Unemployment in Weimar Germany

October 15th, 2009

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Since the powerfully rally several months ago, there are many economic indicators that seems to point to an economic recovery (there are also indicators that point to worsening economic conditions). In Australia, we have the ‘honour’ of being the first Western developed country to be on the road to recovery, with unemployment rate actually falling. The Reserve Bank of Australia (RBA), in the belief that emergency threat of deflation is over, decided to raise interest rates (and indicated that more rate rise will follow).

For the bears (particularly for those who are in the deflation camp), this is a very trying time. Some of them even seem to be throwing in the towel (e.g. Gerald Minack).

But is it really blue skies ahead?

Our view is that, when governments print copious amount of money, mirage of prosperity can appear. In fact, money printing, in addition to doing wonders for stock prices (see Should you be bullish on stocks?), can also do wonders for the unemployment rate. Let’s take a look at this book, The Economics Of Inflation- A Study Of Currency Depreciation In Post War Germany, written by Costantino Bresciani ? Turroni, an economist who lived through the German Hyperinflation of the 1920s,

In the summer of 1922 unemployment practically disappeared. It appears that?in spite of the gaps caused by the war in the ranks of the working population?the total number of individuals occupied in industry, agriculture, commerce, public services, etc., was greater in 1922 than before the war.

Next, we will show you the graph of the unemployment rate:

German unemployment rate 1913-1922

German unemployment rate 1913-1922

As we can see, in the midst of hyperinflation in Weimar Germany, as the standards of living of workers collapsed (as the German mark depreciate against the US dollar), the German economy had made great ‘strides’ in the area of unemployment!

So, don’t be surprised if the US economy’s unemployment numbers actually improved in the months to come. This need not necessarily be a sign of prosperity. Instead, it can be a sign of inflation.

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  • Pete

    That is so scary.

    I can imagine what they will say now.

    “Employment is rising, praise us!”

  • Pete

    That is so scary.

    I can imagine what they will say now.

    “Employment is rising, praise us!”

  • Anon

    Great post CIJ

    ?Employment is rising, praise us!?

    lol pete :P

  • Anon

    Great post CIJ

    ?Employment is rising, praise us!?

    lol pete :P

  • Anon16

    Presumably, employment rose because wages were actually falling in real terms. Right?

  • Anon16

    Presumably, employment rose because wages were actually falling in real terms. Right?

  • http://contrarianinvestorsjournal.com Contrarian Investors? Journal

    Yes, that’s right. Real wage was falling back then.

  • http://contrarianinvestorsjournal.com Contrarian Investors’ Journal Editor

    Yes, that’s right. Real wage was falling back then.

  • anon with a decapitazlied A

    What was the aftermath like i.e. the ensuing graph trends?

  • anon with a decapitazlied A

    What was the aftermath like i.e. the ensuing graph trends?

  • Pete

    Argh too many Anon’s!! :)

    At least you are making an effort to distinguish yourselves though.

    The sceptic in me is thinking you all have something to hide. Too afraid to put up your real names, Ben Bernanke, Wayne Swan, Paul Krugman? :P

    (excuse the insulting names there)

  • Pete

    Argh too many Anon’s!! :)

    At least you are making an effort to distinguish yourselves though.

    The sceptic in me is thinking you all have something to hide. Too afraid to put up your real names, Ben Bernanke, Wayne Swan, Paul Krugman? :P

    (excuse the insulting names there)

  • Drew Weeks

    Yes, because we’ll identify you by the name “Pete” quite easily. Peter pumpkin eater I presume.

    This comparison to employment rising in Germany after the first world war is quite a good thing then for Australia. They did manage to become a superpower once more and start another world war. Is this article actually intended to be praise for the governments actions and their restoration of jobs?

  • Drew Weeks

    Yes, because we’ll identify you by the name “Pete” quite easily. Peter pumpkin eater I presume.

    This comparison to employment rising in Germany after the first world war is quite a good thing then for Australia. They did manage to become a superpower once more and start another world war. Is this article actually intended to be praise for the governments actions and their restoration of jobs?

  • http://contrarianinvestorsjournal.com Contrarian Investors? Journal

    Hi “anon with a decapitazlied A”

    What was the aftermath like i.e. the ensuing graph trends?

    What followed was an explosion in nominal wage rate, thanks to the trade unions. The unemployment rate shot up till 1923 (when the hyperinflation was at its height) before going down again.

    It was a roller-coaster ride back then.

  • http://contrarianinvestorsjournal.com Contrarian Investors’ Journal Editor

    Hi “anon with a decapitazlied A”

    What was the aftermath like i.e. the ensuing graph trends?

    What followed was an explosion in nominal wage rate, thanks to the trade unions. The unemployment rate shot up till 1923 (when the hyperinflation was at its height) before going down again.

    It was a roller-coaster ride back then.

  • Pete

    Haha Drew – touche’! :)

    Perhaps there is some irony in that I could post as Ben Bernanke…but that doesn’t mean I am him. So, in essence it is anonymous anyway.

    This comparison to employment rising in Germany after the first world war is quite a good thing then for Australia. They did manage to become a superpower once more and start another world war.

    A good thing? You realise what actually came with that rise in power, and what facilitated it?

    If that means that Australians will completely lose their current freedom and be ruled by a fascist dictator? We sure could be productive, I mean, we wouldn’t have all that spare time to waste on leisure and entertainment and shopping at Harvey Norman, instead we could be making shell casings and a huge navy instead.

    I don’t think we should go further into this…being that then we would need to talk about a country so desperate that they would even give Hitler the vote for dictatorial power.

  • Pete

    Haha Drew – touche’! :)

    Perhaps there is some irony in that I could post as Ben Bernanke…but that doesn’t mean I am him. So, in essence it is anonymous anyway.

    This comparison to employment rising in Germany after the first world war is quite a good thing then for Australia. They did manage to become a superpower once more and start another world war.

    A good thing? You realise what actually came with that rise in power, and what facilitated it?

    If that means that Australians will completely lose their current freedom and be ruled by a fascist dictator? We sure could be productive, I mean, we wouldn’t have all that spare time to waste on leisure and entertainment and shopping at Harvey Norman, instead we could be making shell casings and a huge navy instead.

    I don’t think we should go further into this…being that then we would need to talk about a country so desperate that they would even give Hitler the vote for dictatorial power.

  • http://www.jobsindubai.com/ Jobs In Dubai

    its sad, from a high average of employment became low in few years. i wonder what are the reason why these things are happening.