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The reverse Fisher effect of level "targeting."

If there are fundamentals that determine a long term price level, and the price level falls below or rises above that level, then expected inflation or deflation causes more or less expenditure now.

A commodity standard works that way. A deflation in a small open economy on an international gold standard should see this effect strongly.

If the quantity of money is held stable, this should work as well. If the price level falls too low, then the quantity of real balances will be too high in the long run. The price level will be expected to rise again. This motivates increased spending now.

If we set up a monetary regime that doesn't target the level, this breaks down. If the price level falls, and then a monetary authority seeks to stabilize it at the new, lower level, then there is never a situation where prices are "too low" and expected to rise again. (And the same is true of an inflationary shock.)

Of course, the monetary authorities efforts to stabilize the price level should keep it from continuing to fall or rise. If their techniques are not considered effective by many, then the Fisher effect you describe might magnify the deflationary effects. So, interest rate targeting where the monetary authority is slow to adjust interest rates, or hits the zero bound.

Also, there is the Yeager effect. If real output falls due to inadequate demand, the demand to hold money falls with it. If the quantity of money doesn't fall, then there is an excess supply of money. That increases the demand for goods.

If the monetary regime causes the quantity of money to fall when real output falls, then this effect won't work. For example, if the quantity of money is adjusted according to the demand for credit. The economy is depressed, no one wants to borrow, so we need a smaller quantity of money. Interest rate targeting, where the interest rate is slow to adjust, tends to have this effect.

By the way, the development of banking and finance could explain why cyclical problems have become more severe. The Pigou effect becomes less and less important as more and more money is "inside" money rather than outside money.

When most of the money was gold coin and substantial amounts of wealth was in Treasure chests, then the Pigou effect was strong. When only a small proportion of wealth is in that form, then larger swings in the price level are needed to return real expenditure to potential output.

Of course, I am no 100% reserve gold standard advocate. Target the growth path of nominal GDP and be ready to make heroic open market operations when needed. Don't like those? Privatize hand-to-hand currency and break the zero nominal bound.


Regarding the Keynes and Fisher effects, here is how I see it. The Keynes effect says that if AD increases, then at constant AS, the *natural* rate will increase. The Fisher effect says that if AD increases, then at constant AS, the *real* rate will decrease (because inflation). Neither of these effects can be said to be equilibrating or disequilibrating on their own. They also can't be said to act against each other. They are best viewed as the two main mechanisms of Wicksell's cumulative process, whereby fluctuations in AD cause the natural and real rates to move apart, a decidedly disequilibrating force.

The Pigou effect really was decisively settled by Krugman '98 (I know nothing about Krugman's work on international trade, but if a Nobel prize could to be granted for the importance of one insight, I think he would deserve it based on this paper alone). The trouble with Pigou's paper was that he was trying to apply an static framework to deal with an essentially dynamic problem. Money is a short term asset, and you need to be very careful that you are respecting time consistency when you analyze its yield relative to yields on t-bills and government bonds (the yields of which are necessarily composed of consecutive short term t-bill periods). Also, Pigou assumed that the money demand could not be satiated, and that nominal rates would therefore always remain above zero. That assumption is obviously wrong, but it's possible to get confused if you don't know how to take different periods account. So the Pigou effect is not "weak" in terms of equilibration. It plain doesn't work at the interest rate ZLB. (It could work if you could lower the yield on money - see e.g. Miles Kimball).

So why don't we get spirals to (log) negative infinity? First, as in the Great Depression, large scale capital destruction raises the natural rate by increasing the real return from new capital creation. Second, bankruptcies destroy nominal debts. But in the current environment, I think there's developing evidence of a third effect, which is that the Fisher effect doesn't work at the inflation ZLB. Without the Fisher effect the natural rate can remain below the real rate without causing a downward spiral. This non-functioning of the Fisher effect is your "equilibrating effect". We just get deficient demand of indefinite duration.

"Or you could stick by your theoretical framework, and ignore the empirical facts."

With the addition of an inflation ZLB, the empirical facts look to me to be entirely consistent with basic Keynesian/Neo-Wicksellian theory.

Empirically we observe that if you don't let the money supply explode to infinity the economy won't explode into hyperinflation either; and if you don't let the money supply implode to zero the economy won't implode to zero either. Empirically we know that monetarism is at least roughly true. But theoretically we don't know why it is true. We don't understand the strong dark force that makes monetarism at least roughly true.

Do we really observe any of this? What if a FTPL effect (lower real future surpluses expected) drives hyperinflationary spirals and an increasing quantity of money is better seen as caused by, not causing, spiraling inflation expectations (the timing is very tricky to tease out here), and that the FTPL expectations would have been sufficient to cause the spiral? If this story is still supporting "monetarism," but the observed increases in the QoM were sometimes neither necessary nor sufficient for the coincident hyperinflations, is this sort of monetarism a useful idea?

And the lack of hyper-deflation plus the lack of QoM collapses doesn't seem to say anything about monetarism. A lot of things besides the quantity of money have never collapsed to zero. I agree that the lack of deflationary spirals tells us about strong, dark equilibrating forces in the world, but I don't see how it supports any useful definition of monetarism.

Very good post. However strictly speaking this one is not true "Because when we observe monetary economies going into hyperinflationary supernova, we always observe the money supply getting very large too."

Some time ago when I was looking up for hyperinflationary periods I found this one. However I suspect that explaining this via interest rates may also be quite tricky.

Nick; hyperinflation is not inflation and not a monetary phenomenon. It begins with an extreme shock to AS: the fall of the Austr-Hunarian empire,Ruhr occupation,destruction of the Zim farming economy. Money printing comes after.

The Pigou effect is a monetarist force, and it's an equilibrating force. But it's far too weak a force to do the job. (The Pigou effect say that if there is excess aggregate demand/supply the price level will rise/fall, which will reduce/increase net wealth from holding outside money, which will reduce/increase aggregate demand. But back of the envelope calculations say this effect is far too weak to do the job, because outside money is too small a fraction of total wealth.)

Yes. I was just asking myself the other day whether this statement was always true. Maybe part of the mystery is that in past the pigou effect was strong and industrial revolution weakened it. This would have an interesting parallel to the business cycle as well--economy booms capita stock grows faster than currency. pigou effect attenuates, risk of instability rises accordingly. You get a recession, capital stock build up falters. Currency catches up, and so on. That would be cool if true but I'm just kidding...

The serious point is that something like the us stock market growing at 8%/yr in real terms creams the real growth in currency over the past thirty years.

I'm really confused by this post. On the surface, your argument is clearly and absolutely wrong... although I *suspect* that's only because the point that you're trying to make just didn't come across--at least not to me.

So why is what(I think) you wrote wrong? Well, first, let me lay out what it seemed to me that you were arguing... i.e. that the asymmetry between massive inflationary episodes and the much smaller deflationary episodes proves monetarism right (or others wrong... I'm not sure which). Your discussion of mechanisms is what makes me suspect I missed something. It seemed you were saying "none of these mechanisms work (to explain the asymmetry), but... (monetary) dark matter!"

At any rate, the argument I read is wrong because of the epistemology of scientific inference. Your argument seems to come down to the recognition that there are no episodes of sharp contractions of money, but money and inflation/deflation are correlated (as the quantity theory would predict). Well, OK, but that's not evidence that "monetarism is right". Actually it is (weak) evidence that monetarism is wrong. Why? because you have to ask what the out of sample prediction would be. A (classical) monetarist if asked in 1913 about the next century would (with no knowledge of future events) have predicted that episodes of collapsing money and hyperdeflation would be as common as exploding money and hyperinflation. That there is an asymmetry is a problem for monetarists who start from the quantity theory. Conversely, Keynesians never denied the validity of the quantity theory (only the stability of v, and so usefulness of the relationship) and therefore a Keynesian in 1913 would have predicted that correlation would in fact exist.

On the other hand, the only mechanism that one would need to predict the asymmetry is downward nominal rigidity, in which case the mechanism suggests a weaker "keynesian mechanism" when prices fall than when they rise. The way the ZLB interacts with the "fisher mechanism" would also be enough as long as the deflationary episodes all hit the ZLB (which I think is true).

In my opinion, this whole line of argument--that keynesians are wrong and monetarists are right--is a whole steaming pile of... you know. We're all using the same models! Stop trying to cut this artificial cleavage within the field! This cleavage has always been more political than economic (as far as I can tell), so why do you insist on trying to perpetuate it? Keynesians believe in central banks and the quantity theory, monetarists start with ISLM and I've never seen a monetarist model in which fiscal policy can't work (as opposed to "but the CB will undo fiscal policy!", which is dumb). Honestly, I'm getting tired of this tit-for-tat between the two groups.

Interesting post.

Jacques René Giguère: But severe AS shocks themselves aren't a sufficient condition for hyperinflation. For instance, Zimbabwe could have decided to pursue price stability and accepted budget cuts instead of trying to print their way out or trouble.

"A (classical) monetarist if asked in 1913 about the next century would (with no knowledge of future events) have predicted that episodes of collapsing money and hyperdeflation would be as common as exploding money and hyperinflation. "

Only if we assumed monetary authorities' behavior is stochastic, which is an odd assumption.

"and I've never seen a monetarist model in which fiscal policy can't work"

Sure, but that's like saying "I've never seen a nail that can't be driven in with a wrench."


"There are two ways a model of a monetary economy can spiral to destruction: it can spiral up into hyperinflationary excess demand where nominal GDP goes towards infinity; or it can spiral down into hyperdeflationary excess supply where nominal GDP goes towards zero."


Nominal GDP = Real GDP * ( 1 + Inflation Rate )

Nominal GDP can spiral up from a high real GDP OR a high inflation rate. Likewise it can spiral down from a low real GDP OR a high negative inflation rate. There are four distinct possibilities.

"Nominal GDP can spiral up from a high real GDP "

Heh. If there were a way to produce upward-spiraling RGDP, wouldn't we all be doing it? :)


"Heh. If there were a way to produce upward-spiraling RGDP, wouldn't we all be doing it? :)"

That would depend on two things:

1. How do you feel about price controls (you must pay this price for a good)?
2. How do you feel about either government mandated purchases (you must buy this good)?
3. How do you feel about government competition in the production of goods (you must buy this good at this price from us)?

You can get upward spiraling real GDP very easily. But you must be willing to sacrifice a lot of choices.

BSE: "A (classical) monetarist if asked in 1913 about the next century would (with no knowledge of future events) have predicted that episodes of collapsing money and hyperdeflation would be as common as exploding money and hyperinflation."

I think if you had shown a classical monetarist in 1913 the next 100 years of money supply data for all countries, he would have predicted that episodes of inflation would be more frequent and severe than episodes of deflation.

At least part of your problem is my fault for not having been clear enough. I agree that with downward nominal price or wage rigidity (which the 1913 classical monetarist would have assumed?) then we are unlikely to see the price level falling to near zero, but instead we would see real GDP fall to near zero instead, if the money supply fell to near zero. When I said "hyperdeflation" I should have said something like "Nominal GDP falling very quickly down towards zero".

Bill: "Also, there is the Yeager effect. If real output falls due to inadequate demand, the demand to hold money falls with it. If the quantity of money doesn't fall, then there is an excess supply of money. That increases the demand for goods."

I think that's key (though I'm not sure I would call it "the Yeager effect"?) But the important thing is that this doesn't have to work via the bond market. The hot potato hits all money markets, and the bond market is just one money market. And with an IS curve that doesn't have to slope down, that's gonna be a big effect.

Historically, we do sometimes observe hyperinflationary excess aggregate demand where a monetary economy spirals up and goes supernova. Sometimes these are so bad the economy has to start again from scratch, with a new money.

Historically, we do not seem to observe hyperdeflationary excess aggregate supply where a monetary economy spirals down and goes into a black hole. We do observe very bad depressions with excess supply, but never so bad that the nominal value of monetary exchange approaches zero and the economy has to start again from scratch. And we do observe economies eventually recover, more or less, even from very bad depressions.

Those are empirical facts...

Yes, we do see hyperinflations where people eventually just switch to different money. But we do also see hyperdeflations where people just switch to different money, because the old money has just become too expensive. A relatively recent one that comes to mind was the collapse of the silver standard in the Republic of China, in 1935, when silver suddenly exploded in value by ~2.5 times as the US purchased vast amounts of it in 1934 and 1935. The ROC, which had previously escaped the contagion of the Great Depression, suddenly joined in, with the economy of Shanghai collapsing. It eventually responded by abandoning the silver standard.

TallDave: in 1996 (after the Saguenay deluge) and 2005 ( remnants of Katrina), my isolated region only road was cut off. Within days,food was lacking,price of milk went up and barter began to develop. The municipality had no monetary power. But let's say the raised interest rates and cut the wages of nurses. Apart from forcing the construction business to stop and people to get ill, what real economic results would have been achieved? Apart from starvation being shifted from some people to others?
This is not inflation control. Just fetishising the price level.


I quite agree that there is an equilibrating force out there – a “dark force”. I suggest it’s Say’s law. My reason are as follows.

Say’s law (or my interpretation of it) says that given excess unemployment, unemployed producers of A,B,C, etc will simply set to and produce A,B,C etc and swap those commodities with each other. E.g. producers of A just set to and produce more A, which they sell to producers of B, who in turn . . . etc etc. That oversimplifies the way Say’s law works in a complex non-barter economy. But I suspect the law still works.

What do reckon?

This post needs graphs and equations.

General comment to many:

If we observed an economy collapsing to (near) zero real GDP and/or hyperinflation because of a massive supply shock (floods, war, etc) that wouldn't either confirm or disconfirm the existence of the strong dark monetarist force.

If we did observe money supply collapsing to near zero and either the price level or real GDP collapsing to near zero that would not disconfirm the monetarist strong dark force.

If we observed hyperinflation without either a massive supply shock or a massive increase in money supply, that would disconfirm the force.

If we observed either the price level going to near zero or real GDP going to near zero without a massive supply shock or the money supply dropping to near zero, that would disconfirm the force.

I think I got that right. In other words: the force says that neither P nor Y can go to either 0 or infinity (or near) unless either M or AS goes to either 0 or infinity (or near).

Noah: I was wondering about that. The diagram would be fairly simple, unless you wanted the 3D version. P or pi on the vertical axis, Y on the horizontal, a roughly vertical LRAS, and an AD which could slope either way. And we are asking: what is the force that seems to make AD slope down? Trouble is, this rather assumes that the equilibrating force works through P or pi, and maybe it doesn't. But it does at least force us to look at the problem, that for most of our models, unless monetary policy is chosen by a wise policymaker who understands the model, the AD curve may easily slope up. Which leads to predictions like black holes being very likely. And we don't see them.

I have no idea what equations I would write down. And I'm bad at math, so would probably get them wrong.

Ralph: Say's Law has a lot to do with it, IMO. It's only money that makes Say's Law false.

I don't understand this post much.

I thought that there was a very simple reason why there are never price deflationary black holes. People have minimum needs that have to be met on a day to day basis. They have to purchase food, water and shelter for today or they die. They have to go to the market and buy that much, at the least. Which means that "supply" of money (the cumulative money price of the basic necessities) never goes to zero, even in the absence of new money creation.

How this makes monetarism more true, I really don't know.

I'm not sure that there aren't examples of economies spiralling to zero. That would mean depopulation. You would probably be looking for islands or even towns that voluntarily depopulated as the population became impoverished.

And doesn't the Fisher effect disappear with a competent Central Bank.

Prakash: that's not what economists mean by "the supply of money".

reason: There's always the chance of a deficient demand black hole existing where we don't see it, and the reason we don't hear about it is that the population dies off. Sample selection problem, OK. But we do eventually get to hear about many economies that disappear due to supply-side problems, like wars or floods etc. so I don't think this would explain it.

Yes, a competent and quickly-acting central bank that had a roughly correct economic model would counteract the Fisher effect. But we can't reasonably assume there always was a central banker, because for most of history there wasn't, and certainly not a competent and quick one with a good model. That's the "argument from design".

I guess I'm saying that the effects of a hyperinflationary spiral are pretty bad, but the effects of a deficient demand black hole are so much worse that it never gets that far. But we do see it happening on a small local scale often enough (national boundaries are just lines on a map).

(Examples on small local scale = ghost towns).

reason: "(Examples on small local scale = ghost towns)."

People leave the town because other people leave the town, so it becomes a ghost town/black hole. Multiple equilibria: some (ghost town) stable, and others unstable.

And there are macro models like that micro example.

Good point. Not what I "really meant", but. Hmmm.


"And doesn't the Fisher effect disappear with a competent Central Bank."

Not at the ZLB (for a negative shock). I guess you could call that incompentence. However, if you just assume that CB *always* keeps AD at the natural rate, then your dynamics *will* preclude the Fisher effect, and the real rate will just be at the natural rate. And then you won't even see the problem at the ZLB, as inflation will rise all by itself if the natural rate falls thanks to a negative AD shock. The problem is that even an arbitrarily good central bank is not sufficient, since the equilibrium is unstable. The CB has to be believed to be *perfect* in order to stay in the ratex equilibrium that ignores the Fisher effect (liquidity preference) (See Howitt 92 on convergence to the ratex equilibrium). As soon as you model potential dis-equilibrium (no matter how small), you get a liquidity trap.

Pigou effect -- why limit yourself to the wealth effect from holding outside money? How about the wealth effect from falling rates driving bond prices higher?

The Keynes effect -- It is my understanding that the Keynes effect is weak. Interest rates on consumer spending -- How sensitive is the consumer to financing terms? I am going to buy it because I want it, more than because I can afford the payments. Interest rates on Investment spending -- If I am considering a new project, the variables are the expected return, the risk, and the financing terms. A reduction in the interest rate improves the financing terms and may make a marginal venture more interesting, but if rates are falling because of falling demand, the expected return is likely falling as well, and the risk premium rising.

The Fisher effect -- rates change instantly with changing inflation expectations.

Any more dark forces?

"You can get upward spiraling real GDP very easily. But you must be willing to sacrifice a lot of choices."

Ha, no. Price controls and forced purchases don't create real GDP growth, that's an accounting fiction -- they just create disparities between reported GDP and the actual value of GDP.

For instance, let's say the U.S. government pays me $15T to dig a small hole in my backyard. Did we just double RGDP?

Jacques René Giguère -- Well, municipalities get hit by severe AS shocks all the time -- a mine or oilfield runs dry, a factory closes. Since they can't inflate, they cut their budgets.

Now, if they had monetary power, they could hyperinflate instead. But that would be a choice.

Granted, life isn't going to be a bed of roses in either scenario. Still, choices are choices!

This may be my favorite blog post ever.


"For instance, let's say the U.S. government pays me $15T to dig a small hole in my backyard. Did we just double RGDP?"


There is no "holes in the ground" category for prices tracked by the CPI or GDP. Try instead the U. S. government pays each and every adult American (about 100,000 of them) to watch Apple Computer's 1984 commercial at a fixed admission of $1.00 per person for the next year. Has real GDP increased by those expenditures?

GDP growth is not created. Goods and services are created. A person can chose to purchase those goods / services or chose not to purchase them. Or they can be coerced into purchasing them (see insurance).

Ugh. 250 million adults in U. S. not 100 thousand.

TallDave: you can't solve real AS shocks by inflating. The mine is there or not. Anyone who lived through the North Shore 1981 mine closures could see that.


The government does in fact pay people various sums to dig holes for various reasons.

What you're missing is that coerced prices don't reflect RGDP because they aren't market prices. Nominal or real, GDP is defined by market value.


GDP is defined as the price paid for marketable goods and services. GDP does not depend on prices being determined in the market place. It depends on the seller and buyer being able to exchange goods for money even if the price of the good is determined by a third party.

And please be careful interchanging price with value - they are not the same thing. There are lots of things in this world that have a value but do not have a price. Money can't buy everything. :-)

Nope, it's market value (if it weren't you'd have all sorts of comparability problems). This is pretty basic, it's in the wiki.

"Real GDP is an example of the distinction between real vs. nominal values in economics. Nominal gross domestic product is defined as the market value of all final goods produced in a geographical region, usually a country."


And market value really does mean market value.

"Market value is the price at which an asset would trade in a competitive auction setting. Market value is often used interchangeably with open market value, fair value or fair market value, although these terms have distinct definitions in different standards, and may differ in some circumstances."


So again, we can't double RGDP with my $15T hole. We can't even double NGDP with it, because it's not being sold at market value. If one was estimating GDP, you would need to disallow all but the market value of my hole.

Frank Restly
"There are lots of things in this world that have a value but do not have a price."

And even more things that have a value exceeding their price (consumer surplus).

And there are some things that have a price exceeding their value (lemons).

But really value and price cannot be measured in the same units so this is a bit misleading. Relative value and relative price are unitless so if we could find some commodity where price varied parallel to the value then we could make a comparisons that could tell us what was good value and what was less good (assuming we really knew relative values).

I take it you a Wikipedia fundamentalist.

reason -- Definitely. I even had a Facebook comment liked by Jimmy Wales himself :)

Seriously though, it's usually pretty good for basic, uncontroversial stuff like this.

Here's a fun examnple that illustrates the problem: let's say Kim Jong Un wants North Korean RGDP to exceed that of the United States. So he pays himself the NK equivalent of $20T to a dig a hole.

I don't think there's any economist who will agree Kim Jong Un's Great Hole was worth more than the entire U.S. economy.

Jacques: TallDave: in 1996 (after the Saguenay deluge) and 2005 ( remnants of Katrina), my isolated region only road was cut off. Within days,food was lacking,price of milk went up and barter began to develop. The municipality had no monetary power.

But doesn't that prove TallDave's point? AS shocks, in and of themselves, don't lead to hyperinflation. Inflation, perhaps, but hyperinflation is a policy choice. If it weren't, the fact that municipalities have no monetary power would be irrelevant.

In the case of Weimar German, hyperinflation was a policy choice by the government of the day as a way of meeting their reparation obligations (i.e., printing mark and buying US dollars rather than, for example, levying taxes). Moreover, the Ruhr occupation as an explanation for hyperinflation in Weimar German is probably not that useful, since the Ruhr was occupied only AFTER German hyperinflation and the collapse of the Mark were well under way. By the time French troops rolled into the Ruhr in 1923, the mark had collapsed relative to the US dollar. Indeed, to the extent that the occupation of the Ruhr exacerbated German hyperinflation it was as a result of the conscious decision of the German government to pay Ruhr workers who were refusing to work for the French with printed money.


I stand corrected.

However, price controls were instituted at least twice by the U. S. federal government. During World War II and during the early 1970's. And yet, the BEA maintains records of Nominal GDP during those time frames:

Nominal GDP - http://research.stlouisfed.org/fred2/series/GDPA

By the strict definition from Wikipedia, these records are not accurate.

Well, let me salute your intellectual honesty, sir. A rare quality.

Yep, anywhere coercion enters in you'd have problems with recorded vs. market value. WW II had the odd situation of rising GDP and falling living standards (due to rationing/war), though one can certainly argue Americans really did want to buy all those tanks and planes and generally supported the price controls as a war measure.

I know there's been papers on the issue, but I don't know if BEA or anyone else ever makes any adjustments on that basis, whether under the aegis of hedonics or otherwise.

Bob Smith: but Germany had already deep Real AS shocks to deal with, such as the collapse of it's Eastern and European trade.

TallDave Frank Restly

Noted on the wikipedia page - This article has multiple issues.


Right, but hyperinflation was the policy they chose to deal with their problems. Had they financed their reparation payments with taxes, hyperinflation wouldn't have occurred. Not a good option, sure, but an option.

Bob: you don't need hyperinflation to refuse to pay your external debt. You may try all the tricks they used. Anyway, the debt was fixed in gold, so german price level and exchange rate were irrelevant.

Jacques René Giguère,

Inflating away the nominal value of debt is not the only way that inflation makes it easier for governments to finance their debt obligations.

I think I can explain exactly how hyperinflation works. I am looking for anyone to review my stuff or debate it.


"Bob: you don't need hyperinflation to refuse to pay your external debt. You may try all the tricks they used."

No, but the German's weren't refusing to pay their external debt, they were paying it (or at least some of it), and printing money was they tool they chose to use.

"Anyway, the debt was fixed in gold, so german price level and exchange rate were irrelevant."

Right, but hyper-inflation wasn't a strategy to inflate the debt into nothingness, it was a strategy to raise funds to PAY the war reparations by using marks to buy US dollars (or other hard currency linked to gold) at any price to pay that debt. The strategy works in two ways. Initially, if foreign buyers don't really that German is printing money, you can use the newly minted marks to purchase dollars (or gold) at the old price. Obviously that strategy implodes the minute the market twigs to what's going on. But the second element is more important. Even if the exchange rate reflects domestic inflation (such that )printing money isn't a way to fleece foreign creditors/currency buyers) it's a way of taxing domestic mark holders. That the exchange rate for that currency will decline doesn't take away from the fact that the government has obtained real value (i.e., if a mark is worth $1, and printing $100 causes the exchange rate to decline to $.50, the German government still has $50 worth of newly printed marks that it didn't have before - at the expense of immiserating mark-holders). I.e., German hyper-inflation was as much a fiscal policy choice as a monetary one.

An interesting backstory to German hyperinflation is that Germany had largely financed WWI by printing money, in contrast to the Western Allies, who to a much greater extent relied on taxes (hello the "temporary" income tax).

Bob Smith: true. Inflation may be the sign of the transfer of real resources to the extérior. But the scale of payment was so small, it could generate inflation, not hyperinflation.

"Inflation may be the sign of the transfer of real resources to the exterior"

Well, in this case, inflation was sign of the transfer of real resources from mark holders to mark-issuers (i.e., the German government). The size of reparation payments have been disputed, although even critics like Ferguson, who think they were otherwise manageable suggest a not immaterial size (4-7% of German GDP). More to the point, his observation is that German hyperinflation made a lot of sense in order to allow German to pay it OWN war debts (which, being denominated in marks, it successfully did or deflated away) and the social services provided by post-WWI Germany. Again, it was a policy choice.

Indeed, Ferguson's account ties in with your proposed link between the Occupation of the Ruhr and the skyrocketing inflation in 1923 since, as I noted above, one of the policy responses to that was for the German government to pay resisting workers to not work - in effect taking on additional fiscal obligations to be financed by printing money.

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