Exits Blocked & The Real Pain Begins

Sorry, for not posting- hopefully I'm not needed to shout fire anymore. Peter Schiff has another great update video about what's likely the next leg down.

To recap- We all know about dramatic fall in asset prices, the pain from the debt bubble and the dramatic rise in unemployment. But it really looks like the real pain is just getting started.

The near total collapse of the private economy has been offset so far by a dramatic increase in federal spending that we only thought we could afford. The initial Lehman shock caused a massive pull back from almost every asset class except super duper safe-- US government debt which allowed team Obama to cheaply- if temporarily push out trillions in new bonds most of which are short term notes.

Meanwhile our real ability to pay off this debt has gotten much worse.

"The numbers could hardly be more stark: Tax receipts are on pace to drop 18 percent this year, the biggest single-year decline since the Great Depression, while the federal deficit balloons to a record $1.8 trillion.(or more)

Other figures in an Associated Press analysis underscore the recession's impact: Individual income tax receipts are down 22 percent from a year ago. Corporate income taxes are down 57 percent. Social Security tax receipts could drop for only the second time since 1940, and Medicare taxes are on pace to drop for only the third time ever."

As foreign economies seem to be leading the recovery, the conditions which made finacing the U.S debt so easy are going into reverse- exposing the country to far higher interest rates-- or galloping inflation.Our rising market has underperformed most and in fact has hardly kept up with the rapid decline in the dollar's value.

Tails, You Lose: The Amazing Goldman Sachs

No, Goldman Sach's did not create the insane, senseless collectivist free for all that passes for our system of government these days- a system based on the blind belief that a small group of elite folks will serve and protect "the public interest".

Of course, most folks smart enough to work at a place like Goldman Sachs know there is not and will never be a way for anyone to know what might best for millions of living, thinking changing human beings. Goldman, and it's employees and alumni however have had an amazing record protecting their own interests.They didn't invent the game but man can they play it.

Visit msnbc.com for Breaking News, World News, and News about the Economy

Was Hank Paulson- the former Treasury Secretary and former Goldman Sachs CEO protecting his own interests when thought it critical to bail out AIG-- a firm that just happened to owe Goldman 13 billion or more?



Is it any wonder why we can't audit the FED?

The March To Fascism And How To Stop It

People know I've been beating the drum, warning of the Fascist trends in our government which have been building for years and are reaching a crisis.

Jack Gildern did a much better post on this subject than I have called Fascism: Foolish Fallacy Or Frightening Fact. I urge you to read it-please.

He starts with a simple definition of Fascism.

Here is the literal definition of Fascism:
fas⋅cism [fash-iz-uhm]
–noun
1. A governmental system led by a dictator having complete power, forcibly suppressing opposition and criticism, regimenting all industry, commerce, etc., and emphasizing an aggressive nationalism and often racism.
2. The philosophy, principles, or methods of fascism.

Of course, we haven't reached this level yet. Exactly when one says something that walks like a duck and quacks like a duck can be described as a duck is always a judgement call. The problem is--- This is not a duck we are talking about here-- It's Fascism!-- or perhaps some other brand of totalitarianism. We test and test for cancer in a way we don't for colds because- it's a deadly and often fatal disease and when we find it we try to kill it and cut it out. (no that was not just a call to kill the president. Our troubles go much deeper than one man. He was actually elected)

I made two comments that prescribe what I think might be the quickest and most effective way to stop this train and get people to think. You need to read the post and comments for context.

Comment One

"One of the best posts on here ever. I think one of the biggest factors at work here is what Hitler called the big lie. Admiting just how bad, Obama is means confronting our own guilt for having elected him and going deeper into just how the government got this out of control means looking at almost a century of guilt.

We as American's as whole- not all, have betrayed our founders and the basic ideals and foundations our country was founded on in exchange for a few favored programs or vague promises.

People need to stop and admit they live a nearly bankrupt and nearly Fascist country and then decide what role they have played in it and what they are going to do about it.

As, I mentioned before-- I think the Tenth Amendment route might be the fastest clearest way to stop this train. There are states and places in the country where enough broad support for individual rights and the Constitution exists. We need to work from there, to both educate and broaden this base and use it to confront the Monstrous powers in Washington.

After all, the Constitution and the founding documents of the country are on our side. If enough people scream that they really matter, and that the law matters and rights and truth matter, something might be done."

Comment Two

Well, I'm going to have to admit to living in "blue states" all my life in either NY or PA.

But my perception from my reading, interactions and occasional travels is that there really are very large chunks of the country that could almost be called "occupied territory" at this point. I mean when was the last time Wyoming, Utah or Alaska voted blue. I think we need to start from there and work to educate the people about just how deeply damaging the federal occupation of their states has been. Instead of working from positions of weakness, we can start from strength where there is already a lot of political and media support and build on that.

The starting point should be for the "occupied states" to one by one re-affirm their commitment to the original Constitution and it's tenth amendment- which in reality is an implied threat to take the clear course out of the union that the Constitution allows.

Hopefully, a chain of firm resolutions by a large number of states that seem very serious will in itself put a radical brake on things. Remember that just by taking these actions, one is calling attention to all the Constitutional and legal violations, which may help more people in other states to wake up and think deeply about what's going on. This will be hard for the media to ignore.

Remember---the Constitution and all the legal traditions of our country are on our side. Every founding document shows a clear intent to protect individuals from out of control federal power and to protect minorities from a possible tyranical majority.

We can't do this blindly so each resolution needs to state clearly the exact Federal moves that would trigger further action. For example, I think every state should declare federal limitations on free speech and the press to be an instant trigger for further action. Moves against the Second Amendment are in close to the same territory.

Why We Must End The Fed Part Two

Mish, who has a blog I really follow and respect has a good post up about the declining values of fiat currencies around the world.

Gold is near a new high again, but it's very important to understand what's going on. Gold is really very stable in value in relation to most hard assets and manufactured goods in terms of it's purchasing power. Gold is really, just money- a real store of transferable wealth that holds it's value over time. It can't be faked or printed. You either have it or you don't. Government's today don't like it since it represents the real world they are trying to evade.

When we hear about gold rising-- what we are really talking about is that our fake money is falling in relation to gold.

Mish has a great quote from Clyde Harrison at the end.

Fiat currencies don't float. They sink at varying rates

Why We Must End The Fed

I'll start this out with a warning. This is a long post, the bulk of which I wrote late last year, in the hopes that some of it might be avoided.

Contrary, to the story told in the popular media, there were in fact a large number of trained economists and investors who predicted and warned about the situation we are now in. Of course, they were called kooks and rarely got much air time in the media or in college campuses. Ron Paul, is likely the one most of us would know.

Anyway, when the "Schiff started hitting the fan", Glenn Beck was one of the few major media figures to point bring up the Weimar Republic.

Here's my post which I titled "Weimar America"



Sorry, they pulled that one since they want you to see the full film.



I've put a lot of videos and links about America's debt and financial condition in this post. I think that only by understanding this condition fully can one see the connection between America today and that of Weimar Germany.

Most people, to the extent they know anything about the Weimar Republic know only a few things-- it was a period of interesting art, Mann, Kandinsky, Klee, Grosz; -- something about carts of money to buy loaves of bread-- and finally, that it was shortly followed by the Third Reich.







Here is an extended quote from the book, The Age Of Inflation. The roots of Germany's problems began with the promises of Bismark's welfare state and the way Germany financed the costs of WWI.

"Like all the other banks, it offered assistance to the central government in financing the war effort. Since taxes are always unpopular, the German government preferred to borrow the needed amounts of money rather than raise its taxes substantially. To this end it was readily assisted by the Reichsbank, which discounted most treasury obligations.

A growing percentage of government debt thus found its way into the vaults of the central bank and an equivalent amount of printing press money into people's cash holdings. In short, the central bank was monetizing the growing government debt.

By the end of the war the amount of money in circulation had risen fourfold and prices some 140 percent. Yet the German mark had suffered no more than the British pound, was somewhat weaker than the American dollar but stronger than the French franc. Five years later, in December 1923, the Reichsbank had issued 496.5 quintillion marks, each of which had fallen to one-trillionth of its 1914 gold value.[1]

How stupendous! Practically every economic good and service was costing trillions of marks. The American dollar was quoted at 4.2 trillion marks, the American penny at 42 billion marks. How could a European nation that prided itself on its high levels of education and scholarly knowledge suffer such a thorough destruction of its money? Who would inflict on a great nation such evil which had ominous economic, social, and political ramifications not only for Germany but for the whole world? Was it the victors of World War I who, in diabolical revenge, devastated the vanquished country through ruinous financial manipulation and plunder? Every mark was printed by Germans and issued by a central bank that was governed by Germans under a government that was purely German. It was German political parties, such as the Socialists, the Catholic Centre Party, and the Democrats, forming various coalition governments, that were solely responsible for the policies they conducted. Of course, admission of responsibility for any calamity cannot be expected from any political party."

This was just the start of the problem. Germany was already deep in debt but it didn't feel like it could handle the sharp recession all the industrial countries had as they demobilized. To put off this pain and potential instability, they began to spend more and more. Many, many people, soldiers, farmers, workers and businesses needed help.

"Immediately after the war the German government, under the leadership of the Socialist Party, embarked upon heavy expenditures for health, education, and welfare. The demands on the treasury were extremely heavy anyway because of demobilization expenses, the demands of the Armistice, the disorders of the revolution, and the staggering deficits of the nationalized industries, especially the railroads, postal services, telephone, and telegraph. Public administration by the new men raised to power by the revolution, nevertheless, was extravagant, as the resources made available by the creation of new money were apparently unlimited. A number of measures for the nationalization of certain industries (e.g., the coal, electrical, and potash industries) were introduced, but failed to become law. The eight-hour day was enacted, and labor unions were given many legal immunities and privileges. In fact, a system of labor councils was set up which authorized the workers in each enterprise to elect representatives who shared in the management of the company! While government expenditures rose by leaps and bounds, the revenue suffered a gradual decline until, in October 1923, only 0.8 percent of government expenses were covered by tax revenues. For the period from 1914 to 1923 scarcely fifteen percent of the expenses were covered by means of taxes. In the final phase of the inflation the German government experienced a complete atrophy of the fiscal system."

The immediate effects of their actions weren't clear to most and the monetary authorities went to great lengths to tell people that the inflation people saw in their daily lives wasn't really there.



The other thing that reminds one of this time was not just that Germany was up to it's eyeballs in debt but that this debt was largely owed to foreigners who had once considered it a good credit. They continued to lend and only slowly realized their mistake. When they did, the Mark dropped like a stone and the real pain began.



The situation since only a reinforced and confirmed my worst fears. The receding tide exposed the pyramid of lies and false promises behind not just the Federal, but almost every local and state budget. It's a very grim situation, I talked about here. We have been living far beyond our means and have to make serious cuts on a personal and national level. A new confrontation with reality is slowly taking shape, which we saw at the Tea Parties, and was carried forward by the votors in California.

But, But, But, This is the rub. We all know that the government run by people like Barak Obama, Joe Biden, Nancy Pelosi, or for that matter Arlen Specter, Colin Powell or Arnold Schwarzenegger will never allow itself to shrink and can in fact never live within it's means.And, as long as they a have the Fed, they don't have to. We know almost every state can count on a bail out.

Even more scary than all of this is the bold honesty of the looters who now run the Fed and their fellow travelers. through most of it's history, the Fed made the pretense of "protecting" the value of the dollar-- even as it destroyed it. In fact, this is supposed to be it's primary job. How's it doin?

This exposes the real and only reason governments need fiat paper money -- to use inflation to paper over bills they cannot or do not want to pay. Be very afraid, because they can no longer hiding this.

Here's advice from a prominent economist and Bush advisorBut Bernanke has made many similar statements.

"In advocating that the Fed commit itself to generating some inflation, Mankiw, 51, likens such a step to the U.S. decision to abandon the gold standard in 1933, which freed policy makers to fight the Depression.(the FED caused the depression)

Faster inflation might be preferable to increased unemployment, or to further budget stimulus packages that push up the national debt, says Mankiw, who was chairman of the Council of Economic Advisors under President George W. Bush.

The White House has forecast that the budget deficit will hit $1.84 trillion this fiscal year, or 12.9 percent of gross domestic product. Rogoff doubts that politicians will be willing to reduce that shortfall by raising taxes as much as needed. Instead, he sees them pressing the Fed to accept faster inflation as a way of easing the burden of reducing the deficit.

Easier Debt Repayment

Inflationary increases in wages -- and the higher income taxes they generate -- would make it easier to pay off debt at all levels."

This is the kind of sick morality that's at work here. Here is a major economist who doesn't see any difference between paying off debts normally through savings, work and hard choices like normal people do-- and just printing fake money. We have to understand that the FED is no longer an impartial actor here. It's backing up major banks, companies and most especially itself by conducting a massive theft from any responsible person.

Also, please, please remember the cold cruely of these actions which put the lie to the sham of government concern for the poor. Inflation is a sharply regressive tax on all the basic necessities of life.

Are Asian Investors Being Racist?

OK, this is sort of tongue in cheek, but a lot of the major media and administration spin has implied that most administration critics are racists, dumb or "super rich" and have few rational reasons for opposing Obama. An extreme version of this spin can be seen here.



This then makes one wonder about the overtly critical and fearful statements coming from major figures in Asia about our economic policies. First we had major Chinese Officials saying they no longer believed we could fully pay our debts or maintain a solid currency.

And now, the major Japanese opposition party has said that if elected they would no longer buy dollar denominated U.S. Government debt. Of course there have been many other foreign critics of our policies, but some of them are white, so their views are suspect.



Remember, China invented the abacus.

Peter Schiff To Speak At End The FED Rally Tomorrow

I don't have time to do a more propper post on this issue. But as you may know, tomorrow there will be End The Fed protests at every Federal Reserve Bank In the country.

Peter Schiff will be the key note speaker for the NY event. He is an investor and adviser to Ron Paul and part of a rather large group of people, who correctly predicted the mess the FED was getting us into. Most of them were students of the Austrian School of economics.

Peter Schiff to speak this Saturday at NYC's "End The Fed" Rally

For years, Peter Schiff has consistently warned that the policies of the Federal Reserve would drive this country toward a monumental collapse. He also warned that the Fed would respond to the crisis by doubling down on previous mistakes. That day has arrived, and people across the country are trying to stop it.

This Saturday (4/25), rallies will be held simultaneously in Washington and all cities with a Federal Reserve branch. Peter will deliver the keynote address to the NYC Campaign for Liberty's "End The Fed" Rally at City Hall Park, Manhattan.

Much attention has been focused on last week's Tax Day Tea Parties. Those events showcased pent up frustration with runaway government, but also revealed some political partisanship that has been exploited by pro-regime pundits. This upcoming rally, however, has a clear and non-partisan goal: pass HR 1207. This bill, backed by more than 65 Congressman and introduced by Representative Ron Paul, would for the first time give Congress greater audit authority over the Federal Reserve and increase transparency at the central bank. Organizers of the rally believe that the more Americans understand about the Federal Reserve System, such as how its continual expansion of the money supply robs savers of their wealth, the more they will demand a return to real money.

Friends of Euro Pacific are urged to take time from their busy schedules to show their support. The campaign has posted a Meetup page for the event, but the basic details are as follows:

Saturday, April 25th
11:00AM
Assemble at the New York Federal Reserve building (33 Liberty St.)
March up Broadway
2:00PM
Arrive at City Hall Park
Guest Speakers
Keynote by Peter Schiff

A Genius From Harvard

I think most of you on here have given up on The New York Times as a source of objective facts or rational insight. One cannot deny however the window it gives to the minds of people currently in charge.

In the guise of a semi serious proposal, a prominent Harvard economist floated an idea , almost perfectly designed to toilet whatever limited confidence anyone could have in the value of our dollar and cause a panic of epic proportions.

The rub is that many people and companies after seeing the negative effects of their bad investments and often reckless consumer spending have decided to rebuild their balance sheets by saving. They understand that only rational investments which pay off in the future can be a possible way to future wealth. And they understand the extreme personal risk any person takes by spending money they don't have or taking on debts they can't repay.

Lucky for them, geniuses like Bernanke, Obama and their cheerleaders like Krugman and this guy are there to stop them. Already, Bernanke has dropped the Fed funds to almost zero, and engaged in the wholesale printing of money while it and other Federal agencies have purchased garbage bank assets, guaranteed toxic loans used HUD, and FHA, to pump out factory fresh bubble loans. (many of which default right away)

Meanwhile, Obama and the Democratic Congress have implemented a national debt explosion and an ever changing array of promised taxes and regulatory schemes almost sure to choke off market confidence and scare long term investors.

The latest concept is an attempt to force people to spend by proposing a scheme of outright government theft. Please, please, please-- take it seriously. This guy is seriously floating this idea in our so called-- paper of record.

"At one of my recent Harvard seminars, a graduate student proposed a clever scheme to do exactly that. (I will let the student remain anonymous. In case he ever wants to pursue a career as a central banker, having his name associated with this idea probably won’t help.)

Imagine that the Fed were to announce that, a year from today, it would pick a digit from zero to 9 out of a hat. All currency with a serial number ending in that digit would no longer be legal tender. Suddenly, the expected return to holding currency would become negative 10 percent.

That move would free the Fed to cut interest rates below zero. People would be delighted to lend money at negative 3 percent, since losing 3 percent is better than losing 10.

Of course, some people might decide that at those rates, they would rather spend the money — for example, by buying a new car. But because expanding aggregate demand is precisely the goal of the interest rate cut, such an incentive isn’t a flaw — it’s a benefit."

He then of course quickly tries to run away from this explicit theft while endorsing a more subtle one-- inflation.

"If all of this seems too outlandish, there is a more prosaic way of obtaining negative interest rates: through inflation. Suppose that, looking ahead, the Fed commits itself to producing significant inflation. In this case, while nominal interest rates could remain at zero, real interest rates — interest rates measured in purchasing power — could become negative. If people were confident that they could repay their zero-interest loans in devalued dollars, they would have significant incentive to borrow and spend."

He seems to have gotten a lot of flack for this insanity and he defends his editorial here.

"If people are feeling poorer and want to save for the future, why should we stop them? Unless we think their additional saving is irrational, it seems best to try to funnel that saving into investment with the appropriate interest rate. And given the available investment opportunities, that interest rate might well be negative".( even he says there might not be that many good economic opportunities so you should invest in bad ones)

At no point does he appologize or even question the legal right of the government to steal the capital and savings of Americans and use them as rats in weird economic experiments.

Mish, who has a great economics blog has this to say.

"Even more galling than his blatant arrogance, Mankiw has no problems with theft. Because confiscating or expiring 10% of someone's money at will is theft of property, and would (at at least should) be a violation of the 5th amendment and due process of law. How anyone cannot see that is beyond me.

However, let's assume such a law was passed, and upheld by the courts. How would people react? Simple, they would pay off every debt they could as they would get an immediate 10% return on their money to do so! Thus credit would implode.

I repeat my call for Mankiw to resign or be fired. Mankiw is unfit to teach economics anywhere, let alone Harvard."

Was this Obama's economics teacher?

Find Out The True Numbers

I am not an accountant, but I have some knowledge of it.

True accounting is about trying to get an accurate picture of not just one's current"cash flow" but also all assets and liabilities. A person for example with $5000 in the bank, no job, negative home equity and a leaking roof in need of $40,000 in repairs would be called broke by an honest accountant. Suppose that person had also co-signed loans promising to bail out everyone else on the block.

Let's be honest, American's would likely not have bought into most of "free" gifts offered by the government, if they knew their true cost, to themselves and future generations.

Look up the film IOUSA on the internet, to get some idea of the real reality which has only gotten much worse since the film was made.

Here is an organization dedicated to exposing the ponzi frauds both our federal, state and local governments are running.

(No, printing monopoly money in your basement, like our federal government does doesn't make you rich either)

Geithner: The Voice Of Arrogance

OK, a few minutes ago there was a video up of Geitner's testamony before congress about his latest plan.



He was asked by Rep, Gresham Berrett, if he had any backup plan to fall on if this scheme should fail.

He replied that the plan basically couldn't fail and that all that was required was to have "faith and confidence" and keep on pushing. Does anyone around here see parallels to George Bush's policy in Iraq or the early days of the Vietnam War?

The general gist of his statement is that now the government has all these powers, to tax, spend, guarantee assets, print money and lie at will. It has powers that transend the constitution and market forces so nothing can go wrong.

However, even Geitner's boss, Obama admitted that there was a limit to what the treasury could spend. John Galt is watching.

Weimar America 2 : Start The Presses

I want to warn you that there may be a bit of bold type in this post. Even I am still occasionally shocked by the actions of the government, by large numbers and still have the quaint belief that America is still a semi rational nation under the rule of law.

So, in my last Weimar America (yes it looks like a series) post, I warned about the risk of hyperinflation and what might happen if Fed began to "monetise" our ballooning debt by creating money out of thin air. Please tell me they are not doing it, but more and more wise people (the people who predicted this mess, like Peter Schiff, Jim Rogers and many others) are telling me this is what has begun to happen.

"You’ll also find this little snippet in the article, “Most of the money, about $5.5 trillion, comes from the Federal Reserve, which as an independent entity does not need congressional approval to lend money to banks or, in “unusual and exigent circumstances,” to other financial institutions.

Just another reminder that the private, run for profit, Federal Reserve has the printing presses cranked on overdrive in order to bailout Wall Street and the big banks, while the homeowner and the middle class see their savings devalued out of existence.

“If you print money all the time, the money becomes worth less,” warns Diane Lim Rogers, chief economist with the Concord Coalition, but its an empty threat to delirious traders and investors drunk on a record stock market rally after the government pumped more fake liquidity into the bloated bubble.

Veteran investor Jim Rogers echoed the sentiment, predicting the dollar is “going to lose its status as the world’s reserve currency,” adding, “It will be devalued and it will go down a lot. These guys in Washington, they want to debase the currency.”

A website called Prison Planet might be run by kooks you say, but the story's link is to an article in The San Fransisco Chronicle and quotes major investors and other sources like The Concord Coalition which could hardly called fringe.

"A deficit arises when the government's expenditures exceed its revenues in a particular year. Some estimate that the federal deficit will exceed $1 trillion this fiscal year as a result of the economic slowdown and efforts to revive it.

The Fed's activities to shore up the financial system do not show up directly on the federal budget, although they can have an impact. The Fed lends money from its own balance sheet or by essentially creating new money. It has been doing both this year."

The article also points out that these 8.5 Trillion in obligations and promises represent 60% of America's GDP.

Now one other question might come up. It sounds like other countries like England are also deep in a hole and are doing the same thing. Doesn't this mean that we are OK cause the dollar can't fall against anything if other currencies are falling too? The short answer is that all these currencies will fall against any real store of value like gold or any reasonably sound currency like those of Japan, China and other countries we owe money to.

The whole process is accompanied by constant reassurances that this is a temporary thing, and we will act responsibly in the future even though 60 years or more of U.S. history tell you that is very unlikely. The goal as usual is to kick the pain and hard decisions down the road to another administration or generation.

Weimar America

Sorry, they pulled that one since they want you to see the full film.



I've put a lot of videos and links about America's debt and financial condition in this post. I think that only by understanding this condition fully can one see the connection between America today and that of Weimar Germany.

Most people, to the extent they know anything about the Weimar Republic know only a few things-- it was a period of interesting art, Mann, Kandinsky, Klee, Grosz; -- something about carts of money to buy loaves of bread-- and finally, that it was shortly followed by the Third Reich.







Here is an extended quote from the book, The Age Of Inflation. The roots of Germany's problems began with the promises of Bismark's welfare state and the way Germany financed the costs of WWI.

"Like all the other banks, it offered assistance to the central government in financing the war effort. Since taxes are always unpopular, the German government preferred to borrow the needed amounts of money rather than raise its taxes substantially. To this end it was readily assisted by the Reichsbank, which discounted most treasury obligations.

A growing percentage of government debt thus found its way into the vaults of the central bank and an equivalent amount of printing press money into people's cash holdings. In short, the central bank was monetizing the growing government debt.

By the end of the war the amount of money in circulation had risen fourfold and prices some 140 percent. Yet the German mark had suffered no more than the British pound, was somewhat weaker than the American dollar but stronger than the French franc. Five years later, in December 1923, the Reichsbank had issued 496.5 quintillion marks, each of which had fallen to one-trillionth of its 1914 gold value.[1]

How stupendous! Practically every economic good and service was costing trillions of marks. The American dollar was quoted at 4.2 trillion marks, the American penny at 42 billion marks. How could a European nation that prided itself on its high levels of education and scholarly knowledge suffer such a thorough destruction of its money? Who would inflict on a great nation such evil which had ominous economic, social, and political ramifications not only for Germany but for the whole world? Was it the victors of World War I who, in diabolical revenge, devastated the vanquished country through ruinous financial manipulation and plunder? Every mark was printed by Germans and issued by a central bank that was governed by Germans under a government that was purely German. It was German political parties, such as the Socialists, the Catholic Centre Party, and the Democrats, forming various coalition governments, that were solely responsible for the policies they conducted. Of course, admission of responsibility for any calamity cannot be expected from any political party."

This was just the start of the problem. Germany was already deep in debt but it didn't feel like it could handle the sharp recession all the industrial countries had as they demobilized. To put off this pain and potential instability, they began to spend more and more. Many, many people, soldiers, farmers, workers and businesses needed help.

"Immediately after the war the German government, under the leadership of the Socialist Party, embarked upon heavy expenditures for health, education, and welfare. The demands on the treasury were extremely heavy anyway because of demobilization expenses, the demands of the Armistice, the disorders of the revolution, and the staggering deficits of the nationalized industries, especially the railroads, postal services, telephone, and telegraph. Public administration by the new men raised to power by the revolution, nevertheless, was extravagant, as the resources made available by the creation of new money were apparently unlimited. A number of measures for the nationalization of certain industries (e.g., the coal, electrical, and potash industries) were introduced, but failed to become law. The eight-hour day was enacted, and labor unions were given many legal immunities and privileges. In fact, a system of labor councils was set up which authorized the workers in each enterprise to elect representatives who shared in the management of the company! While government expenditures rose by leaps and bounds, the revenue suffered a gradual decline until, in October 1923, only 0.8 percent of government expenses were covered by tax revenues. For the period from 1914 to 1923 scarcely fifteen percent of the expenses were covered by means of taxes. In the final phase of the inflation the German government experienced a complete atrophy of the fiscal system."

The immediate effects of their actions weren't clear to most and the monetary authorities went to great lengths to tell people that the inflation people saw in their daily lives wasn't really there.



The other thing that reminds one of this time was not just that Germany was up to it's eyeballs in debt but that this debt was largely owed to foreigners who had once considered it a good credit. They continued to lend and only slowly realized their mistake. When they did, the Mark dropped like a stone and the real pain began.