Some recent books…
(1) When Money Dies by Adam Fergusson (1975, 2010). The subtitle is The Nightmare of Deficit Spending, Devaluation, and Hyperinflation in Weimar Germany. We’ve covered this ground before and the story remains the same. When confronted with unsustainable finances (from war, from reparations, from subsidies), politicians are unable to make tough choices, and invariably have special interests that also stand in the way. The solution is the printing press and a move away from money that is backed by gold. Under such circumstances, labor trumps and professions that require a modicum of brain power (instead of heft) suffer. All of these dynamics made worse when the French and Belgians march into the Ruhr as a claim on what they were owed related to the Great War. Firms were forced to print their own money as an emergency measure when there was not enough currency to go around, and the Reichsbank accepted it, all of which enflamed the inflationary embers. Not surprisingly, we see a rise in extremism on the one hand (Hitler made his introduction to the German scene during this period), and a deferral to authoritarianism as the only hope for salvation on the other (with Democracy viewed more dismissively).
All of this finally resolved when a new currency (the Rentenmark) was introduced, tied to both gold and the dollar. It was a confidence trick, which speaks to how psychology is so important to the markets. In looking at the aftermath, while everyone lost, those who had gold or stable currencies fared much better – and with hindsight, it was clear that the hoped for inflation did nothing to resolve the debt burdens that existed before. There was pain before and after – all of it just exacerbated because of the delay in getting to the “after”.
(2) Rethinking the Great Depression by Gene Smiley (2002). A lot of the author’s work resembles the “regime uncertainty” thesis of Robert Higgs (how New Deal programs inhibited investment and private enterprise). At the same time, he does show some sympathy for Keynesian theory.
Within the universe of what he examines, he confirms the notion that the gold standard did not cause the Great Depression – instead a main contributor was an inability for countries to recognize how much the money supply had expanded during WW1 as they tried to maintain the pre-war peg. Smiley also recognizes that the idea of sticky wages was a new and unusual phenomenon in the context of history – Keynes pushed for rigid wages, but it did not help the process of economic rejuvenation and caused the downturn to last even longer. When the bank holiday happened in 1933, the proposals associated with the re-opening of banks sound a lot like the TARP program from 2008 (point being, we never learn). The “Depression within a Depression” was largely brought about by higher reserve requirements demanded by the Fed and higher wages from increased unionization.
For me, the most interesting part is where Smiley undermines the whole “war prosperity” nonsense – that World War II somehow brought the country out of the depression. Of course unemployment went down by 7 million people when 9 million men were conscripted. And of course GDP will go up when government spending is added to its calculation – we note that rationing and price controls prevented consumers from actually partaking in that “boom”. We also know that inflation was understated due to those same control mechanisms – which also means that GDP was overstated. Simply put, the war had to end before anything resembling a real recovery could emerge.
(3) Building Tall by John Tishman (2011). The subtitle is My Life and the Invention of Construction Management. Interesting tale about the Tishman who spent his career in construction (as opposed to the segment of the family that formed Tishman Speyer). He was involved in building the Twin Towers, Epcot Center, Renaissance Center in Detroit, Hancock Tower in Chicago, and many other interesting projects. He definitely makes a compelling case for having a construction management firm involved in any project.
