Brexit

Money- “Makes the World Go Around”

We saw a fascinating display at the Museum in Gdansk recently.  It was a mock up of a bank from the 1930’s.  Although it covers a period that was in the early part of last century we are still affected by it.

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These are pictures to depict what it was like in Germany during the 1920’s.  The hyper inflation of that period meant that even to buy a loaf then the cost was soaring.

 

1918 0.25 Reichmark

1922 3.0 Reichmark

1923 January  700 Reichmark

1923 May 1200 Reichmark

1923 July 100,000 Reichmark

1923 September 2,000,000 Reichmark

1923 October 670,000,000 Reichmark

1923 November 80,000,000,000 Reichmark

The hyperinflation of 1923

With this rate of change it is clear that those who held any of their assets as cash were rapidly and completely impoverished.

It is also rather a nice link to be reminded of the piece from Cabaret with Lisa Minelli.  She sings about how Money Makes the World Go Round- only the accent is a Germanic one- not sure if that was a coincidence or not

https://www.youtube.com/watch?v=PIAXG_QcQNU

And there is a very informative piece on Wikepedia

https://en.wikipedia.org/wiki/Hyperinflation_in_the_Weimar_Republic

 

 

So why do I return to this era so far ago.  Well I’m currently reading David Cameron’s Memoir For the Record.  I’ve just reached the part where Norman Lamont takes action to take the UK out of the Exchange Rate Mechanism.  This was the forerunner to the Euro.  https://www.waterstones.com/book/for-the-record/david-cameron/9780008239282

During that time the interest rates in the UK rose to near 15%.  All around us we saw people who were struggling to pay their mortgages and in some cases lost their homes.  We were partially protected from that by having decided to fix our mortgage at 10%! yes 10%.!  Compare that to the current rates of interest.

In recent years we have visited Italy and Greece on holiday.  We have seen the extensive and bad effects that have been caused to these 2 countries by the Euro crisis.  There were many young people who should have been working whose main activity was meeting in a bar to play pool.  There were also large number of buildings which were left partly complete.  So although there was no hyper inflation the effects on people of an economic crash are just as bad

Which brings me to the current.  Since the banking crash of 2008 there has mass pumping of money into the economy  with Quantitative Easing.  This seems to me as a layman to be very similar to the excess money which caused the great loss of value of the hyperinflation of the 1920/30’s.  Not clear why hyperinflation has not occurred.  Is it just a matter of time?

We have had articles warning that the current process of loans for every kind of items are also creating the debt issues which have been such a problem in the past

https://www.telegraph.co.uk/business/2019/10/05/car-financing-loans-could-erupt-next-ppiscandal/

Apparently there was £19bn advanced for car loans last year alone.  Similarly most items eg mobile phones, household goods  and furniture are now available to be purchased through credit.  All goes well while one can keep all the plates spinning successfully however, one small change in circumstances and the problem grows rapidly.

Our High street retailers are also finding out that whilst debt can be easy to acquire it rapidly becomes a huge burden if there is any change in circumstances.  The list of retailers who have closed down over the last 12 months is all too easy to identify due to the empty shops on the High St.

Sadly even the politicians are at risk of adding to the problems.  They seem to have got the same habit as Formula 1 racing driver.  All parties seem to feel that if they do not spay the money around like the Champagne spraying adopted by the winning driver then they are not competing well.

So when you see your prospective candidate on the doorstep please ask him how it will all be paid for.

Or to coin that famous slogan from the 1967 when Harold Wilson advised that ” the pound in your pocket has not been devalued it just means that the pound abroad will buy 14% less.    As we import so much  that soon had a profound effect

 

So let us hope that sense returns and we don’t have a race to the bottom in this election and afterwards with Brexit.

One can be sure that those in the Westminster Village will have a very different experience from those in the rest of the country.

And to finish on a more cheery note here is the link to Abba’s hit song Money, Money.  Sadly the issues are very similar, we just need to find that wealthy man. https://www.youtube.com/watch?v=ETxmCCsMoD0

 

 

 

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