You Want Inflation? I'll Show You Inflation!

(Cross-posted from CreditSlips)

Followup on yesterday (link)--you want inflation? I’ll show you inflation. Here’s a piece I put together a few months back to introduce inflation to some law students:

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The Thomas Mann story I mentioned this morning is “Disorder and Early Sorrow,” published in 1925, situated in the great German Hyperinflation that peaked in 1923. The story revolves around Professor Cornelius and his family, particularly his new-age children. The first two sentences are:

The principal dish at dinner had been croquettes made of turnip greens. So there follows a trifle concocted out of one of those dessert powders we use nowadays, that taste like almond soap.

Not the kind of life a senior professor wants to lead, I can assure you. Later we get this sketch of domestic life as the family organizes a party:

Many people had to give up their telephones the last time the price rose, but so far the Corneliuses have been able to keep theirs, just as they have kept their villa, which was built before the wear, by dint of the salary Cornelius draws as a professor history—a million marks, and more or less adequate to the changes and conditions of post-war life. The house is comfortable, even elegant, though sadly in need of repairs that cannot be made for lack of materials, and at present disfigured by iron stoves with long pipes. Even so, it is still the proper setting of the upper middle class, though they themselves look odd enough in it, with their worn and turned clothing and altered way of life. The children, of course, know nothing else; to them it is normal and regular, they belong by birth to the ‘villa proletariat.’ The problem of clothing troubles them not at all. They and their like have evolved a costume to fit the time, by poverty and out of taste for innovation: in summer it consists of scarcely more than a belted linen smock and sandals. The middle-class parents find things rather more difficult.

Later still, Frau Cornelius

speaks of what is uppermost in her mind: the eggs, they simply must be bought today. Six thousand marks apiece they are, and just so many are to be had on this one day of the week at one single shop fifteen minute’s journey away. Whatever else they do, the big folks must go and fetch them immediately after luncheon; and Xavier Kleinsgutl [the house-servant] will don civilian garb and attend his young master and mistress. For no single household is allowed more than five eggs a week; therefore the young people will enter the shop singly, one after another, under assumed names, and thus wring twenty eggs from the shopkeeper for the Cornelius family. This enterprise is the sporting event of the week…

Let’s do some computation here. Eggs cost six thousand marks, so 20 eggs cost 120,000 marks. The professor gets a slary of a million marks a month. So 20 eggs cost 12 percent of his monthly salary. In our world, 20 eggs cost—what, maybe $3, give or take. If eggs cost 12 percent of your salary, you’d be earning $25 a week…

Finally, here’s a good non-technical non-fiction account of the German experience (link).

And here’s a neat little graph of the German hyperinflation (link). Note that it is “log scale,” which means that each horizontal line represents a number ten times the last horizontal line.

Postscript: Taxmom, a premium-content subscriber to Buce/Underbelly, asks:

On the subject of literature and insolvency, what do you think of Arthur R. G. Solmssen? I came across his book "A Princess in Berlin" about a year ago. While it's not deathless prose (somewhat contrived plot) his description of the inflation in Berlin in the 20's is awesome. I just googled him and come to find he is a Philadelphia lawyer.

That can be easily answered: never heard of either one. Looks like one more item for the inbox, and near the top, too. Thanks again, Taxmom.