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Macroeconomics in Germany: The forgotten lesson of Hjalmar Schacht

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Macroeconomics in Germany: The forgotten lesson of Hjalmar Schacht

Biagio Bossone, Stefano Labini, 01 July 2016

Despite facing many of the same challenges, Germany’s current macroeconomic policy is substantially different to those of other countries, in part due to the economy legacy of Walter Eucken. This column considers the economic policy of Hjalmar Schacht, whose ‘MEFO-bills’ monetary solution ended the years of economic struggle caused by the Treaty of Versailles’ reparations commitments. By tying the bills to output, Schacht was able to stimulate output, and eliminate unemployment. This historical implication has clear modern-day implications, with parallels to ‘helicopter money’ policy and Italy’s recent ‘fiscal money’ proposal.

Modernity of Schacht’s lesson
Such was the economic policy that allowed Germany to regain monetary sovereignty and finance its reconstruction in the interwar period – an ante litteram case of unconventional money-financed fiscal expansion. It enabled a national economy to exit a long and deep depression, and to attain non-inflationary full employment in a short span and with no use of price controls or rationing (Stucken 1953).7 In only five years, Schacht’s programme transformed a bankrupt state into Europe’s strongest economy (Emry 1982).

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This post was last modified: 26.01.2017 21:09 by Helsworth.

26.01.2017 20:45
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RE: Macroeconomics in Germany: The forgotten lesson of Hjalmar Schacht

mefo bills were just a way of financing their deficit when they couldn't borrow because of a legal limit on their bonds' interest rate and also to disguise such a deficit (being spent largely on illegal rearmament) both from buyers and international observers, basically cooking the books. There's nothing special about them- in the absence of restrictions, Hjalmar would've used a larger deficit instead.

Weimar did something similar to what Greece did more recently, actually.

I'm leaving and probably never coming back, so thanks for the interesting discussions I guess, dunno why im writing this nobody even irl gives a toss about me anyway

This post was last modified: 27.01.2017 08:50 by VineFynn.

27.01.2017 08:47
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