A few years ago, Peter Schiff and a few other Austrians (not all Austrians, as Mish was stating the opposite) were adamant about hyperinflation and Paul Krugman stated that it was like talking about fire problems during a flood, which made sense because of the credit crunch (the inverse problem). However, Schiff kept pointing to Zimbabwe and the Weimar Republic as examples of hyperinflation and even now, we're seeing it in Ukraine.

As far as Ukraine and Zimbabwe are concerned, neither appeared to have much gold before their hyperinflation. For instance, Ukraine has next to 0, if not 0 and Zimbabwe, from what I could find, had less than 5 metric tonnes. When I was looking online to see if anyone knew how much gold they estimate the Weimar Republic had, I couldn't find a figure and was curious if anyone knew, or could find a historic estimate?

The reason I ask this is because the United States owns the most gold in the world (and it's not a close competition), assuming we don't believe the people who think it's not there, and thus it's hard to believe that, unless the U.S. begins to liquidate its position, that it would face hyperinflation like these other countries even without a currency backed by gold because people know that in a really bad situation, it could trash the dollar, create a new currency backed by its gold (note that I'm not saying this would happen, but the US is hardly a country comparable to Zimbabwe when you consider its gold holdings).

  • $\begingroup$ Excellent point; adamant $\endgroup$ Feb 26, 2015 at 16:50

2 Answers 2


To address the first part of your question:

"By July 10, Germany's free gold reserve had fallen to the equivalent of £35 million pounds, and all the Bank was doing had produced precisely the effect it was hoped to avoid. Another loss of 50 million gold marks was suffered during the week which ended on July 14 — the direct result of supporting the paper mark by rationing supplies of foreign currencies and having to cover indispensable imports from the gold reserve. If intervention continued at the then level of 10 million gold marks daily, bankruptcy would come within 60 days: the reserves had already taken as much as they could stand. If intervention ceased, on the other hand, it was broadly expected that the dollar would go to a million marks, the pound to over 4 million — and by the end of July that expectation was fulfilled. Merchants were still said to be borrowing paper marks to the value of 80 per cent of their stock, and exchanging them at the Bank for dollar Treasury bills needed ostensibly for imports. These bills were sent abroad to the merchants' buying agencies, and in most cases stayed there with no countervalue returning to Germany."

-A World of Possible Futures: German Weimar Republic in the early 1920s and the U.S. - Troubling similarities

The source itself appears to be of questionable value, but makes vague reference to:

"The Economics of Inflation (Routledge Library Editions-Economics, 84)" by Constantino Bresciani-Turroni (427 pages, Routledge, reprint edition, October 1, 2003, first published 1937

Judging from historical gold prices and exchange rates, we could estimate:

$$ 35M x 4.58 / 21.32 = 7.5M$$

So, 7.5 million troy ounces or 233 Metric Tonnes according to Google.

To address your second point, it seems to be exactly what the Weimar Republic tried.

I would not imagine the US would be keen to repeat something like that, though it seems far outside the scope of this SE to speculate on that.


It´s an historical side note at this point, but it´s not entirely clear that the Weimar authorities fully understood what they were kicking off.

The first public acknowledgement of the multiplier problem in the banking system - that is the way changes to reserve holdings could multiply the amount of money in deposit accounts - appears to be the 1931 MacMillan Report to the British Parliament. By contrast, von Mises book on capital in 1911 talks around various banking practices, including variations in cash money due to seasonal demands, but does not explicitly talk about the reserve issue.

So it´s entirely possible that when they tried to duck out of the Versailles Treaty requirements (which were impossible to meet in any case) by printing money, they didn´t envision a full on destruction of their monetary system.

It´s not as appreciated as it should be, the fundamental problem with the government printing money under reserve regulated systems, isn´t the money the government prints. It´s the second-order response of the banking system as it then creates a multiplier of the printed money as a result of its regulatory framework. F.ex. the government thinks its just doubling the money supply, resulting in an acceptable degree of mild inflation, but what happens is that the banking system multiplies that by 5x (reserve requirements back then were usually between 20-25%), and that then kicks off more government printing and a hyper-inflationary spiral, as the government is then forced to print more money to pay their civil servants.


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