How did Schacht's MEFO Bills work? Were they inflationary or not?

In 1934, Reichsbank President Hjalmar Schacht introduced the MEFO bills scheme to fund the German government's rearmament programme. There are various interpretations regarding this scheme, and there hasn't been a decent explanation of how they worked. Some say they were inflationary, while others claim they were not. This video aims to clarify what the scheme was about, how it worked and whether the MEFO bills could be classed as inflationary or not.
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History isn’t as boring as some people think, and my goal is to get people talking about it. I also want to dispel the myths and distortions that ruin our perception of the past by asking a simple question - “But is this really the case?”. I have a 2:1 Degree in History and a passion for early 20th Century conflicts (mainly WW2). I’m therefore approaching this like I would an academic essay. Lots of sources, quotes, references and so on. Only the truth will do.
This video is discussing events or concepts that are academic, educational and historical in nature. This video is for informational purposes and was created so we may better understand the past and learn from the mistakes others have made.

[@Davide-yh8qx]

Every Hoi4 player wanted this

[@TheImperatorKnight]

I gathered that after Googling "Mefo Bills" to see if there were more sources about it online and realizing that most of the results were from sites dedicated to HOI4.

[@Black-js5ke]

@@TheImperatorKnight have you play hoi4? And did you enjoy it or not?

[@independentomega2701]

@@Black-js5ke HOI4 is great, if you like beating your head against a brick wall. Watch some videos on KZbin, it might be something you dig.

[@TruetoCaesar]

@@independentomega2701 hoi4 is great only if you have patience and are not bothered by losing by random events

[@Black-js5ke]

@@independentomega2701 I have 1 150 hours in hoi4 and have take the world as Germany and won the eastern front as ussr

[@vulcan7859]

Normal people: wait, MEFO bills? What's that? Hoi4 players: finally, after all these years...

[@commissarkordoshky219]

Fucking mood

[@regu6582]

LOL I knew what the MEFO bills were and found it interesting how HOI IV would deal with them. I think Paradox did a decent job tieing them to civ's. Hint, dump the bills asap.

[@niranjansrinivasan4042]

@@regu6582 why dump them ? it is the greatest buff for Germany

[@davidburroughs2244]

@@niranjansrinivasan4042 when you win, yes .... therein lieths the lesson. All real world iou's come with a due date - either one of when it is due or one of potentially never or immediate call.

[@regu6582]

@@niranjansrinivasan4042 And when war does break out... Better to get the benefit from NOT having as opposed to having the bills in the longer game.

[@penguin6815]

So how did MEFO bills increase construction speeds by 25%?

[@quedtion_marks_kirby_modding]

Swedish magic and game balance.

[@michaelthayer5351]

Well if you have more money (read inflation) slushing through a system, essentially giving an unlimited budget to what you really want, i.e. rearmament then you can do lots of things to speed up construction. Like, hiring more workers, paying more overtime for the workers, outbidding domestic competition for the resources needed to build the factories. It essentially lets you redirect all the resources and manpower normally tied up in productive industries and economic sectors into war production. Or like MMT where the government prints money and by inflation reduces consumer purchasing power while increasing government purchasing power, redirecting resources out of the population and into whatever the government's aims are without "officially" ever raising taxes. For Germany the aim was rearmament and conquest. For modern Central Banks, eh I don't know really, the tinfoil hat people have a lot of ideas. I personally ascribe it to shortsightedness, greed, but mainly the political inability to raise taxes or cut spending that leave inflationary printing the only alternative given the lack of political will to reform the status quo.

[@grekusPotatus]

They just gave the state stolen money.

[@quedtion_marks_kirby_modding]

@@michaelthayer5351 So tldr, they use inflation as tax to increase war production while screwing over more peoductive industries?

[@michaelthayer5351]

@@quedtion_marks_kirby_modding If you're looking for a one sentence summary, yes.

[@Corey_Brandt]

Hitler: someone who is good at the economy please help me budget this. my country is dying! Food $200,000,000 Repatriation Programs $150,000,000 Infrastructure $800,000,000 Armaments Procument $980,000,000,000 Public Services $150,000,000 Schacht: Spend less on armaments Hitler: no

[@theeternalsuperstar3773]

that's the rough breakdown? Damn!

[@Corey_Brandt]

@@theeternalsuperstar3773 I literally just made the numbers up off the top of my head 😆 ik 98 trillion is way too much but its easier to understand the meme at a glance

[@theeternalsuperstar3773]

@@Corey_Brandt You wrote 980 billion, not 98 trillion.

[@Corey_Brandt]

@@theeternalsuperstar3773 like I said, I came up with it off the top of my head. 🤷🏼‍♂️

[@AlphaAurora]

That's a very unnoticed aspect of the interwar years. Germany had stockpiles of munitions and spares ready to go around the outset of the war due to all the interwar era production. Moreover, the fast victories over smaller opponents (up to the roughly equivalent sized France), meant that they had plunder and time to rebuild stores. Meanwhile the Western Allies at least only really started stockpiles post-Munich. Heck, even the US programs don't really kick off till 1939 or so.

[@gimmedat5541]

TIK: why don't retailers raise the price on Toilet paper to regulate demand? TIK's Mom: well there are government regulations on this. TIK: But is this really the case? That you even cross checked your mother's statement on this is quite astonishing. Keep up the good work

[@YekouriGaming]

Keep in mind that it would be the wild west without regulations. One day it costs 10$, another day it costs 13$, next week its 4$ etc. One of the few markets that is pretty wild west is the housing market, and there it is a matter of cycle of 4-5 years between getting an awesome deal or getting screwed over. The issue with housing, basic consumer goods and other stuff is that you rarely have the time to wait around for the good deal if the price fluctuates a lot.

[@davedoe6445]

​@@YekouriGaming yeah man gov't just makes everything so smooth

[@coletrain5667]

@@YekouriGaming You are off your rocker. The housing market is easily one of the most highly regulated markets in modern economies, every single aspect of it other than price is a product of central planning and social engineering.

[@YekouriGaming]

@@coletrain5667 The price of a house is not regulated, while almost any other price is.

[@sorsocksfake]

I think there's a problem here though. Market prices are great with rational actors. The Great TP Crisis of 2020 was primarily irrational. It had nothing to do with real supply and demand, as far as I can tell. It was the result of an insanity (and then a self-fulfilling prophecy). You can't market against that. Raising prices would likely just fuel the insanity as people "think" that the TP factories have been invaded by corona-chan's ghost. That's exactly a situation where rationing does seem reasonable. Its only impact would be, to prevent insane people from buying a cart full of TP and thus preventing people who actually ran out, from getting any.

[@renngretsch]

Young TIK: Who brought these toys during the night? Mam: Santa, a magic old man that comes down the chimney. Young TIK: Let me just check that.

[@guernica4262]

But is that really the case?

[@lucas82]

Mam: Stick to toy tanks

[@HansLemurson]

If a *Corporation* issued enough new shares to double the number of outstanding shares overnight, they'd face hell from all their investors from the resulting share dilution, and the stock price would plummet from both dilution and loss of confidence. But when a *Central Bank* issues new currency...it's _totally different!_

[@AUniqueHandleName444]

To be fair, central banks print money with the express purpose of getting people to spend it. It doesn't seem to actually work very well.

[@HansLemurson]

@@AUniqueHandleName444 If they gave it to poor people to spend, then it would work, but it would also make the inflation be felt very quickly and the "inflation tax" would hurt the wealthy, which is a no-no.

[@LiftOffLife]

The Central bankers demise will be block chain technology and crytocurrencies.

[@intranext1359]

@@LiftOffLife or use gold because if there is an electromagnetic explosion from the sun (god forbid), all unprotected electronics would be fried

[@LCDqBqA]

@@LiftOffLife The Central banker's demise is simply to stop using fiat and the central bank...

[@TruetoCaesar]

Thanks for making hoi4 more immersive

[@TheImperatorKnight]

FIRST! I made HOI4 more immersive?

[@cplson2706]

Would love to see TIK play Germany or UK in HoI4.

[@purplefood1]

@@TheImperatorKnight It's a national spirit in the game that gets you a fairly sizable bonus but if you don't declare war you take a large debuff.

[@TruetoCaesar]

@@TheImperatorKnight the bills are a sub event in the game but I never knew what went on behind the scenes. Now I can imagine schact in his office working with the nazis.

[@ausar3852]

In the game mefo bills can be cancelled or kept going. If you keep on the bills you rearm faster than everyone but your civilian economy stays behind from countries like uk... but if you capture those countries germany becomes strongest economy

[@1CE.]

“Stick to tanks” Never got how people could sleep on these details. So much more interesting on how the war machine works than just the tactics themselves Average “WW2 tactics” Fan, Average “WW2 logistics” Enjoyer

[@acew2306]

I'm wondering what kind of pictures such a meme would even use

[@tyvamakes5226]

A picture of a tiger tank vs a detailed war map of the western front.

[@koj2698]

Average "enemy at the gates" watcher vs chad caucasus logistics researcher

[@tyvamakes5226]

@@koj2698 We need a better physical visual to emphasizes them.

[@koj2698]

@@tyvamakes5226 yeah but graphics work are boring and demanding so I doubt it could be done without professional support.

[@brianpalmer6823]

Isn’t this essentially a “War Bond” before a war broke out? That was my interpretation….

[@Zveebo]

Yes. But it would have been a much shorter video if TIK had just said that 😅

[@alanpennie8013]

It was something weirder, a quasi - government bill whose redemption could be indefinitely extended.

[@simplicius11]

No, it wasn't. The Mefo bills were only used and held by the arms producers and banks.

[@mauertal]

@@simplicius11 thats like the fed would buy her own loans..........crazy........oh NO......THEY DID THAT NOOOOOOOOOWWWWWWW..........

[@janehrahan5116]

@@Zveebo Just saying "the german 30s are the modern west" gets pushback from simpletons like simplicus down there :)

[@mickandrus367]

Back in the day, I studied central banking in grad school. TIK has a pretty good handle on how this works so I respect his opinion.

[@GuilhermePereira-vi6vc]

Ah yes, the MEFO bills, that thing that allow you to construct civilian factories faster as Germany in hoi4

[@sld1776]

Only indirectly, with the -5 percent to consumer goods. The tasty 25 percent buff applies to everything else you need to wage war except dockyards.

[@doodguytheblank2403]

Actually, the speed buff doesn’t apply to civilian factories.

[@lesliefranklin1870]

The toilet paper shortage last year (2020) was initially due to the consumers using toilet paper at a different location, home, rather than before, work. The toilet paper supply streams for home and work are different and are slow and difficult to change. It is not economically feasible to keep toilet paper in a big warehouse and redirect it quickly due to changes in market demands. There was actually a glut of toilet paper for the work and institutional supply stream. When people perceive a shortage of an essential item, they will tend to hoard that item. So, the perceived shortage resulted in a real shortage.

[@alanpennie8013]

There was the same problem with food as people ate out less.

[@georgekosko5124]

That's great and all but no, most people buying toilet paper did it because of panic buying, not because their home tp usage increased by 25%

[@surlyboomergaming2517]

Er.... no. At least not here (USA) the toilet paper problem happened almost over night with the quarantines. It also included just about any paper product you use at home, and basic food staples. So while your explanation is logical, it does not agree with the temporal realities.

[@YlL-ji2sl]

@@surlyboomergaming2517 It was clearly panic buying. People were beating each other up over the last pack of toilet paper. No one knew at the time whether the shops would remain fully open and the media said that there are shortages in toilet paper so the people bought even more. When you don't get toilet paper than you obviously buy other paper products to replace it which IS why the demand for napkins etc had risen aswell. And i get it. If i have to die i would want to die with a clean ass at least.

[@daizyflower272]

And then there was a boom in babies. Covid babies. And covid breakups.

[@NNN_613]

"It's distortions all the way down?" Wait a TIK, I thought it was turtles all the way down?

[@peterg76yt]

It's turtles but it looks like something financial because of all the distortion.

[@TheADPOL]

So, the MEFO bill...is almost literally just an IOU. Lol. "Give me your cash, you'll get it back and a bit more, I promise. Trust me dude."

[@BoxStudioExecutive]

Are you one of those people who don’t use banks

[@flamingoxe5984]

trust me dude it’s backed by the government

[@gargoyle7863]

Yep, the "trick" was hiding it away in the balance sheets as something different than a IOU, so it was harder for foreign intelligence to sum up the true spending on rearmament.

[@Hydrogenblonde]

TIK, whatever you do please do not "stick to tanks". Your economic assessments are a revalation and in simple terms destroy the economic BS fed to us in the wider media. More please.

[@cdcdrr]

Son: Dad, what is inflation? Me: Well, son- Private Banker: Yeah, what _is_ inflation? Central Banker: [cracks knuckles] Answer correctly. Me: *nervous sweating*

[@ian_b]

Being a bit of a Mises fanboy myself, I always like it when you do an economics video.

[@YlL-ji2sl]

How about learning something new instead of watching something you already knew?

[@zephyrus339]

I may have an idea on why they used the Netherlands as comparison. From an economic perspective the Netherlands functions largely as a German Bundesland. To have this make sense you must consider the following: The largest land border of the Netherlands is with Germany. People and business have done business on both sides of the border for centuries. Germany is the Netherlands largest trading partner. You must also consider the Ruhr area, Germany's industrial heartland. This area needs imported raw resources. How to they get these resources? Via the Rhine. How do you get on the Rhine? You go to the Northsea, enter the Netherlands and dock at Rotterdam, the biggest port in Europe (and the largest in the world before the rise of China in the 21st century). The Netherlands is a trading country. The more the Ruhr produces, the more products are transferred at Rotterdam. The more is transferred at Rotterdam, the more money the Netherlands earns. On the other hand if the Ruhr produces less (like in a crisis), the Netherlands earns less. So there is a direct impact of the German economy on the Dutch one. Also, prior to the Euro, the Dutch Gulden was pegged to the German Reichsmark. Comparing the two nations therefore makes some sense. Though Germany is a bigger country with a lot more economic flexibility. And the two countries have different laws and policies. So I wouldn't say any correlation is one on one.

[@lincolnkia4256]

“I May” isn’t a fact, buddy. 🙄 The Netherlands’ neutrality during World War I and its policy of non-intervention in European affairs made it a relatively neutral and objective reference point for comparing Germany’s economic and infrastructure achievements. This comparison could be made without the political baggage associated with other neighboring countries.

[@frontiervirtcharter]

@@lincolnkia4256 Political neutrality isn't the same as economic non-involvement. Politics sets up economic barriers, but in most cases those are gated barriers rather than absolute blockages.. Even North Korea and Myanmar still trade with the rest of the world, just with a lot of interference due to international and internal politics.

[@alexhodskins8426]

Thanks for all the info and not sticking to tanks

[@ardasurel8951]

Some aspects of the Mefo Wechsel maybe could be reexamined. The Mefo Wechsel were not bonds, they were bills of exchange. The difference is that a bond is an 'I owe you' whereas a bill of exchange is a 'You owe me'. The cash which Hjalmar Schacht identified to be idling around in safes was the cash of war industy supplying companies. The chain that the Mefo BoEs started was that such companies could use their idle cash for the purchase of input for their pruduction, deliver the produced goods to the Wehrmacht and then could isse their BoE with the Mefo as the borrower. So this is not a bond in which the public can invest as today. It is more like a contract where the supplier allows deferred payment to the purchaser. As this document was interest bearing, two thirds of all the Mefo BoEs were held till maturity. And before the date of maturity of the bulk of these, the Reichsbank laws were changed and the Reichsbank was obliged to refinance the government without limits. You also could not pay with the Mefo BoEs (in the sense of walking into a shop and paying with Mefo), what you could do was to offset your own debts to third parties (business to business) under the condition that your own creditor accepted these bills . Mefo bills were intended to be a loan by industrial producers in the armament sector to the government and only a total of a third of these was presented to the Reichsbank to be discounted in the sense of being exchanged into Reichsmark.

[@alanpennie8013]

A very clear explanation. It appears that MEFO bills were converted into state debt in 1939.

[@stargazerspark4499]

indeed thank you for pointing this out.

[@Niklas.K95]

Preventively: "TIK didn't gulaged himself"

[@samsonsoturian6013]

MEFO Bills = High Interest Treasury Bonds in simple terms. Issuing more bonds is also how governments deflate their currency when needed, because they can sell the bond and then delete the cash.

[@samsonsoturian6013]

@@DonnieAllenCooper anyone. Government bonds are as safe as the cash issued by the same government, and there was plenty of idle German currency.

[@AKUJIVALDO]

High interest? 4% is high?!

[@deanmurphy5735]

Careful Tik. You might be declared an enemy of the state and held at her majesty's pleasure.

[@fallingfallingfallingfalli500]

We all are. According to the "new" politic way of gauging "risks" we are "dangerous bugs" carriers.

[@auo2365]

TIK I gotta give you thanks. Your recommended readings got me through my history units. Without them I reckon I would be extremely lost in my modern history classes. Reading them was rather enlightening too. Thank you very much.

[@gilbertjones9157]

When you couple this video with yours on the logistics for the Eastern Front you have a very deep insight of the complexity of the economy, war and likely out come, Germany was dying since before 1937. A short take away is that it is better to be Switzerland or Sweden, armed but selling to everyone. I know they were occupied but what was economics of Vichy France, since they did not have to continue the war? There was a shortage of labor with over a million men entered during the war. Did the French have a deflationary period? Did their economy contract? Did Germany tip the scales when they stated to print 5 pound notes that were indistinguishable from the genuine B.E. fivers? Could Germany have waged the whole war using their chief foe's economic stability, make war using their money? Economic Price control by Nixon and Ford's Wipe Inflation Now is a smigine of what it was like in Germany which we may see come back during our hyperinflation but if we loose so many to the infection and treatment of Cov19 would the developing contraction stall out the inflation? One of the response to the Nixon Ford inflation and imposition of price and wage controls was innovation, No more New York steaks replaced by Kansas City Cuts, new product new price. The USA has been in a shooting war every decade since 1980 and instead of wage and price control they have used derivatives to manipulate all commodities and keep the hyperinflation buried while keeping production moving. Another country to check during WW2 is Spain; how did their economy fare during that time? ------- War will rototill the economy of both side of a conflict. A better way is not to engage in war. Spend small on war and make the front line boots pay as you fight but how can a pilot pay for the Warthog Gatling ammo or the fuel the plane uses, but a sniper could pay for both his 50 cal long barrel and the round he would use and who's going to be responsible for using a drone? War maybe good for innovation but in reality is is good for nothing.

[@lordbonney9779]

TIK I came to your channel for information about the battles and problems during WWII. But, I also learn so many things I didn’t know I wanted to learn, but I’m happy I have. Keep up the good work and don’t let naysayers get you down!

[@vareckthehistoricaldemon196]

The MEFO bills were always extremely confusing to me so thank you for this

[@etistone]

Great analysis! People have reached the same conclusions of dubious economical success of nazi Germany by looking other parameters such as child mortality, child growth, life expectancy, etc. They found out that there was no improvement on those parameter, despite reduction of unemployment, many people stayed miserable. While before the Nazis coming into power, there was improvement on those parameters. It is an indication that all the economic growth generated at the time was not directed at the people, but to rearmement and preparation for war.

[@anon_148]

Well, all that money directed to the war effort sure proved useful when Germany got itself in WW2 so I would say that their policy was a success no?

[@etistone]

@@anon_148 Yes, initially, when they plundered their neighbours after defeating them. But in the end, they lost big time.

[@anon_148]

@@etistone They were able to plunder and conquer said neighbours because they won offensive wars against very heavy odds, which is what their economic policy was supposed to enable. That is why I said that their economic policy was very sound, because it literally achieved what it was supposed to to a stunning degree. They ran heavy deficits to fund their army in a gamble to use said army to get the resources they lacked, even with TIK being tunnel-visioned into his ANCAP autism I don't get how he fails to see this. The economy is supposed to benefit the nation, not the other way around.

[@etistone]

@@anon_148 You are twisting the meaning of words. What you are describing is not an economic policy, it is a war policy, and yes it was successful, for a short time.

[@anon_148]

@@etistone What do you mean "for a short time", I'll say it once again they took over all of Europe against what seemed insurmountable odds and their economic policy helped them achieve that. TIK decries the "unsustainable" deficit spending and points to it as being the product of socialism incompetence, but clearly the economic policies helped them accomplish their goals. I don't quite understand what you mean when you say that what I'm talking about here is "war policy" and not economic policy, since I am referring to the way they allocated their budget and used the aforementioned deficit spending to finance the rearmament at the expense of other industries or long-term profit or sustainable growth, which is clearly a deliberate economic policy. The reasons they eventually lost were, among many others, the fact that their enemies simply had many times their industrial capacity, manpower and resources; I don't think anybody can deny that in 1939 and especially in 1941 Germany was punching way above their weight. I also believe it would be absolutely insane to claim that a more liberal, free-market oriented economic policy focused long-term economic growth would have had them better prepared for a war in 1939, which was clearly their goal.

[@1amjapan]

That was an amazing overview of a complex subject. I really appreciate how scholarly these lectures are, you're an excellent teacher.

[@jamiengo2343]

It’s really handy to get this simple explanation of inflation at 27:30. In fact, you have a great knack in making really complex sounding economic topics simple enough to allow me to wrap my head around them (just about), thanks!

[@frontiervirtcharter]

Except for the point at 27:04 where he misquotes what the wiki article on the screen says ..

[@garywebb8086]

Now I know where the US government got the idea for savings bonds. 🤔😳

[@Vitross]

Saving bonds are way way older than mefo bills.

[@samsonsoturian6013]

About central banks making money off money printing: That's only more or less true. In the civilized world hotshots are SALLARIED, and the men printing bills don't set the budget. In the US, inflation is targeted at 1%-2% to keep people investing and spending rather than saving. Of course, there's a conflict of interest where inflation behaves like a tax while not appearing as so, leading to many historic instances of currency mismanagement (mostly during wartime).

[@janehrahan5116]

Amazing. Almost everything you said is wrong.

[@samsonsoturian6013]

@@janehrahan5116 don't you have a court date to ignore? There's no combination of facts that renders everything I said wrong.

[@PeachesandCream225]

Thanks for the link to the pdf. Your passion for explaining history and economics is inspiring!

[@InterestedAmerican]

Allow me to swerve from the WWII-era German economy to current economic affairs that we all can see happening today (if we dare actually look) - It is about the condition of the United States economy (and by connection, the global economy, due to globalization) It is important to understand that the Federal Reserve follows the economic policies set by the Federal government. The Federal Reserve is no longer a completely independent agency. - Figures used are taken from the chart website used in the above video - The US currency supply 30 Dec 2007 is a modest $1.4-trillion. On 31 May 2021, the US currency supply reached a whopping $19.2-trillion. On average, that is an increase of 100% per year, since the 2008 financial crisis. Putting that into even greater perspective, it is a mind-bending 1,300% increase in the US currency supply over that 13 year period. However, we find the largest jump in sheer volume when we look at the period, 13 January 2021 thru 31 May 2021. During this period, the US currency supply went from $3.8-trillion, and reached that whopping $19.2-trillion figure. This means the US government created $15.4-trillion - that's a 500% increase in only 5 months! Anyone that has taken Economics-101 will understand that such government actions will inevitably have adverse effects the economy. Well guess what? There has been a very noticeable effect, and it is being felt right now by everyone in the United States. For the past few months consumer prices across the board have been slowly yet steadily rising. US Government economists claim the rising prices are only due to shortages in the supply chain caused by reopening the economy after the 1.5 year global pandemic shutdown. They also claim the prices will return to normal once businesses reach their pre-pandemic production capacities, and returning truck drivers start to once again deliver the increasing supply of commerce. When all this happens, the economy will be fine... you'll see. I'm completely skeptical of these claims, because I have been waiting since 2008's financial crisis for the US economy to force a policy reset. What I mean by "reset" is the moment when one economic policy becomes moot, and is no longer applicable to the current economic situation, and a new and different economic policy must be developed and implemented to steady the economy, so it can recover. To borrow from Professor Mark Blyth's (google/KZbin him) computer analogy; think of the entire economy as a computer, and the economic policy that runs it as the software that operates it. At present, the computer is running on 40-year old software that has been periodically updated. But now, it appears that software is going to cause the computer to crash. A new economic policy (the software) is needed so the next iteration of the economy (the computer) can run smoothly again... for 40-50 years, when it should all happens again (because history shows that this does happen periodically, ~twice a century).

[@stargazerspark4499]

this is of course totally unsustainable and the wheels are falling off regardless of how they try to apply the brakes to the economy, The U.S. is running out of countries to invade and plunder too. looks like the petrodollar system is failing as well so other countries won't need any more devalued fiat dollars to buy energy resources (thanks Russia!), meaning an end to exclusive world reserve currency status. how convenient we have a global crisis in the form of a p(l)andemic to serve as a pretext for a "Great Reset". what a fortuitous "coincidence".

[@lotus95t]

There were no hoards of cash sitting idle in Germany in 1933. Unemployment was at close to 30%. GDP declined by 8% in 1931 and 1932. From 1929 until 1933, Germany experienced deflation. By 1933 deflation was at 10% There was no need to invest as the value of money increased because of deflation. From 1933 onwards Germany experienced inflation due to new Government spending, but the highest rate of inflation was 1934 where it reached 4% and would by 1938would fall to 0%. The principal reasons for MEFO was to hide government funding of rearmament and jumpstart the economy, but it was different to cash in that MEFO was only issued on final goods output and the MEFO debt was almost always held by a bank. Thus the circulation of money (MEFO) and the circulation of goods remained in equilibrium. MEFO as a bank investment always paid at or above the rate of inflation so it meant that the Reichsbank could stagger repayment over a much longer period of time. Also, MEFO was only allowed to be used by state contractors and suppliers and only interchanged between them, allowing the government to control who could get it and use it, and thus it was never a true substitute for cash.

[@simplicius11]

Shhhhh..: ) Exactly, but stop it, you'll ruin his fairy tales.

[@user-lq5yx1ke5k]

Ah yes, Vox the pinnacle of Economics.

[@thebourgeoiscapitalist9431]

Keep up the good work TIK. I also found your video on why Hitler declared war on the USA quite useful in filling in several gaps in the explanation of his decision. However I have still wondered why it is said that Hitler wrote in his second book that he planned for war against America. This not only seems to be a bad decision but also would contradict his eastern front strategy.

[@GQ1123ja]

He needed the recorses of the SU to fully mechanize his Army and To build a Airforce and Navy to fight the western powers

[@rafaellorentz6592]

In Brazil they control the rise of prices caused by a inflation not by increasing productivity ( which, it’s kinda of smart) but by raising interest rates in banks, so it encourages people to save money. I never understood why the rising of interest rates would effect the stabilization of prices during an inflation. Thanks tik, for sharing a timeless knowledge. It’s not a WWII channel, because some issues of that era haunts us today.

[@ptkiller26]

The more I hear about the failures of inflationary policies, the more I am concerned for the world post-Covid. The sheer amount of fiat money that has been printed over the past year is likely to cause an huge economic crisis

[@sillypuppy5940]

It's here already.

[@lamwen03]

But the transfer of power to the government will remain. Which is, ultimately, the goal.

[@Zveebo]

All money is fiat money. Gold has no inherent value any more than anything else.

[@user-dp6xi7gq4k]

@@Zveebo Although not backed by gold, currencies are backed by goods and services. The more money you print without economic growth to back it, the more fiat it is. The point is, even though there isn't a gold standard, not all fiat money is created equal.

[@Zveebo]

@@user-dp6xi7gq4k Well, true to an extent, but money backed by a random commodity for which demand ebbs and flows over time is a poor way of running an economy (look at the silver-backed currencies of the past). Generally a good measure of whether money supply is keeping up with economic growth is simply to look at price inflation which is a fairly direct indicator of whether money supply is keeping a balanced pace with economic growth.

[@karisvenner3892]

Great explanation, very fortunate that inflation measures in "modern economies" only account for consumer goods and not, oh you know housing prices, market prices, gold prices, anything-except-bread prices. BTW you have a Typo at 7:40 "Prises" instead of "Prices"

[@sillypuppy5940]

Ah, inflation. Randomly picking a number would be more accurate than the official figures. (Or perhaps they do that?)

[@rhettbutler289]

keep the same prices but change the size/weight of the goods. My Cadbury creme egg keeps shrinking!

[@playmaka2007]

Not only are you a great historian, you are also a great economist. I guess being a great historian will do that to you!

[@soviettankmen]

I just recently discovered (thanks to my friend) that Hjalmar Schacht was an economic advisor in Indonesia during the 50s. I will rewatch this video to understand his views and read Indonesian literature to see how much of his impact in Indonesian early economy and is there a similarity of it with German Natsoc economy

[@wilmerholmqvist8705]

That exemple was great I finally understood

[@jimsackmanbusinesscoaching1344]

Disclaimer: I have not studied MEFOs in depth and am using the language of the video for this post. I think the challenges you are going to get come from the description of a MEFO bill. For all intents and purposes, a MEFO bill is a government issued bond. The MEFO has a single interesting feature in that it is exchangeable for cash at the request of the MEFO holder. All the government bonds that I am aware of are callable at the request of the government. I want to point out that these were apparently issued at a "discount". This would mean that the face value of the MEFO would be discounted against the cash value that represents. This would likely represent why they were not exchanged. Let me give your 4% and $1 example. A baker sells a bun for $1 of MEFO with 4% interest. The baker walks over to the bank that day to exchange the MEFO. The baker would not receive $1, but instead $0.96. This would be even more true if the maturity date was several years in the future. The other thing that should trigger economists was your quick jump over deflation (which if you sneeze you will miss). The general practice of operating governments at a deficit is that the debt principal is worth less in the future because of inflation. Periods of deflation are really bad for this. Operating at a deficit when there deflation is a way of bankrupting very quickly.

[@johnweatherby8718]

This was probably the weak point of the video the quotes about monetarist being wrong about the money supply decreasing and deflation not being harmful. While a general deflation can cause equilibrium, even Keynes admitted this, long term deflation transfers wealth as borrowers the loan plus interest with money that would buy more than when they took the loan so it transfers real purchasing power. There is a difference between prices dropping to reach equilibrium and long term deflation that transfers wealth that occurs with a trade deficit in a gold standard or if a central bank actually decreases the money supply rather than decreasing growth. You could say the same thing if you talk about short term general rise in prices to reach an equilibrium vs. long term rises in prices due to money supply and deficit spending. I don't want to harp on it much though because the general point was right.

[@alanpennie8013]

It was an effect a treasury bill but with the unusual quirk that after its original redemption date (180 days) it could be indefinitely extended in 90 day instalments. This is all from Wikipedia so it may not be quite accurate.

[@jimsackmanbusinesscoaching1344]

@@AYVYN My post did not talk about production or conquest at all. It simply related the MEFOs to bonds that exist today.

[@AYVYN]

@@jimsackmanbusinesscoaching1344 ​I apologize for my reply from last year. After continued research, you’re completely correct.

[@RafaelSantos-pi8py]

We can't understand the events during and leading to WW2 without understanding the economics behind them. And this channel is the first i see openly talking about them. Other documentaries totaly ignore the economics leaving a big gap of knowledge on the reasoning of the major players.

[@koj2698]

Such thought provoking and challenging debates are far more important (especially with todays world) than anything else on your channel(despite you are killing it there too).

[@Mrnewkrakbo]

Damn! This series is amazing TIK and this video is even better than the previous, my head is inflating now

[@mrniceguy7168]

re: toilet paper shortages - you should have seen all the people on Reddit talking about empty shelves in a “capitalist” economy (the US) and how fast you would get downvoted when you pointed out that price controls are not capitalist. I live in Florida and every time a hurricane is headed towards us, we face all sorts of shortages because it is illegal to raise prices in an “emergency.” When I point this out, people think that prices will be astronomically higher and that the 99% will go without gas and toilet paper. They also suddenly ignore how shitty it is right now, even though everyone in Florida knows it sucks.

[@mrniceguy7168]

@@TheImperatorKnight God forbid people make the choice to pay someone offering a service.

[@user-lq5yx1ke5k]

Reddit commies don't understand basic economics? Who would've thought

[@mrniceguy7168]

@@TheImperatorKnight Imagine actually being so hurt by people having different opinions that you have to make false reports to shut their opinion down. We’re literally talking boring economics here. Sheesh.

[@sergiojuanmembiela6223]

Nope. You face shortages because there is a hurricane and logistics are hurt by it and people hoard whatever they can. Rising price would not solve that, it would only make the shortages fall disproportionately on the poor.

[@damyr]

@@sergiojuanmembiela6223 THANK YOU! I just wanted to write that.

[@luelee6168]

Love your channel, LOVE IT!!! Your a history channel and yet you cover more than just history. Brilliant, simply brilliant.

[@lucienberton4538]

Hi TIK; What a timely topic for you to cover. I live in Lebanon. The country is presently bankrupt and going through a Weimar Republic style currency meltdown (all be it for entirely different reasons). Inflation rate is so far 1800% and rising. The central bank has seized all Euro/US$ bank accounts from all citizens and private companies i.e. forcing them to sell their US$ currency for local currency at the official rate which is 1/6th of the black market rate and dropping. Anyone needing to wire money abroad has to sell their US$ in the bank (i.e. Monkey Dollars) at the official rate, buy US$ at black market rate (from the bank that robbed them in the first place), and pay a transfer fees to boot, to make the transfer. Talk about being rear-ended without vaseline! No affection for bankers over here at all. L.

[@Paciat]

Thank you TIK. "America's Great Depression" from your link is in Polish too.

[@jangelbrich7056]

THIS is a topic I longed to know more since a long time. These mystic legendary MEFO thang. Thanks for this special video! (At 03:50 I was curious what You are showing. Alas those are not MEFO bills, but some other POW bills that the Wehrmacht issued in their detention camps. I would be keen to see a real MEFO bill ...)

[@BQD_Central]

For some reason you don't even find real Mefo-Wechsel Scheine in the German web. Not that easy to find one.

[@eressea_]

Magnificent video and so iluminating ! I've been hunting this MEFO dark and conveniently silenced trick for years. I've never listen to someone with the capacity of explaining so much about it with a deep historical understanding of circumsances, and a sense of humor. Thank you for this work

[@kernowpolski]

A great piece of work TIk and thanks for the PDF - all very illuminating!

[@monophthalmos9633]

Funny that you post something like this right now. I'm currently wondering what to do with my own "rainy day fund", it's not a fortune, but having worked for it, I wouldn't like to see it wiped out.

[@mahlapropyzm9180]

Land and gold are the only true assets.

[@TalkernateHistory]

Put it in a Roth IRA. Buy VTI.

[@jamesbeeching4341]

Very good! It is interesting that Schlact knew his economic "plan" was essentially false and was doomed...War in 39 looked inevitable from an economic point of view

[@pertys_socks]

Thank you, tik for explaining inflation and mefo bills. These things were never taught in school.

[@rocksandoil2241]

Your understanding of WWII is exceeded only by your lucid explanation of economics. Excellent Excellent

[@therealcaesar3157]

I always find your videos about economics to be extremely interesting. Have you considered a video about FRD's New Deal, because you only occasionally refer to it but never go into detail (as far as I have seen). I can imagine that you would be able to put a spin on the narrative on how he "ended a depression that went on for 12 years"

[@agesflow6815]

Thank you, TIK.

[@jaimejaime2930]

One of your greatest videos, amazing considering it was an economic discussion and had nothing to do with combat.

[@BelleDividends]

This one was a good economics video. Saying this as a marxist. Enlightening to learn of the difference between various definitions of "inflation" and that I should spend a lot more attention to "monetary inflation" vs "price inflation".

[@jimcronin2043]

The US Federal Reserve has stated that it has an "inflation goal" of 3%/yr. (measured by the CPI, not the Money Supply). Since when does inflation benefit anyone--except major banks? They can't afford price declines, particularly in real estate or else their loan portfolios will go upside down. This is evidence that the Fed is trying to fight off a "bubble" as discussed in the video. I would further suggest that it demonstrates an unwanted blurring of the lines between the private and public sectors

[@Zveebo]

Most countries have a target of a small level of inflation these days. Economists generally view a small amount of inflation as a good thing as it helps discourage the hoarding of money and means that people are encouraged to keep it flowing regularly around the economy. These sorts of targets have generally proved remarkably effective at keeping inflation and interest rates stable over the last couple of decade. Currency is a state creation, so I don’t see how a target for inflation blurs the lines with the private sector.

[@jimcronin2043]

@@Zveebo I am sorry but I am unable to agree with you. With the high levels of credit card debt in society it seems that people are not "hoarding cash". Perhaps that is the stated reason by the Fed, but maybe they are fibbing just a bit. Further, if individuals or companies were keeping large cash balances in bank accounts that would serve to increase the total pool of available capital which would increase the money supply even more because of the loan deposits with fractional reserves it would create.

[@christopherconard2831]

What happens to things like MEFO bills or government backed bonds after a war if they are issued by the loosing side? I understand that if it ends with a treaty and redrawing a few lines on the map the issuing authority is still responsible. But in the case of Germany or Japan after WWII, or Russia after WWI that government no longer exists.

[@tlanimass952]

In most cases, they just became toilet paper. At least this is what happened in Russia (speaking from personal experience). People basically lost their savings overnight.

[@dessertfoxo4096]

If the government secied to exist then the bonds no longer have value. A large part of the marshal plan post war in the UK and France was to stop the old government's falling and defaulting their debts and bonds.

[@cnake4617]

Nice video, as usual m8. Apart from explaining the mefo bills, this video also gave an insight into how currency works. Keep up the great work and never ever just "stick to tanks" Thanks a lot man

[@lukebrennan5780]

I was reading "The Rise and Fall of The Luftwaffe" and they discussed using MEFO bills. Your explanation was exactly what I was looking for. Congratulations on a great explanation. PS love the range of books on your shelf. I need to get some of those.

[@AYVYN]

Every word is an outlet for your biases. I will include real sources. Enterprises in Germany did not directly purchase MEFO Bills using traditional currency, nor did they hoard a rapidly devaluing currency. *“Each bill of exchange was strictly checked to ensure that it was backed by the appropriate commodity, e.g. no bills of exchange for loan were acknowledged.”* (‭Pentzlin, H. (1980). Hjalmar Schacht: Leben und Wirken einer umstrittenen Persönlichkeit. Ullstein Verlag‬). *“MEFO bills circulated widely outside the Reichsbank among companies and financial institutions.”* (Debt and Entanglements between the Wars / editor, Era Dabla-Norris - IMF eLibrary p. 220)

[@grekusPotatus]

Unfortunately in HIO4 Schacht doesn't have anything to do with the MEFO bills but some weird thing about Chehoslovakia. What a let down... Still I like the video so far.

[@EndOfSmallSanctuary97]

Paradox doesn't understand economics. What do you expect.

[@grekusPotatus]

@@EndOfSmallSanctuary97 Well the way I see it is that this is a historical inaccuracy since this activity is documented in the book Vampire Economy. It's a matter of bad research.

[@GuilhermePereira-vi6vc]

@@EndOfSmallSanctuary97 it is literally a game where a person, you, control literally the entire country like if you were a God. If you think that everything has to be perfectly represented you shouldn't even bought the game.

[@EndOfSmallSanctuary97]

@@GuilhermePereira-vi6vc That's not a counter-argument to what I said, Paradox apologist.

[@grundergesellscahftmkii6196]

In the end HoI is about game balancing due to multiplayer focus. So yeah don't expect much from them.

[@FlvAet421]

This video is a hidden gem. Thank you.

[@deeznutsmania]

Simple, they gave a -5% consumer goods and a +25% construction speed bonus to military buildings while draining 0.20 political power +0.15 after every 180 days without cancellation.

[@arvidkoop6738]

Hi TIK At the beginning of the video you said that everyone who invests in the market during economic unsertanty is insane and that saving is the correct way. But for example now there is inflation so youre money which you are saving is getting worth less. Can you explain?

[@TheImperatorKnight]

The currency is becoming worthless, so people rush to make more of it in the stock market. The problem is that the stock market is at all time highs, and is ridiculously overpriced. Worse, you have to beat the inflation - which was 30% in 2020 in the UK last year (that's how much Sterling they printed - about 30%. The CPI doesn't reflect this). Therefore, there's a high chance of a crash where you lose everything, and even if there wasn't, unless you day trade, you're going to get destroyed in the stock market, and you've got no chance in making 30% in a year. So unless you're someone like Gregory Mannarino and know what you're doing (which I'm certainly not), then I'd stay clear of the stock market.

[@arvidkoop6738]

@@TheImperatorKnight Thanks for the explanation!

[@SherlockHo1mes]

@@TheImperatorKnight What do you think about investing in commodities at the moment? I know they are volatile now but I think it’s better than just waiting for your money to be worthless.

[@davedoe6445]

​@@TheImperatorKnight But if central banks are inflating currencies, wouldn't it be reasonable to think that hard assets like (admittedly high quality) business equity would also go up in price? My model is: freshly printed money goes to rich investors who inflate asset prices first, and then later as inflation works its way across the economy business revenues rise to make the valuations reasonable. So it might be simultaneously a bubble and yet never "pop" in "real dollar" terms.

[@Zveebo]

@@TheImperatorKnight The increase in the money supply wasn’t anything like 30% in 2020 - what’s your source for this, TIK? In any case, you are creating the problem yourself by redefining inflation as something that has never been its primary meaning. The US stock market has averaged around 10% return (growth and dividends) yearly for well over a century. So long as you invest for the long term, and don’t do something absolutely insane like day trading or ‘investing’ in commodities or pyramid schemes like Bitcoin etc, you’ll be fine in the long run - you just have to accept there will be peaks and troughs and make sure not to act on any short term basis.

[@ethanlynch8275]

I really appreciate these types of videos, especially since it’s relevant to the current situation in world economics. Postscript I get the weird impression that, when currency is “deflating” the Central Planners want you to spend, and when currency is inflating they encourage you to save. Am I getting that right? Edit: My bad on the ‘they want you to save during inflation part’. That idea came from the fact that in school you were always encouraged to spend, even given the problems of inflation, rendering those savings largely worthless especially when they’re in paper currency or credit.

[@overdose8329]

Central planners never want you to save

[@ethanlynch8275]

@@overdose8329 You’re probably right.

[@menajev]

When currency is inflating they want you to spend, and when currency is deflating they want it to inflate.

[@ethanlynch8275]

@@menajev I think I get it - When the inflationary process is underway, the expansion of the supply of currency prompts the consoomer to spend more money, funneling large amounts of money through high taxes back into the government (accounting for spending multipliers). All in all, since the government just printed more money, and with no real change of the consoomer’s position (until the supply shortage hits, “prompting” the Central Planners to “rescue” the economy), the outcome (one of them) is the central planners are able to increase their share of the value of the currency over the consoomer. And, the process of inflation, shortage and more inflation is a repeating cycle that allows the process to continue relatively quietly. Would that be more accurate?

[@dogcalledholden]

Thank you for revealing this.

[@cc-dtv]

Great video guy, was a pleasant surprise to see some of the concepts surrounding fiat currency being discussed in the comments a few days ago show up in a video

[@oaples8790]

Something2 Hoi 4

[@quedtion_marks_kirby_modding]

Ik this will sound like a dumb question. But what would be a more historical way to balance the economy of a game like hoi4 that doesn't shows the mefo bills as soemthing that helped the economy while also keeping the game balance?

[@TheImperatorKnight]

It's difficult because HOI doesn't have a proper economy. In theory, there should be an inflation feature, much like there was in EU2, where after a while the currency you're using becomes worthless and the economy starts to implode. So it may have a good effect in the beginning (maybe), but then results in long-term stagnation and difficulty.

[@quedtion_marks_kirby_modding]

@@TheImperatorKnight I wish hoi4 had a proper economy, but it seems the devs are "too focused on the tanks" to add one.

[@juliantheapostate8295]

@@TheImperatorKnight There is a crude inflation debuff if you play as Nationalist China

[@DrewPicklesTheDark]

@@TheImperatorKnight The MEFO bills cost more and more political power over time, you don't notice it much in a typical game since it's basically set up so that when you annex other countries you get their gold and that reduces the penalties of the MEFO bills. If you _don't_ start a war (Did a "peaceful Hitler" run once), then they can actually stack pretty high if you let them go on. It's a really really bad way to represent it, but it does at least capture the "if you keep this up forever you're going to get screwed" aspect.

[@splatsma]

Fascinating, I bought the book, thank you for the recommendation.

[@holyfreakinschift5740]

I moved you from "Great Researcher" to "Damn Near Genius". No, no raise, but think of the added prestige with that title! Great work, dude.

[@FullSemiAuto357]

Should've named them mofo bills...

[@Ivan_I99999]

Seeing as you're delving into more economics, why not discuss the role of bonds in the economy and recessions.

[@tomg.1309]

Thanks for this one; very interesting and well researched; getting the PDF download, thanks

[@pluxauag7555]

Perfect, very sound explanation of money. "Princes of the Yen" a great documentary here on KZbin based on a wonderful book. As an Economics graduate, I didn't know what Window Guidance was until that opened my eyes. You explained this subject wonderfully, thank you TIK. Totally agree.

[@Random-om8rq]

you don't actually agree with him, because he's literally saying that window guidance, which was Japan's way and other countries's way in east asia to create money for productive investments, is in his eyes just hiding inflation, i think that's because credit creation, which what window guidance literally was, is for him inherently inflationary.

[@MrBigCookieCrumble]

_Sticking to Banks_ i see

[@davedoe6445]

Stick to Gold. I want to hear TiK's 100% gold investment plan :)

[@mistysowards7365]

Tik, can you please do something well outside your norm on your channel please? We are in fact in a legit cold war inside the US ... And given your knowledge on the subject I would love your thoughts on this; Please review this new book, American Marxist by Mark Levin. . I really fear history is repeating itself in the worst of ways and the ones repeating insane mistakes really believe they can avoid ALL the history of past failures. Please Tik.

[@masoodvoon8999]

I believe the point of the "zero savings" quote was purely in relation to the governmental sector in the article. The German government was heavily restricted due to Versailles and had limited means to raise money. It couldn't raise the money except through the MEFO bonds. I don't claim that the MEFO bonds caused the recovery but I think that is the only purpose of that quote: to state that the government had limited revenue abilities at its disposal and that the MEFO could sidestep the conventional means and unique restrictions of the time.

[@pd4165]

I heard an interesting take on the toilet paper shortage. 1) Consumers bought more (because we were told not to panic buy). 2) There was a shortage due to supply issues because 2a) Supply chains were short of drivers - less stock on the shelves makes people panic buy. 2b) Because most people were forced to stay home they stopped using the commercial toilet paper (fhose big rolls) and started using domestic paper - which came from different suppliers. There was plenty of toilet paper - locked up at workplaces and in the commercial supply chains - not accessable to the public. My own take on the supply and demand situation - I could easily have bought toilet paper at two or three times the price and absorbed (ha-ha) that price hike - it's not an expensive product. I would have reduced my purchase of toilet paper above that price not because it was unaffordable but because I'd start to feel cheated. At the time I assumed that supermarkets weren't price gouging because they wanted to keep your loyalty - after all they will sell loss leaders just to keep your custom. Thanks for the heads up on the price controls.

[@falsouth762]

It's TIK time!

[@ggimenes42]

Thank you TIK for not sticking to tanks

[@KaisarHendrik]

When talking about the UK government fixing prices during the pandemic saying: “There wouldn’t have been shortages.” If those rules weren’t in place, is very misleading. Yes, demand would have fallen if prices rose thus ‘ending’ shortages. That doesn’t take away that rising prices for everyday goods tends to increase demand for those goods temporarily because people fear the prices rising further. So they buy more simply to stockpile it. This drives prices up further outside of the reach of people living paycheck to paycheck. This is a problem because everyday goods are needed for everyday use, so a fall in demand for these goods is a very good indicator that standards of living are falling among middle and especially lower income households. Which in extreme cases may lead to theft and looting so people are able to fulfill these everyday needs. So at least a part of the shortages would have taken place anyway and would have hit the people with the lowest incomes hardest directly in their everyday lives. Something economic turbulent times already tend to do. And because we know that markets tend to recover best if as few people as possible hit the financial bottom and are thus still able to participate in the market once it recovers, pretty much all developed countries have put limits on price rises for everyday goods.

[@miguelangelsimonfernandez5498]

a ife changing lesson that is currently not told in many universities not today but for decades.

[@tancreddehauteville764]

I still think the stock market is a good investment. There is a constant flow of money going into the markets from pension funds - the political consequences from any crash would therefore be dire. Governments of the G8 will fight tooth and nail to prevent a crash in the markets.

[@zeitgeistx5239]

Typical libertarian Austrian school of economics TiK.

[@rahulgawali6135]

Got to revise economic concepts. Thanks. Need more of economy's hand in history.

[@jakubnita200]

great video, my a level textbook explained MEFO bills in a really confusing way and this cleared everything up for me

[@internetstrangerstrangerofweb]

Hitler could’ve just said no to the bills and waited a few months and everything would’ve been fixed ez

[@Nick-rs5if]

Ah yes, the magic theory of printing infinite currency without it losing value. I love it! Imagine asking some of these people if the prize of gold would decrease or not if every human on earth owned a 50kg bar of pure gold. Then what the inflated gold supply would do to the economy if its value didn't decrease...

[@Nick-rs5if]

Hint to people who does not understand how it works, or flat-out are in denial: Giving every human a 50kg bar of gold would make gold worthless. Because every human now owning 50kg worth of it means that the supply of gold has gone up to the point of it not having any value anymore. The higher the abundance of an object with a value to it (such as currency) there is in circulation, the lower its value becomes. Increasing currency supply erodes its value. That is inflation. The more currency there is in circulation, the more you can buy as you now have more currency to spend. This causes the masses to purchase more than is being produced or sold. That is shortage. The more currency there is in circulation, the more companies can charge you for any goods you may buy. That is rising prizes. Rising prizes and shortages are both symptoms of inflation.

[@AgendaFiles]

>"Ah yes, the magic theory of printing infinite currency without it losing value. I love it!" Explain how it is possible to have more money in circulation ABOVE the original principal sum that was introduced as monetized against the represented property. This is a basic 2nd grade maths question, which claiming that increasing the supply of money in circulation causes increased prices should be easy for you to explain. >"Imagine asking some of these people if the prize of gold would decrease or not if every human on earth owned a 50kg bar of pure gold." This analogy fails, just by the limited quantity of known gold ever mined. Use some maths Nick, total the estimated gold value of the complete known supply, match against the indebtednesses of the global economy and what do you have? Hint, there is not enough gold to sustain even a small modern nation, nor its continued growth without failure.

[@AgendaFiles]

@@Nick-rs5if >"Hint to people who does not understand how it works, or flat-out are in denial: Giving every human a 50kg bar of gold would make gold worthless. Because every human now owning 50kg worth of it means that the supply of gold has gone up to the point of it not having any value anymore." The problem is that you are not using any real world accounts that give credit to your analogy of 50k bar of gold, per person. >"The higher the abundance of an object with a value to it (such as currency) there is in circulation, the lower its value becomes. Increasing currency supply erodes its value. That is inflation." No, the value of money does not lose "value" merely by their being an alleged "abundance" of money which is being introduced and monetized that represents the total circulation of the money supply. Nick you are struggling with 2nd grade maths. "Price inflation" or the artificial costliness is not caused by new money being introduced into circulation that was already monetized against property. The increased cost is passed on by industry to the consumer through the multiplication of debt by interest. >"The more currency there is in circulation, the more you can buy as you now have more currency to spend. This causes the masses to purchase more than is being produced or sold. That is shortage." No chance, as with the increase in circulation and the growth and production, the economy matches. There is not just an alleged, "excess" supply of money and no growth of industry or the economy. The reason why people are unable to purchase is due to the multiplication of debt by interest, which destroys people's creditworthiness to assume further debt obligations to "borrow" and spend. The circulation is instead dedicated to serving the interest payments on the national debt than sustaining the industry and economy. As caused by interest. >"The more currency there is in circulation, the more companies can charge you for any goods you may buy. That is rising prizes." No chance, people would instead go elsewhere, and the prices would follow. Increased costliness is caused by interest, not an increase of monetized production in the supply of money being introduced. >"Rising prizes and shortages are both symptoms of inflation." No, "price inflation" and the artificial costliness is caused by interest, by the multiplication of debt by interest which causes all the money in circulation to be dedicated instead to servicing interest payments on the national debts rather than in sustaining industry. This topic is easy to get technical, although your examples explain nothing. Nick where do you see this excess supply of money; are you and everyone you know a wash in this "excess" supply? Where is it? Of course not, the circulation instead is deflated, which is why over the past decade bank rates have remained at the negative while the attempts continue to reflate the circulation through QE/federal overspending.

[@Nick-rs5if]

​@@AgendaFiles The examples are oversimplified and exaugurated on purpose to illustrate the blatant stupidity of the idea that one can increase (inflate) the currency supply without the consequences of that inflation ever occurring. Or even more stupid; denying that inflation occurs at all. Question: What would happen to the economy if the central bank printed ten times the amount of currency than what is currently in circulation? Answer: Venezuela, the Weimar Republic and the early Soviet Union. There are no two-ways about it, because that's how inflation works, and the economy by extension. I'd say it's basic, elementary-level math, but it isn't even that. It is just simple logic. If gold was in abundance, than the value of gold would decrease, that is the message I tried to communicate, though it seems you missed it, and overshot the point by a country mile. If an object with a value attached to it is in abundance, than it loses its value, because it is now abundant, meaning that the supply of that object is now inflated. It's so horrendously obvious that I shouldn't even have to explain it. It doesn't even have to be currency, collector items for instance wouldn't be collector items if everybody had them. Another great example is trading card games. A card is only as valuable as it is rare, the more of it exists, the less it'll be worth. Inflation of currency works on the same principle. It really is that simple. What would happen to the market, and to society if everyone were freedom-dollar millionaires?

[@Nick-rs5if]

Damn TIK, you really do attract the weirdest people. Really glad you're here. KZbin really needs this kind of content! 😄

[@jackmara7659]

Sometimes sceptical of tics work, brilliant yes but sometimes sceptical 🤨 However...! This is nail on the head perfect 👌 and epically so... Exactly what needs to be heard by the people who care to listen, there’s no doubt possible about what is really going on in the world right now. Much respect from “not generally a fan” 👍