Vic Socotra

30 January 2009

The Kit Kat Klub

(The Kit Kat Klub, Berlin)

I’m in the dental chair in an hour, spending way too much on teeth I am fortunate to have had this long. There will be time to think, looking up, waiting for the mysterious Persian dentist to apply a porcelain cap in the back of my mouth.

The temporary crown has been an irritant- there is a rough spot on it that has teased the tip of my tongue for a couple weeks. A nagging irritant, like the news about the economy on National Public Radio.

Like you, I have been trying to noodle this through. Not so much as an intellectual exercise in critiquing the latest smart guys who lead us, but to try to figure out the strategy for surviving this mess the best I can.

The smart guys have thrown a couple trillion dollars at the problem, and common sense says there are going to be repercussions.

I mean, what does the triumph of Keynsian economics do in the long term? Keynes knew the answer to that one; in fact, it is his best quote. Someone was quibbling with his strategy of having Great Britain crank up the printing presses and spend its way out of the Great Depression. They said that in the long term, the inevitable devaluation of the currency would be a grave mistake.

Keynes, always a quipster, shot back that “in the long run, we are all dead.”

Well, that is fine, and quite true. But it is like joke about the hard-of-hearing Irishman in the bar, who got in trouble with the Priest over the question of going to Heaven. I’ll cut to the chase: of course the drunk wanted to go sit on the right hand of God.

He just wanted to finish his pint first.

So that is where I am coming from on this. I have been thinking a lot about Weimar Germany, in general and the Kit-Kat Klub in particular. You know the plot; the musical Cabaret was set in decadent smoky Berlin just before Hitler's rise to power.

Hyperinflation had ruined the old order, and everyone was wearing fishnet stockings and heavy rouge like Sally Bowles.

Especially Joel Grey. Remember when that was supposed to be a little....unsettling? We are well beyond that now.

The times don’t match, precisely. The hyperinflation in Germany occurred during 1921-1923, while Cabaret is set in the dark place of a decade later, when everything and everyone had been thoroughly wiped out. None of us, unless you are from Zimbabwe, know how it works: order-of-magnitude increases in prices and interest rates, redenomination of the currency, consumer flight from cash to hard assets like gold and commodities.

Lord Keynes himself described the situation this way in his treatise The Economic Consequences of the Peace: "The inflationism of the currency systems of Europe has proceeded to extraordinary lengths. The various belligerent Governments,=2 0unable, or too timid or too short-sighted to secure from loans or taxes the resources they required, have printed notes for the balance."

I actually have some of the notes from that crazy time, purchased for pennies as a novelty when I was a kid. The numbers in crisp German engraving have more zeros than Carter had pills. There is a Nazi medal commemorating the era of hyperinflation, struck in the days when everyone was so happy about the trains running on time. The engraving on it reads: "On 1st November 1923 1 pound of bread cost 3 billion, 1 pound of meat: 36 billion, 1 glass of beer: 4 billion."

So, to get out of the hole we are in, we are in the process of making up all the money in the world, printing it, and handing it out to targeted groups20of people who should have known better.

Common sense tells me that is how you get to the four billion dollar glass of beer, and if I am going to be along for the ride, I know which side of the bar at the Kit Kat Klub I want to be on, and am not interested in wearing fish-net stockings.

I have a strategy for dealing with that eventuality, though it is going to be painful. It is about having things people need, rather than money, which will be worthless. It is a lousy option, I figure it is better than being the one wearing rouge.

But this is not Weimar Germany, and it might not work out that way. Something very curious happened in Japan in the 1990s, and I will have to tell you about it tomorrow. It is just as scary, and not all the rouge or lipstick in the world makes that pig look any better.

Keynes had a point about that, but of course he is dead and we can’t ask him.

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