THE BLACK OBELISK AND THE REBIRTH OF INFLATION...
When three deciduous forests can only buy you one peanut...
Erich Maria Remarque was a remarkable man. He dated variously Hedy Lamarr, Dolores Del Rio, Marlene Dietrich, Greta Garbo and lastly married Paulette Goddard. However, he’s more widely remembered as author of ‘All Quiet On The Western Front’, a novel about a group of young men enduring war’s stresses. Basis for an Academy Award Winning film but also subject to countless book burnings from those objecting to his views.
I recently read another of his works, ‘The Black Obelisk’. Written in the late 1950’s but set around 1923, it’s the story of a young man, a veteran, living in a small Bavarian town and working for a local funeral monument dealership. Just after WWI business is brisk for war memorials and in the aftermath of the Great Flu Pandemic. His life struggles with the men and women he meets is the bulk of the story but a significant portion deals with the hyperinflation in the Weimar Republic. As early as page five, our protagonist Ludwig Bodmer is asking his friend and boss Georg Kroll for a raise as the German Mark had between 9am and noon gone from 33,000 to 36,000 to the Dollar. Georg commiserates, he’d only been able to obtain ‘...a small suitcaseful for today and tomorrow.’ and reminiscences on ‘
...the fine peaceful times of 1922? Then the dollar only rose from two hundred and fifty to ten thousand in a whole year. Not to mention 1921– when it went up a beggarly three hundred percent.’. For those remembering trading the Deutschemark (DEM) aka the Dmark or ‘the Mark’, this might, as it did me, give a chilling resonance to the almost religious aversion late 20th Century Germany had to inflation. I was also reminded of a recent talk at a London LatAm Conference by Sr. Julio Verlarde, Governor of the Central Bank of Peru (BCRP) and a CB veteran of 30+
years as he spoke of starting 25 years prior and how he and the BCRP were lauded for achieving only 1000% inflation (
...to laughter...), the lowest annual inflation rate then in Latin America. It recalled my business trips to Brazil in the late 1980’s and seeing ‘guaranteed’ interest rates of 1350% in local banks.
So why the fuss? We’re not just one but many generations away from such past inflation and far from it happening again? Surely, a little inflation would be economically helpful? Well, we do seem to be on the way up in inflation with the US Fed raising rates last December and with rising commodity inflation despite some unwinding EM currency induced inflation spikes, support programme removal (
...sugar) and record harvests in certain cereals. As for energy inflation... the jury’s still out on OPEC and that, overall estimates of global inflation are at 2.4% this year...but they seemingly omit one thing.
‘Our currency is too strong, and it is killing us...’ was President Trump’s comment to US newspapers. This was possibly the first unilateral exertion of influence on the USD by a sitting US President since Nixon and went against the co-ordinated regimes of the last century’s Louvre and Plaza Accords plus most
AS FOR ENERGY INFLATION... THE JURY’S STILL OUT ON OPEC AND THAT, OVERALL ESTIMATES OF GLOBAL INFLATION ARE AT 2.4% THIS YEAR... BUT THEY SEEMINGLY OMIT ONE THING.
4 | ADMISI - The Ghost In The Machine | January/February 2017
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