Stagflation ravaged the economies of the 1970s. Candidate Jimmy Carter was able to beat Gerald Ford, the sitting president, by accusing him high and wide of having made the “misery index” worse. The unemployment rate and inflation added together was at 13 at the time. Four years later, it was Reagan that was able to win by a landslide, but with this same index exceeding 20!

However, bringing up hyperinflation always routinely leads to the one suffered by Germany a hundred years ago. Even this well-known and very well documented episode is not the worst case of hyperinflation in modern history, because nothing can compete with the mega-inflation of Zimbabwe at the end of the 2000s.

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The German example is of course worthy of interest and should be studied to this day — at a time when our prices are reaching very worrying levels — because this hyperinflation hit a developed economy of the time and destroyed the credibility of the regime in place, that being the Weimar Republic. Our understanding of this extreme German case study is therefore likely to provide us insights with regards to our outlook for 2022.

Inflation now weighs heavy on the purchasing power and morale of consumers. The disenfranchisement that worked against Weimar was complete once the measures adopted in 1923 ruined the German middle class’s savings and increased unemployment that was already high. Thus leading to one portion of the population turning to the communist chimeras and another succumbing to fascism. The Great Depression of 1929 was then the icing on the cake.

Back then, the Germany wrought with hyperinflation was marked by great violence and the constant drum of boots on the ground, much like our world of 2022. Weimar has, alas, shown us with clarity that our leaders only decide to fight against inflation once they have no other options! However, inflation is an evil genie that — once out of its bottle — can be put back in only with extreme difficulty.

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When the stars align, inflation can soar spectacularly and its surge then becomes almost impossible to stop, at least not without frightening social costs. The fact remains though that financial stability was not the top priority for Germany’s political leaders at the time, who only decided to combat inflation once it had caused an incommensurable social, political, and economic upheaval.

This is why, if there is only one lesson to be learned from Germany’s hyperinflation in our current climate, it should be a lesson of courage and voluntarism. Doing the job on inflation is in fact not easy and requires political courage, a far cry from the prevailing and widespread mediocrity that is now par for the course among the political class. The leaders of Weimar failed to contain the catastrophe because they feared unpopular measures that would most likely have required their own political sacrifice. Those who lead us tomorrow will have to do absolutely everything to preserve our financial stability.

For more information about Michel Santi, visit his website: michelsanti.fr/en

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