Jerome Von Havenstein: Inflation Or Bust

Hence, Powell endeavors to keep Federal Reserve Banks and their member banks flush with cash and liquidity. He also endeavors to provide Washington an endless supply of cheap credit.

The point is, the higher interest rates run, the more Powell will intervene in credit markets, via Treasury and MBS purchases, to hold rates down. The goal of maximum employment is merely a cover for what will be several trillion dollars more in quantitative easing.

Powell, we presume, grasps the importance of history. He surely knows all fiat money is doomed to failure. And he surely knows the dollar’s current place in a fiat money’s lifecycle.

Powell, no doubt, recognizes the dollar’s end is nigh. But what can he really do?  He has a tiger by the tail. He can’t reverse course. Like others before him, he must ride it to the bitter end…

The Grandmaster of Monetary Stimulus

Rudolf von Havenstein had been president of the Reichsbank – the German central bank – since 1908. He knew the workings of central bank debt issuances better than anyone. He was a central banker’s central banker.  He was good at it.

Thus, when he was called upon by history to deliver a miracle for the Deutsches Reich in the aftermath of WWI, he knew exactly what to do.  He’d deliver monetary stimulus. In fact, he’d already been at it for several years.

On August 4, 1914, at the start of the war to end all wars, the Goldmark – or gold-backed Reichsmark – became the unbacked Papermark. With gold out of the picture, the money supply could be expanded to meet the endless demands of war.

To this end, von Havenstein took public debt from 5.2 billion marks in 1914 to 105.3 billion marks in 1918. Over this time, he increased the number of marks from 5.9 billion to 32.9 billion. German wholesale prices rose 115 percent.

By the war’s end, Germany’s economy was in shambles. Industrial production in 1920 had slipped to just 61 percent of the level seen in 1913. With a weak economy, and under the crushing weight of debt, it was time for von Havenstein to really crank up the money printers.

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