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From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of 1914-23
© Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, 28. 7. 2013© Dr. Heinrich Kahlert, GOC+Partner, Crisis Conf., Durham UK, 25. 7. 2013
From ‘War Profiteer’ to ‘Inflation Underdog’: the German Chemical Industry during the Inflation Crises of 1914-23
Heinrich E. R. K. KAHLERTEmail: [email protected]
During hyperinflation, banknotes had lost so much value that they
were used as wallpaper, being much
cheaper than actual wallpaper.
From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of 1914-23
© Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, 28. 7. 2013
• Motivation• Introduction• Methodological Discussion:
Can we obtain real data?• Results:
a.) General Economic Trendb.) German Chemistryc.) From War Profiteer to Underdog
• Summarisation
Overview:
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From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of 1914-23
© Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, 28. 7. 2013
• “Reviving” my PhD-Thesis caused this part was not (yet) quoted• Searching new Partners for Multi-Discipline Project (EU)
(Historical) Consequences of Earthquake, Flood, Fire, Tornado• Our (GOC+Partner) Competence:
Modelling Risk on NPP with so called PSA-Methodology• Concrete:
We are experts on Time-Series Analysis, Risk Hazard Modelling,Geochemical Modelling etc.
• The lectures of Bruce Campbell & Mark Casson were good examples to give examples for collaboration
Motivation:
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From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of 1914-23
© Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, 28. 7. 2013
Introduction
20 Billion Bill
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From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of 1914-23
© Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, 28. 7. 2013
Introduction
Sergey Potashov (2012)German Inflation „Third Kind Crisis“ Energy Crises „Second Kind“Depresson „First Kind“
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From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of 1914-23
© Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, 28. 7. 2013
Introduction
Gutenberg and the Billions-Press, “I never intended this!” From the German satirical magazine Simplicissimus, 1923.
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From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of 1914-23
© Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, 28. 7. 2013
Introduction
Holtfrerich (1984);
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From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of 1914-23
© Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, 28. 7. 2013
Introduction
Widdig (2001)
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From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of 1914-23
© Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, 28. 7. 2013
Methodological Discussion: Purchasing Power Parity (PPP)
1.2 $
0.6 $
WWI First Level Crisis Depression Second Rate
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From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of 1914-23
© Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, 28. 7. 2013
• Check historical data on Consistency (here US with German data) Surprising good, although inflation years were “Data Deserts” (Feldman)
Methodological Discussion: Comparison of Data
Kahlert, 2001
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From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of 1914-23
© Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, 28. 7. 2013
• Still today PPP is used as suitable indicator Advantage: Historic data can be obtainedDisadvantage: Equilibrium method
• However:Hyper-Inflation results Non-Equilibrium Condition, e.g. Currency velocity change rapidly (t) (see lecture of Mark Casson his chapter “quantity theory”)
Methodological Discussion:
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From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of 1914-23
© Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, 28. 7. 2013
• The consequence of pressing money can historical be investigated in the present time with various sources (quantity theory)
• The velocity of money, however, hardly• Appropriate Method only the relation between Wholesale Price
Index (WPI) as most time sensitive indicator and exchange rate (here: $/ Mark unweighted PPP)
Methodological Discussion:
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From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of 1914-23
© Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, 28. 7. 2013
Methodological Discussion: Precision versus Historian Approach
Pearson CF > 0.92 !!
Equilibrium Condition by Introduction of “Rentenmark”
Kahlert, 2001
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Unweighted (only $/Mark , 20% external trade) and weighted PPP (Holtfrerich 70% external trade; Bundesbank Method, all Currency/Mark) Method are nearly identical (PCF=0.92)
Unweighted=Historical (Decision making); Weighted more correct Difference neglectable
From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of 1914-23
© Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, 28. 7. 2013
• Using the right basket of commodities (goods) (here US-results)
• Index reference preferable near your historical problem
• But keep in mind: Still comparing apples with oranges (but not eggs)
Methodological Discussion: Suitability of WPI
Kahlert, 2001
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From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of 1914-23
© Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, 28. 7. 2013
• Can we obtain real data?Yes, we can… (Kahlert not Obama) to some extend
Methodological Discussion:
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From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of 1914-23
© Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, 28. 7. 2013
• Third highest inflation rate in modern history But the most important economic power of all these Using the most stable currency (Gold, $) in comparison with inflated currency to obtain real data
Results : General Economic Trend
Bernholz 2006
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From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of 1914-23
© Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, 28. 7. 2013
Results : WPI (all Prod.) US, GB, in comparison with inflat. WPI Germany
Kahlert, 2001
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From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of 1914-23
© Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, 28. 7. 2013
Results : Revenue & Earnings “IG-Group” during WWI
Kahlert, 2001
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From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of 1914-23
© Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, 28. 7. 2013
• Real Price Maximum Germany 1918 (Indicator for loosing the economic war) regardless basket of goods,
• US Maximum 1920, but WPI Chemistry high since beginning WWI! war profiteer (DuPont etc.)
• Decoupling German economic history with rest of world
Results : Comparison WPI (Indust. & Chem. ) US with DR
WWI was for Chem. Ind. Ideal caused by military actions: “Geld verpulvern” (=“to shoot one’s wad”) by artillery
Kahlert, 2001
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From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of 1914-23
© Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, 28. 7. 2013
Results : “Deflated” WPI 1916-24 for German Chemical Products
Kahlert, 2001
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From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of 1914-23
© Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, 28. 7. 2013
Results : From War Profiteer to Underdog to Profiteer
Hindenburg Program
Loosing War (Economic)
Hunger-Blockadefinished
London Ultimatum 226,132 Bill. GM (=real Mark)
“Ruhrkampf”(=French Occup.)
IntroductionRentenmark
Violating “Shannon Theorem”
Pearson CF (> 0.75)
“World “ US-Recession
20 Bill. GM=7000 t Gold
Kahlert, 2001
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From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of 1914-23
© Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, 28. 7. 2013
Results : From War Profiteer to Underdog to Profiteer (IG-Group)
Kahlert, 2001
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From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of 1914-23
© Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, 28. 7. 2013
• WWI produces War Profiteer until 1916• Then loosing real money, but thinking (chemical industry), that they
earning money until 1918 (=Underdog)• 1919 lost year (no war material, limited export possible caused by
British blockade), the money reserve were sucked by inflation, but the non-current assets (plants, human capital) is match decisive in long term ( Haber-Bosch, Methanol etc.)
• 1920-23 Export very profitable caused by low PPP in comparison foreign PPP War profiteer
Summarisation
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From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of 1914-23
© Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, 28. 7. 2013
• WWI ending in terms of economic history at end 1923 for GERMANY (and Austria, Serbia)
• The increase of German Chemical Industry after WWI was heavily influenced by inflation effects, hence through PPP, and technological revolutions (not discussed here)
Summarisation :
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From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of 1914-23
© Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, 28. 7. 2013
Discussion
Sponsor: GOC+Partner Ltd. CH-2502 BielHans-Peter Gutknecht, Architect; CH 2540 Grenchen; [email protected]