Martin Wolf MARCH 24 2020 The coronavirus seeks only t.docx

Martin Wolf MARCH 24 2020
The coronavirus seeks only to replicate. We seek to halt that
replication. Unlike the virus, humans make
choices. This pandemic will pass into history. But the way in
which it passes will shape the world it leaves
behind. It is the first such pandemic for a century. And it comes
to a world that — unlike in 1918, when
the Spanish flu hit — has been at peace and enjoys
unprecedented wealth. We should be able to
manage it well. If we do not do so, this will be a turning point
for the worse. Making the right decisions
requires that we understand the options and their moral
implications. We now confront two
fundamental sets of choices: within our countries and across
borders. In high-income countries, the
biggest choice is how aggressively to halt transmission of the
virus. But we also need to decide who will
bear the costs of that choice and how. Some continue to argue
that it is wrong to force the economy
into a depression to suppress transmission of the virus. This,

they suggest, will cause unnecessary
disruption. If, instead, the virus is left to spread relatively
freely, we can achieve “herd immunity”,
sustain the economy and still focus resources on the vulnerable.
Yet it is not clear that the economy
would fare better under this relatively laissez faire “mitigation”
policy than under one of determined
“suppression”. Long before government-imposed lockdowns,
many people stopped travelling or going
to restaurants, cinemas or shops. Decisive action to suppress the
virus and follow up with testing and
tracking of new infections could well end the inevitable
economic slump even sooner than otherwise.
What seems quite certain is the global health system would fare
much better under suppression than
mitigation. Under the latter, argues the Imperial College Covid-
19 Response Team, the health systems of
the UK and US would be overwhelmed: large numbers of
predominantly old people would be left to die
untreated. It was presumably to prevent this from happening
across China that the government
suppressed the virus so fiercely in Hubei. Could a health
calamity that is unacceptable in China be
acceptable in the UK or US? Yet the critics are also right: it

will be impossible to close large parts of our
economies for very long. If suppression is to be tried, it must be
successful quickly and resurgence of the
virus must be throttled. Meanwhile, central banks and
governments must seek to keep as much of the
economy going as possible, preserve as much productive
capacity intact as possible and ensure that the
people, above all the vulnerable, are generously protected in
whatever way a country finds practical.
The solidarity between countries needs to be as strong as within
them. The financial instability and
looming recession (probably depression) we see coming will
inflict huge harm on emerging and
developing countries. The IMF states that investors have
already removed $83bn from emerging
economies. The fall in the prices of commodities, upon which
many emerging and developing countries
depend, is also deep. These countries must also grapple with the
domestic spread of the virus and the
weakening of their own domestic demand. Their ability to
manage these internal and external pressures
is limited. The outcome could be huge economic and social
disasters. The IMF itself already faces 80
requests for rapid financial support. The aggregate external

financing gaps of emerging and developing
countries are likely to be far beyond the IMF’s lending capacity.
These vulnerable countries will benefit if
high-income countries succeed in suppressing the disease and
rescuing their economies. But this will not
be true in the short run. Emerging and developing countries will
need much assistance. That will also
help every country’s economic recovery. The virus is a shared
challenge. So, too, is the coming global
slump. Practicality and the demands of solidarity justify
generous help. The same is true within the
eurozone. The defining characteristic of a currency union is that
individual members have given up the
insurance of fiscal autonomy and a sovereign currency in favour
of collective mechanisms. During the
global financial crisis, that largely failed a number of member
countries. Yet, in that case, a moralistic
argument could plausibly assert that it was in good part their
own fault. This pandemic is not anybody’s
fault. If the eurozone cannot show solidarity in such a crisis, its
failure will be neither forgotten nor
forgiven. The wounds will be deep, perhaps mortal. Without
visible solidarity in a crisis for which nobody

bears blame, the European project will be morally, maybe
practically, dead. Any cross-border aid
cannot, moreover, be purely financial. Medical help will be
needed too. A crucial step will be ending the
spate of export controls that are destroying medical supply
chains. Fortunately, the disease we now
confront is nothing like as bad as the plagues that repeatedly
devastated the lives of our ancestors. Yet it
is still something virtually no living person has experienced. It
is a practical challenge that must be met
with well-informed decisions. But it is also an ethical
challenge. We should recognise both aspects of the
decisions we must make. Do leaders project calm and use
reason? Do we defeat the disease, while
minimising the economic damage? Do we ensure that the
weakest people and countries are protected?
Do we choose solidarity over hostility and global responsibility
over inward-looking nationalism? Do we
seek to bequeath a better post-pandemic world, not a worse one?
Unlike viruses, human beings have
choices. Choose well.

INFLATIONARY CULTURE:
STEFAN ZWEIG'S WORLD OF YESTERDAY
The first panacea for a mismanaged nation is inflation of the
currency; the second is war. Both
bring a temporary prosperity; both bring a permanent ruin. But
both are the refuge of political and
economic opportunists.
Ernest Hemingway
Notes on the Next War
Introduction
Inflation in the twentieth century has become the object of
social and literary, as well as economic analysis,
as suggested by the quotation above. Like other economic
crises, inflation produces severe hardship and
political instability, creating in turn vast human tragedies. Thus
severe economic conditions disrupt social
and political, as well as financial and commercial life. It is the
human element of these crises that has
attracted writers such as Hemingway and Stefan Zweig. Yet
unlike the garden variety recessions and
unemployment, or even "moderate" inflation, hyperinflation--
the accelerating and uncontrolled explosion in

the money supply and prices-- creates a particularly devastating
and lasting effect on a nation's psyche.
The German experience with hyperinflation in 1923 eroded the
German people's confidence in the Weimar
Republic and paved the way for Hitler's rise to power. Yet even
after the second world war, the memories
of the 1923 hyperinflation created a strong and typically
German aversion to inflationary policies, even
those "moderately" excessive monetary policies that became a
common tool of stabilization measures
among governments in the wake of the "Keynesian Revolution."
In terms of its historical impact, the
German hyperinflation can be compared only with the Great
Depression for leaving its mark on current
economic policy. The main channel of its influence is the
Exchange Rate Mechanism (ERM) of the
European Community, which is dominated by German monetary
policy.
In 1922, the exchange rate of the German mark was 70 marks
per U.S. dollar. By November 1923, the
mark was trading at 4.2 trillion marks to the dollar. In a six-
month period from May to November 1923,
the annual inflation rate in Germany was 1.3 trillion percent.
The causes of this incredible situation have

been the subject of much economic study, but in general it was
the punitive burden of war reparations
imposed upon Germany after world war I that lay at the root of
the crisis. The German economy had been
severely weakened by the war and its aftermath; as a result the
economy could not generate output
sufficient to meet the requirements of the reparations demanded
by the victorious allies. Unable under
these conditions to borrow or to collect more taxes, the
government turned to the printing presses to meet
its obligations. A vicious circle of political instability, rapidly
declining confidence in the mark, and
greater expansion of the money supply followed, exacerbated by
events such as the assassination of
German foreign minister Walther Rathenau in June of that year,
described by Zweig below. The crisis
finally ended in November 1923 with the currency reform
implemented by Gustav Stresemann, but the
damage to the credibility of the Weimar Republic was
irreparable and the trust in its democratic institutions
was broken. The coming of the next economic crisis, the Great
Depression, left the way open for Hitler to
seize power.

Stefan Zweig was born in Vienna in 1881. His literary career
focused on biographies and literary and
psychological portraits of historical figures such as Erasmus
and Dostoyevsky, but also generated poetry,
essays, drama and novels. In his writings one senses above all
else a cosmopolitan dedication to European
culture; Zweig was steeped in the literary traditions of Austria,
Germany and France (he also translated
literary works from French into German). Like many German
and Austrian Jewish intellectuals of his time,
however, he was forced to leave his homeland by Hitler's racial
policies. This separation from his cultural
and literary roots proved to be devastating to Zweig. He finally
settled during the war years in Rio de
Janiero and managed to continue his writing, but under the
increasing burden of psychotic depression. His
last work, a memoire entitled The World of Yesterday, recalls
the Europe of the early twentieth century and
the events that destroyed it. In a sense they also destroyed
Zweig. Just after mailing the final manuscript to
his publisher in New York in 1942, Zweig and his wife carried
out a suicide pact that had evidently been
planned for months. The following passages represent both his
observations on the role of inflation in the

2
crumbling of political and moral institutions, and his final
tribute to the civilization that he longed for
during his exile.
In the first passage, Zweig describes the famine and inflation
immediately following the first world war in
Austria. The second passage begins with a description of the
news of Rathenau's assassination in June,
1923, which helped to trigger the political instability that fueled
the hyperinflation of that year.
THE WORLD OF YESTERDAY
by Stefan Zweig
(New York: Viking Press, 1943)
The Austrian Inflation
Every descent into the town at that period was a moving
experience; it was my first sight of the yellow and
dangerous eyes of famine. The bread crumbled into black
particles and tasted like pitch and glue, coffee

was a brew of roasted barley, beer like yellow water, chocolate
like colored sand and the potatoes were
frozen. Most people raised rabbits, in order not wholly to forget
the taste of meat; a young lad shot squirrels
in our garden for his Sunday dinner and well nourished dogs or
cats returned only seldom from lengthy
prowls. Such textiles as were for sale were no more than
specially treated paper, ersatz for an ersatz; men
crept about almost always dressed in old uniforms--even
Russian uniforms--which they had obtained from
some depot or hospital and in which more than one had already
died; trousers tailored from old sacks were
not uncommon. Every step through the street, where show-
windows had a plundered look, where decaying
houses shed crumbling mortar like scurf, where visibly
undernourished people painfully dragged
themselves to their work, served to trouble one's soul. Out in
the country the food situation was better; no
peasant-farmer allowed himself to be influenced by the general
breakdown of morale to sell his butter,
eggs, or milk at the legally prescribed "maximum prices." He
concealed his goods wherever he could and
waited at home for the highest bidder. This procedure gave rise
to the "black market." A man would set off

with an empty bag or two and go from farm to farm, sometimes
even taking the train to particularly
productive illicit sources of provisions which he would then
peddle in town at four and five times the cost
price. ln the beginning the peasants gloated over the shower of
paper money for which they had sold their
butter and eggs, and which made them profiteers. However,
when they brought their bursting wallets to
town to make purchases, they discovered to their exasperation
that while they had merely quintupled
normal prices, the scythe, the hammer, the kettle which they had
come to buy had meanwhile risen twenty
or fifty times in price. Thereafter they sought to exchange only
for manufactured goods and demanded
substance for substance, merchandise for merchandise; mankind
with its trenches having been content to
retrogress to cave-dweller times, it now dissolved the thousand-
year-old convention of money and reverted
to primitive barter. The whole country was seized with a
grotesque traffic. The city dwellers hauled out to
the farms whatever they could get along without-- Chinese
porcelain vases and rugs, sabers and rifles,
cameras and books, lamps and ornaments--thus, entering a
Salzburg peasant's home, one might be surprised

by a staring Indian Buddha or a rococo book case with French
leatherbound books of which the new
owners were particularly proud. "Genuine Leather! France!"
they bragged impressively. Substance,
anything but money, became the watchword. There were those
who had to take their wedding ring from
their finger or the leather belt from around their body merely to
keep that body alive.
Finally the authorities interfered to stop the subversive trade in
the execution of which none but the well-to-
do derived benefit; in every province cordons were thrown
around key points and illicit goods arriving by
train or bicycle were confiscated for the benefit of the
municipal food offices. The hoarders responded by
organizing nightly deliveries by lorry with Western desperado
accompaniment or by bribing inspectors,
themselves the fathers of hungry children; sometimes there were
real battles with revolvers and knives
which these youths, after four years of practice at the front,
knew how to use just as well as they knew the
approved military way of finding cover when in flight. The
chaos grew from week to week, the population
became more excited. The progressive devaluation of money

became increasingly manifest. The
neighboring states had substituted their new currency for the old
Austro-Hungarian notes, thus saddling
tiny Austria with the main burden, more or less, of redeeming
the old krone. The first sign of distrust was
the disappearance of hard money, for people tended to value a
bit of copper or nickel more highly than
mere printed paper. The government did its best to get
maximum note production from the printing presses,
3
following Mephistopheles' prescription, but it could not keep
pace with the inflation; then every city and
town, eventually every village, began to print its own
"emergency money" which neighboring villages
could reject and which, for the most part, was recognized to be
worthless and was thrown away. An
economist who knew how to describe graphically all the phases
of the inflation which spread from Austria
to Germany, would find it unsurpassed material for an exciting
novel, for the chaos took on ever more
fantastic forms. Soon nobody knew what any article was worth.
Prices jumped arbitrarily; a thrifty

merchant would raise the price of a box of matches to twenty
times the amount charged by his upright
competitor who was innocently holding to yesterday's quotation;
the reward for his honesty was the sale of
his stock within an hour, because the news got around quickly
and everybody rushed to buy whatever was
for sale whether it was something they needed or not. Even a
goldfish or an old telescope was "goods" and
what people wanted was goods instead of paper. 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; during five or ten years (for
the cancellation of leases was forbidden
even afterwards) the population of Austria enjoyed more or less
free lodgings. In consequence of this mad
disorder the situation became more paradoxical and unmoral
from week to week. 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.
A man schooled in bribery got ahead, if he
speculated he profited. If a man sold at cost price, he was
robbed, if he made careful calculation he yet
cheated. Standards and values disappeared during this melting
and evaporation of money; there was but one
merit: to be clever, shrewd, unscrupulous, and to mount the
racing horse instead of being trampled by it.
To top it all, during the financial whirlwind when Austrians
were deprived of every economic yardstick,
certain foreigners recognized how our misery might be made to
serve their purposes. The only thing that
remained stable within the land during the three years in which
the inflation progressed at accelerating
tempo was foreign currency. Because Austrian money melted
like snow in one's hand everyone wanted
Swiss francs or American dollars and foreigners in substantial
numbers availed themselves of the chance to
fatten on the quivering cadaver of the Austrian krone. 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 shop stocks before their

owners, in their distress, woke to how they had been plundered.
Humble hotel clerks from Switzerland, stenographers from
Holland, would put up in the deluxe suites of
the Ringstrasse hotels. Incredible as it may seem, I can vouch
for it as an eyewitness that Salzburg's first-
rate Hotel de l'Europe was occupied for a period by English
unemployed, who, because of Britain's
generous dole were able to live more cheaply at that
distinguished hostelry than in their slums at home.
Whatever was not nailed down, disappeared. 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 eventually to become a hundred thousand
times greater than Austria's, exploited our
shrinking krone to the advantage of her mark. Salzburg, a
border town, afforded me an opportunity to
observe these daily raids. Bavarians from neighboring villages
and cities poured into the little town by
hundreds and by thousands. They patronized the tailor, they had
their cars repaired, they consulted

physicians and bought their drugs. Munich business men mailed
their foreign letters and filed their cables
from Austria so as to pocket the saving in the rates. Then, at the
instigation of the German Government, a
border control was established to stop Germans from buying
their supplies in Salzburg where a mark
fetched seventy Austrian crowns. Merchandise coming from
Austria was strictly confiscated at the custom
house. One article, however, that could not be confiscated
remained free of duty: the beer in one's stomach.
And the beer-drinking Bavarians would watch the daily rate of
exchange to determine whether the falling
krone would allow them five or six or ten liters of beer in
Salzburg for the price of a single liter at home.
No more superb enticement could be imagined, and so they
would come in hordes with their wives and
children from nearby Freilassing and Reichenhall to enjoy the
luxury of gulping down as much beer as
belly and stomach would hold. Every night the railway station
was a veritable pandemonium of drunken,
bawling, belching humanity; some of them, helpless from
overindulgence, had to be carried to the train on
hand-trucks and then, with bacchanalian yelling and singing,
they were transported back to their own

4
country. The merry Bavarians did not, to be sure, suspect how
terrible a revenge was in store for them. For,
when the krone was stabilized and the mark in turn plunged
down in astronomic proportions, it was the
Austrians who traversed the same stretch of track to get drunk
cheaply, and the spectacle was duplicated
but this time in the opposite direction. This beer war between
two inflations remains one of my oddest
recollections because it was a precise reflection, in grotesque
graphic miniature, of the whole insane
character of those years.
The strangest thing is that I cannot recall, however I may try,
how we kept house during that era, or in what
manner the Austrians kept on raising the thousands and tens of
thousands of kronen and the Germans, in
their turn, the millions which were daily needed to keep body
and soul together. Mysteriously enough, they
did raise them. Habits are acquired and the chaos became
normal to life. It stands to reason that one who
was not a witness would imagine that, at a time when an egg

cost what a fine motor-car used to cost (in
Germany eggs went up to four billion marks, the approximate
past value of all the real estate in Greater
Berlin), women must have been running wildly through the
streets with tousled hair, that shops were
deserted for lack of purchasing power and that theaters and
amusement places were surely empty.
Astonishingly enough, just the opposite was the case. The will
to pursue life was great enough to overcome
the instability of the currency. Financial chaos prevailed yet the
daily round seemed little affected. There
were widespread individual changes, such as those who had
wealth in the form of cash in bank or
government bonds became impoverished, speculators became
rich. But the balance-wheel maintained its
rhythm unconcerned with single fates, there was no standstill;
bakers baked bread, cobblers made boots,
authors wrote books, peasants sowed and reaped, trains ran on
schedule, the morning newspaper never
failed, and it was just the places of entertainment, bars, and
theaters, that were filled to capacity. The very
fact that what once represented the greatest stability--money--
was dwindling in value daily caused people
to assess the true values of life-work, love, friendships, art and

Nature the more highly, and the whole
nation lived more intensively and more buoyantly than ever
despite the catastrophe; young people went on
mountain tramps and returned healthily tanned, dance halls kept
going until late at night, new factories and
business enterprises sprang up. I don't think that I ever lived
and worked with greater zest than in those
years. Whatever had meant much to us in days gone by meant
even more now; at no time had we ever been
so devoted to art in Austria as in those years of chaos, because
the collapse of money made us feel that
nothing was enduring except the eternal within ourselves.
I shall never forget what an opera performance meant in those
days of direst need. For lack of coal the
streets were only dimly lit and people had to grope their way
through; gallery seats were paid for with a
bundle of notes in such dcnominations as would once have been
sufficient for a season's subscription to the
best box. The theater was not heated, thus the audience kept
their overcoats on and huddled together, and
how melancholy and gray this house was that used to glitter
with uniforms and costly gowns! There never
was any certainty that the opera would last into the next week,

what with the sinking value of money and
the doubts about coal deliveries; the desperation seemed doubly
great in this abode of luxury and imperial
abundance. The Philharmonic players were like gray shadows in
their shabby dress suits, undernourished
and exhausted by many privations, and the audience, too,
seemed to be ghosts in a theater which had
become ghostly. Then, however, the conductor lifted his baton,
the curtain parted and it was as glorious as
ever. Every singer, every musician did his best, his utmost, for
each had in mind that perhaps it might be
his last time in this beloved house. And we strained and
listened, receptive as never before, because
perhaps it was really the last time. That was the spirit in which
we lived, thousands of us, multitudes, giving
forth to the limit of our capacity in those weeks and months and
years, on the brink of destruction. Never
have I experienced in a people and in myself so powerful a
surge of life as at that period when our very
existence and survival were at stake.
*******
Germany: The Hyperinflation

On that day [in June, 1923], I was already in Westerland.
Hundreds of vacationists were bathing gaily in
the surf. Again, as on the day when the assassination of Franz
Ferdinand was announced, a band played to
5
carefree people when, like white petrels, the newsboys stormed
over the boardwalk. "Walter Rathenau1
assassinated." A panic broke out and the tremor spread through
the whole Reich. Abruptly the mark
plunged down, never to stop until it had reached the fantastic
figures of madness, the millions, the billions
and trillions. Now the real witches' sabbath of inflation started,
against which our Austrian inflation with its
absurd enough ratio of l5,000 old to 1 of new currency had been
shabby child's play. To describe it in
detail, with its incredibilities, would take a whole book and to
readers of today it would seem like a fairy
tale. I have known days when I had to pay fifty thousand marks
for a newspaper in the morning and a
hundred thousand in the evening; whoever had foreign currency
to exchange did so from hour to hour,

because at four o'clock he would get a better rate than at three,
and at five o'clock he would get much more
than he had got an hour earlier. For instance, I sent a
manuscript to my publisher on which I had worked for
a year; to be on the safe side I asked for an advance payment of
royalties on ten thousand copies. By the
time the check was deposited, it hardly paid the postage I had
put on the parcel a week before; on street
cars one paid in millions, trucks carried the paper money from
the Reichsbank to the other banks, and a
fortnight later one found hundred thousand mark notes in the
gutter; a beggar had thrown them away
contemptuously. A pair of shoe laces cost more than a shoe had
once cost, no, more than a fashionable
store with two thousand pairs of shoes had cost before; to repair
a broken window more than the whole
house had formerly cost, a book more than the printer's shop
with a hundred presses. For a hundred dollars
one could buy rows of six-story houses on Kurfurstendamm, and
factories were to be had for the old
equivalent of a wheelbarrow. Some adolescent boys who had
found a case of soap forgotten in the harbor
disported themselves for months in cars and lived like kings,
selling a cake every day, while their parents,

formerly well-to-do, slunk about like beggars. Messenger boys
established foreign exchange businesses and
speculated in currencies of all lands. Towering over all of them
was the gigantic figure of the superprofiteer
Stinnes2. Expanding his credit and in thus exploiting the mark
he bought whatever was for sale, coal mines
and ships, factories and stocks, castles and country estates,
actually for nothing because every payment,
every promise became equal to naught. Soon a quarter of
Germany was in his hands and, perversely, the
masses, who in Germany always become intoxicated at a
success that they can see with their eyes, cheered
him as a genius. The unemployed stood around by the thousands
and shook their fists at the profiteers and
foreigners in their luxurious cars who bought whole rows of
streets like a box of matches; everyone who
could read and write traded, speculated and profited and had a
secret sense that they were deceiving
themselves and were being deceived by a hidden force which
brought about this chaos deliberately in order
to liberate the State from its debts and obligations. I have a
pretty thorough knowledge of history, but
never, to my recollection, has it produced such madness in such
gigantic proportions. All values were

changed, and not only material ones; the laws of the State were
flouted, no tradition, no moral code was
respected, Berlin was transformed into the Babylon of the
world. Bars, amusement parks, honky-tonks
sprang up like mushrooms. What we had seen in Austria proved
to be just a mild and shy prologue to this
witches' sabbath; for the Germans introduced all their
vehemence and methodical organization into the
perversion. Along the entire Kurfurstendamm powdered and
rouged young men sauntered and they were
not all professionals; every high school boy wanted to earn
some money and in the dimly lit bars one might
see government officials and men of the world of finance
tenderly courting drunken sailors without any
shame. Even the Rome of Suetonius had never known such
orgies as the pervert balls of Berlin, where
hundreds of men costumed as women and hundreds of women as
men danced under the benevolent eyes of
the police. In the collapse of all values a kind of madness
gained hold particularly in the bourgeois circles
which until then had been unshakeable in their probity. Young
girls bragged proudly of their perversion, to
1 Walther Rathenau (1867-1922): German statesman,
industrialist and philosopher, also founder of the

centrists German Democratic Party. As foreign minister, he
negotiated the Treaty of Rapallo, which ended
hostilities between Germany and the Soviet Union in 1922.
Reviled by right-wing groups as a "Jewish
conspirator" and for his dealings with the communist Soviet
government, he was assassinated by fascist
extremists. As a result, the German government enacted new
state security measures, which were
ironically used mainly to suppress left-wing groups, facilitating
the rise of national socialism (Nazism).
2 Hugo Stinnes (1870-1924): German industrialist. He pursued
strategies of vertical integration to create
huge industrial trusts controlling river and ocean barges and
steamers, coal and iron mines, factories and
power plants. Later acquisitions focused on timberlands,
insurance companies, paper manufacturing plants
and newspapers. Stinnes thus represented the trend in Germany
at the time towards unrestricted industrial
concentration, and opposed any efforts at government regulation
of industry. He was a member of the
Reichstag (Parliament) from 1920-1924.
6

be sixteen and still under suspicion of virginity would have
been considered a disgrace in any school of
Berlin at that time, every girl wanted to be able to tell of her
adventures and the more exotic, the better. But
the most revolting thing about this pathetic eroticism was its
spuriousness. At bottom the orgiastic period
which broke out in Germany simultaneously with the inflation
was nothing more than feverish imitation;
one could see that these girls of the decent middle class families
much rather would have worn their hair in
a simple arrangement than in a sleek man's haircut, that they
would much rather have eaten apple pie with
whipped cream than drink strong liquor; everywhere it was
unmistakable that this over-excitation was
unbearable for the people, this being stretched daily on the rack
of inflation and that the whole nation, tired
of war, actually only longed for order, quiet, and a little
security and bourgeois life. And, secretly it hated
the republic, not because it suppressed this wild freedom, but on
the contrary, because it held the reins too
loosely
Whoever lived through these apocalyptic months, these years,
disgusted and embittered, sensed the coming

of a counterblow, a horrible reaction. And behind the scenes,
smiling, there waited, watch in hand, those
same people who had driven the German nation into the chaos:
"The worse it is for the country, the better
for us." They knew that their hour was at hand. Around
Ludendorff3, more than around the then still
powerless Hitler, the counterrevolution was already
crystallizing openly; the officers whose epaulettes had
been torn off their shoulders organized in secret, the small
tradesmen who had been cheated out of their
savings silently closed ranks and aligned themselves in
readiness for any slogan that promised order.
Nothing was as fateful to the German Republic as the idealistic
attempt to give liberty not only to the
people but even to its enemies. For the German people, a
disciplined folk, did not know what to do with
their freedom and already looked impatiently toward those who
were to take it from them.
The day the German inflation ended (1924) could have become
a turning point in history when, as if at the
sound of a gong, each billion of artificially inflated marks was
exchanged for a single new mark, a norm
had been created. And, truly, the muddy tide with all its filth
and slime flowed back soon, the bars, the

honky-tonks disappeared, conditions became normal again,
everybody could now figure clearly how much
he had won, how much he had lost. The great majority, the
mighty masses, had lost. But the blame was laid
not on those who had caused the war but on those who with
sacrifice and without thanks had undertaken
the burden of reconstruction. Nothing ever embittered the
German people so much--it is important to
remember this-- nothing made them so furious with hate and so
ripe for Hitler as the inflation. For the war,
murderous as it was, had yet yielded hours of jubilation, with
ringing of bells and fanfares of victory. And,
being an incurably militaristic nation, Germany felt lifted in her
pride by her temporary victories; while the
inflation served only to make it feel soiled, cheated, and
humiliated; a whole generation never forgot or
forgave the German Republic for those years and preferred to
reinstate its butchers. But all of that was still
far away. On thc surface, in 1924 the wild phantasmagoria
seemed to have passed like a dance of will-o'-
the-wisps. It was day again, one saw one's way in and …
Finance Essay Questions
Use 200 – 250 words for each question. Ensure to answer the
whole question not partly. The files attached are for question 2

and 4.
1. Covered interest differentials and covered interest parity.
What motivates covered (as opposed to uncovered) borrowing
and investing strategy in international finance? Show how
market forces tend to cause the covered interest differential to
converge to zero, and what can prevent absolute convergence to
zero?
2. How has Coronavirus affected emerging market economies.
In terms of their output, attractiveness for foreign investment,
and exchange rates against the US dollar? What is the strongest
economic argument for making loans and aid available to these
countries during the crisis?
3. What are the advantages for an emerging market to be a
foreign direct investment host country? In your answer, address
the incentives for good economic governance, advantages over
other forms of capital flows, trade, domestic savings and
investment, and economic growth. Describe any potential
negative effects of FDI.
4. Based on the article by Stefan Zweig on the German
hyperinflation, describe how this event affected prices, the
nature of economic exchange, income distribution, and lifestyle
at the time. What role did foreign exchange play in the German
hyperinflation? What economic policy was required to end the
crisis?

Martin Wolf MARCH 24 2020 The coronavirus seeks only t.docx

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