Deflation – not hyperinflation – brought Hitler to power

This Matt O’Brien in The Atlantic:

“Everybody knows you can draw a straight line from its hyperinflation to Hitler, but, in this case, what everybody knows is wrong. The Nazis didn’t take power when prices were doubling every 4 days in 1923– they tried, and failed — but rather when prices were falling in 1933.”

Matt is of course right – unfortunately few European policy makers seem to have studied any economic and political history. Furthermore, few advocates of free market Capitalism today realise that the biggest threat to the capitalist system is not overly easy monetary policy. The biggest threat to free market Capitalism is overly tight monetary policy as it brings reactionary and populist forces – whether red or brown – to power.

Update: This is from the German magazine Spiegel:

From 1922-1923, hyperinflation plagued Germany and helped fuel the eventual rise of Adolf Hitler.”

…I guess somebody in the German media needs a lesson in German history.

HT Petar Sisko.

PS Scott Sumner has a new blog post on how wrong many free market proponents are about monetary issues.

PPS take a look at this news story from the deflationary euro zone.

Leave a comment


  1. I don’t think this is a binary either-inflation-or-deflation thing. Sure, Hitler took power in a deflation. But his Beer Hall Putsch occurred during the hyperinflation. Monetary instability in general, not hyperinflation OR deflation, helped put Hitler on his trajectory towards ultimate power.

    I do agree though that people seem to focus on the hyperinflation aspect.

  2. ChrisH

     /  November 18, 2013

    Political movements have long and variable lags.

  3. The bookie that the ASI used to forecast UK inflation and unemployment now offers a bet on Euro Area deflation:

    Currently, they suggest a 25% chance for deflation before and including 2015. However, they define the event as an annual average of HICP which to me looks like a high bar.

    Would you take it?

  4. migas

     /  November 19, 2013

    During the early 30s, the US, the UK and other european countries experienced a deflation. So, why the far right only got to power in Germany?
    If deflation is the main cause for the growth of far right populist ideas, why is Japan immune to it?

    Saying it was the deflation that brought Hitler to power is as simplistic as saying it was the hyperinflation of the early 20s.

    Take a look at portuguese economic history.

    “Portugal’s First Republic (1910–26) became, in the words of historian Douglas L. Wheeler, “midwife to Europe’s longest surviving authoritarian system”. Under the sixteen-year parliamentary regime of the republic, with its forty-five governments, growing fiscal deficits, financed by money creation and foreign borrowing, climaxed in hyper-inflation and a moratorium on Portugal’s external debt service. The cost of living around 1926 was thirty times higher than what it had been in 1914. Fiscal imprudence and accelerating inflation gave way to massive capital flight, crippling domestic investment.”

    “The First Republic was ended by a military coup in May 1926…”

  5. They would not have had the deflation if people had not been so tramatized by the hyperinflation.

  1. ラルス・クリステンセン 「ヒットラーを権力の座に押し上げたのはハイパーインフレではなくデフレである」 — 経済学101

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