Post-WWI inflation in Austria

"An economist who knew how to describe graphically all the phases of the inflation which spread from Austria to Germany, would find unsurpassed material for an exciting novel, for the chaos took on ever more fantastic forms. Soon nobody knew what any article was worth. ...

The most grotesque discrepancy developed with respect to rents, the government having forbidden any rise; thus tenants, the great majority, were protected but property owners were the losers. Before long, a medium-size apartment in Austria cost its tenant less for the whole year than a single dinner; .... A man who had been saving for forty years and who, furthermore, had patriotically invested his all in war bonds, became a beggar. A man who had debts became free of them. A man who respected the food rationing system starved; only one who disregarded it brazenly could eat his fill. ....

Austria was "discovered" and suffered a calamitous "tourist season".

Every hotel in Vienna was filled with these vultures; they bought everything from toothbrushes to landed estates, they mopped up private collections and antique stocks before their owners, in their distress, woke to how they had been plundered. ... The tidings of cheap living and cheap goods in Austria spread far and wide; greedy visitors came from Sweden, from France; more Italian, French, Turkish and Rumanian was spoken than German in Vienna's business district. Even Germany, where the inflation started at a much slower pace even if it eventually became a hundred thousand times greater than Austria's, exploited our shrinking krone to the advantage of her mark."

Stefan Zweig, The World of Yesterday (Die Welt von Gestern, Viking Press, 1943, reproduced by University of Nebraska Press, 1964), pp. 291-293.

Thanks to Larry Willmore for this Tdj. Larry comments on the writer as follows: “Austrian writer Stefan Zweig (1881-1942) emigrated in 1934, settling briefly in London, then in New York State before moving to Brazil where he and his wife died by their own hands on 23 February 1942, convinced that Hitler and the Nazis would win the war. This fascinating book is his autobiography. Zweig is best-known for his short stories and biographies, all of which have been translated into English and other languages.”

Today we face the specter of rising inflation but hopefully nothing like that of Austria and Germany in the 1920s. Nevertheless, oil and food prices are up, and up substantially, as are those for other commodities, and the dollar is weak making imports more expensive. This puts upward pressures on prices at a time when the Fed is also pouring money into the financial system in order to avoid a collapse of many banks. All this generates expectations of a steep rise in inflation, and leads many to feel it is likely that hikes in interest rates will not be far behind, despite the fact that the economy appears to be slowing and could use a boost from cheap money. Times are confusing for the economy and economists, and we shall simply have to wait and see if the incipient inflation and looming downturn that seems to be on its way really makes an appearance