leading to massive population growth and self-destruction ability and potential, the latter certainly would not exist as a human initiative -

and the world's climate (possibly between the last and next ice age?) would not be influenced by our behavior.

However, perhaps the situation is not so alarmingly hopeless if we apply our brain power not so much only in the interests of sectional and tribal welfare and power, but more evenly in the interests of all with participation in the effort by all.

First of all, should the world not make an effort to reduce population growth to at least stabilize the population?

And might not more capital investment (perhaps at the cost of more austere and humble living standards ?) in renewable energy sources and pollution and waste reduction
be practically the only way to reduce poverty and the harmful and ultimately unsustainable human imprints on Earth ?

Can anyone suggest how it could be done in an acceptable way with reduced capitalism ?

Cheers - Jens.

greywarbler said...

Thanks Chris for the background. Extortion from the fallen, the losers, not likely to bring about a scene of stability after the chaos of war or depression then. No doubt that realisation led to assistance to Germany and Europe after WW2. Why would the EU then lead Greece to ruin, then set repressive monetary demands? What is EU's game plan?

And the money-men and ruthless corporates that conduct their affairs suchly to lead to unprecedented city bankrupties in the USA; elsewhere?

Nick J said...

Jens, might I recommend that you read Brian Eastons book Not in Narrow Seas that details our economic history. The chapter covering Julius Vogels public works will demonstrate to you the power of government debt for infrastructural projects in enabling economic growth.