Weimar Republic
Daily Ramble
I’m finding myself pretty far down the proverbial hare’s hole on money at this point. Far enough that I find myself yelling from time to time to see if anyone else is on the same trail. The latest turn in the trail has led me to “When Money Dies,” a book written in 1975 about the Weimar Republic’s hyperinflation from 1918-1923. “Weimar Republic” and “Germany” are pretty much the same.
I’m not even a third of the way into the book, and already, my lid has been blown back. If I’d read this book even a decade ago, it wouldn’t resonate the way it does now. The parallels between present-day society and the Weimar Republic are hard to miss. First, let me give a bit of a backdrop on the Weimar Republic. Germany had lost WWI, and the resulting peace treaties they were forced to sign left them in a pinch. The country had massive reparations to pay off and a decimated economy to do it. The new leaders of the republic were stuck between a terrible rock and an ugly hard place. They chose to print massive amounts of money — marks — to try and patch up the difference. Hyperinflation, or massive price increases on all goods and assets, occurred as a result.
That hyperinflation occurred is not the thing that’s grabbed my interest. I’m pretty much sold — hook, line, and sinker — on the fact that printing more money leads to increasing prices. What’s fascinating is the way the average citizen reacted. The folks that owned needed businesses and hard assets saw a massive influx in wealth. The wealth allowed them to build a life apart from the masses that were literally starving. Eventually, the masses got sick of seeing the opulence of fine nightclubs and high rollers — the clubs were burnt. As food grew scarce, people became increasingly desperate, leading to countryside farmers hoarding their food instead of selling it to townspeople. People were quick to capitalize on perceived advantages in the food chain, leveraging their positions to take from others. Farmers wound up with grand pianos and other goods they otherwise wouldn’t have been able to afford.
Then there was the stock market. Every free mark was thrown in, trying to keep investors’ wealth rising above inflation. While this was going on, asset owners would brag about how much their properties and stocks were worth, while the average joe would complain about ever-increasing prices of necessities. The disconnect between the prices of goods and assets was never thought of as the value of the mark decreasing but as the price of the rest of the world increasing. Anger at the outside world and the search for blame left a cultural fuse that Hitler ultimately discovered and struck with his matchbook.
That was 100 years ago, but am I the only one that sees history beginning to repeat?
Favorite Things on the Interwebs Today
In the chart above, replace the Weimar mark with the US dollar and gold with Bitcoin. 100 years later, and the volatility with Bitcoin makes a lot more sense — wild! (credit to @Myrmikan on Twitter for the image)
Bitcoin Price Prediction
Yesterday: $31k - $40k
Today: $33k - $42k
Tomorrow: $33k - $42k
Bitcoin is back on thin ice. It’s on day six of bouncing between $43k and $30k as the volatility bleeds out of the market. That said, Bitcoin is not out of the woods and back to a bull market…yet. The Chinese government could drop the other shoe on its attempts to regulate coal-powered Bitcoin mining in the next week or two, leading to another panic sell-off. For that reason, the ideal scenario for bulls would be to close the week over $42k, bringing in more buyers that could potentially offset further selling in the East. If not, another round of intense selling could drive price quickly below $30k and into the low $20ks. I’m not a bear here, but I’m also not a bull. It’s time to gather information and wait for clarity.
Bitcoin Q & A
Q: Can governments shut Bitcoin down?
A: No.
There is no single government in the world that can shut the Bitcoin network down. It would take a concerted effort by a consortium of governments to collectively eliminate the Bitcoin miners securing the network and then take it over. Since the world is geopolitically divided, it seems highly unlikely this will occur. Instead, a governmental attack in an isolated jurisdiction is more likely to see hashrate, or the miners, move from one country to another. This appears to be happening in China right now, with miners moving to the United States and Kazakhstan.
Thanks for reading,
Kent
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