Many years ago during my undergrad in economics I debated among friends and classmates about the benefits of governments printing money to ease short-term economic crises. They disagreed strongly and said such Keynesian policies would be ruinous! They reminded me how hyperinflation in the 1920’s crippled the German economy as its central bank printed money to refinance its debts from World War 1.
True, after the war the Deutsche Mark collapsed as investors lost confidence in the German economy. Germany had suspended the gold standard and began printing new Deutsche Marks to fund the war. When the economy contracted the global demand for these Deutsche Marks fell as investors bought less German goods. In addition to large reparations, a vicious cycle ensued as the government continued printing money to cover on-going deficits
0 Comments
|
RSS Feed