Long-time readers of these missives will know that I am fascinated by the long-term memory of societies and how things like the German aversion to debt and fear of inflation have become cultural traits.
This is a fascinating study Joachim. Thank you for highlighting and adding your own perspectives.
I wonder if this might also correlate with other behaviours, eg hoarding. Also, and apt to our current global situation, might this he expanded to eg gold hoarding in Asian societies, who perhaps know all too well the perils of trusting their governments and institutions?
This definitely translates into a preference for gold. Germans, with the exception of the Swiss, are traditionally more open to investing in gold than other Europeans.
There was a large display of gold bars (Umicore and Hereaus) and coins (Krugerrands, Maple Leafs, Golden Eagles, and Kangaroos) for sale next to the teller window at the local Commerzbank last week, which was the first time I'd ever seen this ... it made me wonder if gold was likely peaking at around $3,400 https://goldprice.org ;-)
Those inter-generational memories are indeed long and strong. My German wife's family still has a kitchen cabinet with the inside papered in RM Million and Billion notes! My paternal line were relatively wealthy US industrialists, but my maternal grandfather's family lost it all in the Great Depression, and his words of wisdom clearly had a bigger impact on me than it did my Silent Generation parents who grew up in US post-war unbridled prosperity. I'm Gen X, and outside of an ill-advised car loan between when I was 22 and 26, I have never had any student loans, run a credit card bill, nor borrowed money for anything else in my whole life. In retrospect, I probably should've levered up a bit more and taken advantage of low borrowing rates, but was always too risk-averse. "In God we trust, all others pay cash".
Fascinating though these results are, I'm struggling a bit to believe them. During Weimar, inflation was in the tens of thousands of percent. Shouldn't that completely dwarf any local variation.
I also think that the aversion to inflation has also to do with the fact that Germans are a very risk averse lot, which means both that they save a lot and that they put their savings into low-risk products, which inevitably are bonds or savings accounts - given their fixed compensation, such savings are easily eroded by inflation. I think that explains inflation aversion as much as the Weimar story.
I agree that the Germans are more risk-averse as a nation than others, partly because of their historical experiences.
But the variation in local inflation in Weimar translates into variation in local risk aversion or inflation expectations, which I find fascinating. And yes, the overall level of inflation in Weimar was thousands of per cent, but the variation in local inflation was still hundreds of per cent. And in a hyperinflation, that does make a big difference, I think. Not that I have first-hand experience, though.
The Polish results are a big suprise because the population was almost entirely replaced with ethnic Poles (many of whom came from parts of eastern Poland which became western USSR like Lvov)
A possible natural experiment would be a survey of inflation expectations of those Germans whose grandparents/great-grandparents lived totally outside Weimar Germany i.e. USSR Volga River, Central Asia, Romainia, Yugoslavia, Baltics etc. and who went to live in modern Germany when communism collapsed. These folks didn't experiance the stress of Weimar hyper inflation at all (they had, ahem, other problems to worry about).
fascinating! I had no idea the cultural aversion to inflation is so strong in now-Polish Silesia and Pomerania.
It all fits the theoretical structure of cultural materialism à la Marvin Harris, whereas culture follows economic structure and circumstances, and not vice-versa.
I would assume there is another variable, though. Hyperinflation in Germany was coupled with extreme social unrest and societal dysfunction. Ian Kershaw has written tomes about how the murder rate increased exponentially in Germany in the 1920s, to levels unparalleled anywhere in the world nowadays. I suspect e.g. Turkish folks who knew hyperinflation don't have the same degree of engrained collective aversion as Germans did.
This is really interesting analysis. I wonder if there is any effect cause though by the displacement of people after the war, plus the effects of immigration and how the demography of Germany has changed overall since the 1920s. It’s a great case study on collective memory at a local level but I wonder how much those localities have changed over the last hundred years.
The academic paper linked in the text has some info on the migration, but the key is that if people move to a region with high or low past inflation, they are immersed into a local narrative about inflation and change their own views to be more in line with their neighbours.
I am totally with you on the intergenerational transmission of trauma, Joachim. What a find this study is!
Here's another way it manifests itself. Forget enjoying your meal: Germans are the fastest eaters in Europe. “Eat it before someone else eats it away from you!”
I was just in Denmark on business. The meals were shared in a group of Danes, Canadians and Germans. Once again, the Germans were the first to finish eating every single time, as though it were a race. The result being that they sat there awkwardly, waiting for the rest of us.
Which is a real shame, because the food was excellent.
This is a fascinating study Joachim. Thank you for highlighting and adding your own perspectives.
I wonder if this might also correlate with other behaviours, eg hoarding. Also, and apt to our current global situation, might this he expanded to eg gold hoarding in Asian societies, who perhaps know all too well the perils of trusting their governments and institutions?
This definitely translates into a preference for gold. Germans, with the exception of the Swiss, are traditionally more open to investing in gold than other Europeans.
There was a large display of gold bars (Umicore and Hereaus) and coins (Krugerrands, Maple Leafs, Golden Eagles, and Kangaroos) for sale next to the teller window at the local Commerzbank last week, which was the first time I'd ever seen this ... it made me wonder if gold was likely peaking at around $3,400 https://goldprice.org ;-)
$3,500 max, if you ask me
I've thought more about precious metals in the past month that I ever have, and likely ever will again ;-)
Gold https://substack.com/@gunnarmiller/note/c-113843366
Silver https://substack.com/@gunnarmiller/note/c-111207291
Those inter-generational memories are indeed long and strong. My German wife's family still has a kitchen cabinet with the inside papered in RM Million and Billion notes! My paternal line were relatively wealthy US industrialists, but my maternal grandfather's family lost it all in the Great Depression, and his words of wisdom clearly had a bigger impact on me than it did my Silent Generation parents who grew up in US post-war unbridled prosperity. I'm Gen X, and outside of an ill-advised car loan between when I was 22 and 26, I have never had any student loans, run a credit card bill, nor borrowed money for anything else in my whole life. In retrospect, I probably should've levered up a bit more and taken advantage of low borrowing rates, but was always too risk-averse. "In God we trust, all others pay cash".
Fascinating though these results are, I'm struggling a bit to believe them. During Weimar, inflation was in the tens of thousands of percent. Shouldn't that completely dwarf any local variation.
I also think that the aversion to inflation has also to do with the fact that Germans are a very risk averse lot, which means both that they save a lot and that they put their savings into low-risk products, which inevitably are bonds or savings accounts - given their fixed compensation, such savings are easily eroded by inflation. I think that explains inflation aversion as much as the Weimar story.
I agree that the Germans are more risk-averse as a nation than others, partly because of their historical experiences.
But the variation in local inflation in Weimar translates into variation in local risk aversion or inflation expectations, which I find fascinating. And yes, the overall level of inflation in Weimar was thousands of per cent, but the variation in local inflation was still hundreds of per cent. And in a hyperinflation, that does make a big difference, I think. Not that I have first-hand experience, though.
Well done for bringing this to our attention.
The Polish results are a big suprise because the population was almost entirely replaced with ethnic Poles (many of whom came from parts of eastern Poland which became western USSR like Lvov)
A possible natural experiment would be a survey of inflation expectations of those Germans whose grandparents/great-grandparents lived totally outside Weimar Germany i.e. USSR Volga River, Central Asia, Romainia, Yugoslavia, Baltics etc. and who went to live in modern Germany when communism collapsed. These folks didn't experiance the stress of Weimar hyper inflation at all (they had, ahem, other problems to worry about).
The key word in your comment is "almost".
fascinating! I had no idea the cultural aversion to inflation is so strong in now-Polish Silesia and Pomerania.
It all fits the theoretical structure of cultural materialism à la Marvin Harris, whereas culture follows economic structure and circumstances, and not vice-versa.
I would assume there is another variable, though. Hyperinflation in Germany was coupled with extreme social unrest and societal dysfunction. Ian Kershaw has written tomes about how the murder rate increased exponentially in Germany in the 1920s, to levels unparalleled anywhere in the world nowadays. I suspect e.g. Turkish folks who knew hyperinflation don't have the same degree of engrained collective aversion as Germans did.
This is really interesting analysis. I wonder if there is any effect cause though by the displacement of people after the war, plus the effects of immigration and how the demography of Germany has changed overall since the 1920s. It’s a great case study on collective memory at a local level but I wonder how much those localities have changed over the last hundred years.
The academic paper linked in the text has some info on the migration, but the key is that if people move to a region with high or low past inflation, they are immersed into a local narrative about inflation and change their own views to be more in line with their neighbours.
I am totally with you on the intergenerational transmission of trauma, Joachim. What a find this study is!
Here's another way it manifests itself. Forget enjoying your meal: Germans are the fastest eaters in Europe. “Eat it before someone else eats it away from you!”
I was just in Denmark on business. The meals were shared in a group of Danes, Canadians and Germans. Once again, the Germans were the first to finish eating every single time, as though it were a race. The result being that they sat there awkwardly, waiting for the rest of us.
Which is a real shame, because the food was excellent.