A Lesson From The Not So Distant Past

Posted on January 4, 2011


This is Rudolf Havenstein. The name probably means nothing to most people. However, during the hyper-inflation in Germany that commenced after WWI.,  this man was the President of the German Central Banking System.  He held essentially the same position that Ben Bernanke holds in the U.S. today.   When Germany needed more money to fight WWI. Mr.  Havenstein printed more, regardless of the fact that there was nothing of value to back it.  When Germany lost the war and was being pressed for Reparations Money owed to the Victors, Mr. Havenstein simply printed more.  Mr. Havenstein believed that the answer to all of Germany’s financial difficulties was to simply print more money.  He eventually printed so much worthless money that the once strong German currency collapsed due to Hyper-Inflation.   The German people suffered  and the rise of Adolf Hitler came about partially because of the incompetence of Mr. Havenstein.  Ben Bernanke is an economist and a student of history. Mr. Bernanke knows who Rudolf Havenstein was and is fully aware of the mess the man-made of the German economy, yet he persists in following the same path that will lead the U.S.  to possible hyper-inflation and collapse of the U.S. Dollar.  Every day the price of commodities go higher.  Gold is at a price level never seen before and continues to rise every day.  Oil is getting very close to the $100 a barrel level again.  The reason for this is not that there is any shortage of these products. The reason for the unseemly rise in prices is that the Dollar is becoming worthless because of Mr. Bernankes printing  of currency that has nothing of tangible value to back it.   Mr. Bernanke is playing with dynamite and he knows it.  He has run out of tools to deal with the faltering economy, but feels he must do something even if that something is very risky.  We always tend to think that when men reach high office and positions of great responsibility that they are immune from falling prey to the foolish missteps of the less competent.  Nothing could be further from the truth.  Mr. Bernanke needs to set vanity aside,  admit that the Federal Reserve has exhausted its legitimate remedies and put an end to the printing of more worthless currency.