Historical Response #28: Ellen Brown Refutes My Statement That the German Central Bank Was a Government Bank by Quoting Experts Who Also Say It Was.

Gary North

Ellen Brown says in The Web of Debt that the German central bank in 1921-23 was privately owned. I offered evidence that it was a government institution. This evidence is quite conventional and widely accepted.

She says I'm wrong. Then she quotes two experts who say the central bank was a government institution.

28. Germany's hyperinflation (1921-23) happened only after the central bank was privatized.

My section on that currently reads as follows, and I believe it is accurate:

The Weimar financial crisis began with the crushing reparations payments imposed at the Treaty of Versailles. Hjalmar Schacht, who was then currency commissioner for the Republic, complained:

The Treaty of Versailles is a model of ingenious measures for the economic destruction of Germany. . . . [T]he Reich could not find any way of holding its head above the water other than by the inflationary expedient of printing bank notes.

Michael Hudson is an economist who has studied hyperinflation extensively. He asserts that "every hyperinflation in history stems from the foreign exchange markets. It stems from governments trying to throw enough of their currency on the market to pay their foreign debts."10

That was the precipitating cause of the Weimar financial collapse, but there was more. Zarlenga writes that Schacht proceeded in his 1967 book The Magic of Money "to let the cat out of the bag, writing in German, with some truly remarkable admissions that shatter the 'accepted wisdom' the financial community has promulgated on the German hyperinflation."11 Schacht said that it was chiefly the privately owned Reichsbank that was pumping new currency into the economy.

Let's examine the statement from her first expert.

The Weimar financial crisis began with the crushing reparations payments imposed at the Treaty of Versailles. Hjalmar Schacht, who was then currency commissioner for the Republic, complained:

The Treaty of Versailles is a model of ingenious measures for the economic destruction of Germany. . . . [T]he Reich could not find any way of holding its head above the water other than by the inflationary expedient of printing bank notes.

Schacht says the Reich printed the bank notes. The Reich was the government. To quote Homer Simpson: "Duh!"

Second, she quotes Michael Hudson. Who is he? We read on Wikipedia: "Hudson served as Chief Economic Advisor for Dennis Kucinich's 2008 presidential campaign and holds the same position in Kucinich's Congressional campaign." Kucinich is the Left's version of Ron Paul. Here is what he said: "every hyperinflation in history stems from the foreign exchange markets. It stems from governments trying to throw enough of their currency on the market to pay their foreign debts." The operative word here is governments.

So far, she has offered evidence that I was right, namely, that Germany's central bank in 1921-23 was a government institution. This is probably not the best approach to refuting me. But I, of course, am biased.

Why is this such a defeat for her? Because her book is a call to let governments print paper money. She says that we can trust governments to do this. She refuses to acknowledge that the only hyperinflations in history were conducted by governments through their government-owned central banks. She also blames currency speculators for the rise in prices. As for paper money bills for a trillion units of the currency, this had nothing to do with rising prices, such as in Zimbabwe. Yes, Germany issued such bills, as I showed, but this was a privately owned bank. So that doesn't count, she is implying.

It was a government-owned bank. It does count. Conclusion: we dare not trust governments to print unbacked fiat money. We risk hyperinflation if we do.

Third, she quotes Greenbacker Stephen Zarlenga, who quotes Hitler's economics minister on something unrelated to the ownership of the Reichsbank. (The word Reich" means "government.) Then she says Zarlenga added: "Schacht said that it was chiefly the privately owned Reichsbank that was pumping new currency into the economy." If Zarlenga had evidence that Schacht used the words "privately owned," he would have quoted it. He was putting words in Schacht's mouth.

By the way, Zarlenga has posted a stinging refutation of Brown's book on his site. It says that she has refused to call for the abolition of the debt system. It accuses her of making a U-turn. Zarlenga did not have the courage to write the review, which speaks poorly of him. My view is this: don't let someone else do the heavy lifting for you. The review concludes:

For disclosure purposes, I have met Ellen Hodgson Brown on several occasions, and I like to think she has good intentions. However, I strongly disagree with the approach taken and the conclusions drawn in this book, and articles arising from it, because they do not change the system that has wreaked so much havoc. I have tried on several occasions to convey to the author that doing things the same way won't change anything, but I have had no satisfactory response.

Don't hold your breath, buddy. You aren't going to receive one. When it comes to providing satisfactory responses to important questions relating to her book, Ellen Brown is not your girl.