• C++ Programming for Financial Engineering
    Highly recommended by thousands of MFE students. Covers essential C++ topics with applications to financial engineering. Learn more Join!
    Python for Finance with Intro to Data Science
    Gain practical understanding of Python to read, understand, and write professional Python code for your first day on the job. Learn more Join!
    An Intuition-Based Options Primer for FE
    Ideal for entry level positions interviews and graduate studies, specializing in options trading arbitrage and options valuation models. Learn more Join!

Weimar Hyperinflation: a permabear's saga

I know that a permabear can in most cases (more or less) be like everyone's mother; i.e. telling you every day to wear your coat so to avoid catching a cold.. until one day you do catch a cold (like everyone does, sooner or later) and of course she had warned you. Similarly, many claim that Dr. Michael Burry (as well as zerohedge) depict a half-empty kind of reality. Strangely(?) enough, I more often find myself agreeing rather than disagreeing with them. Maybe I see the world through a half-empty prism myself too. However, if Jens O. Parsson is correct and 2010-2021 has actually been the gestation of the crash and inflation the catalyst, then Dr. Burry would not at all be a half-empty kind of guy but merely the guy "who (once again) simply looked" ("Big Short" - 2015).

Do you think it could actually be the case that something similar to post-modern Germany could also happen to post-covid America; and if yes, what could be the catalyst? Everyone around me looks overconfident, both about the market and mainly about themselves. And yet here I am, most probably a guy with much more to lose* (I work in the financial industry) being afraid to continue investing in that market (let alone in the crypto market). Are you at all worried for the unimaginably fat stimulus packages and the infinite quantitative easing which have deemed the markets and especially equities almost completely inelastic to fundamental factors and have carved their seemingly never-ending (in some cases exponential) upward trajectory? Could it be the case that inflation eventually does ramp up and with most CBs not being able to hike their IRs (because how would then so many bad-quality businesses refinance with higher rates), the situation gets out of control?

PS: "Speculation alone, while adding nothing to Germany's wealth, became one of its largest activities. The fever to join in turning a quick mark infected nearly all classes..Everyone from the elevator operator up was playing the market." - Dying of Money: Lessons of the Great German and American Inflations.

Although none of a market crash's precursors should be viewed in isolation, when one can identify several then the picture changes; it becomes gloomier. I.e. Gamestop, AMC etc. as well as pump and dump schemes in the crypto market are the living embodiment of the aforementioned expression. As a person who very closely monitored the GME action, the illiteracy and yet confidence of the people involved, betting not only a small portion of their savings but rather borrowing to get in the action, really scares me.

Too much (printed out of thin air) money lying around..? In my opinion this is not how "free and rational markets should behave"

*I am not trying to compare myself to anyone, just saying that in a market crash scenario I would most probably lose my job - as I assume many others would do too.

Apologies for the long post!
 
Do you think it could actually be the case that something similar to post-modern Germany could also happen to post-covid America; and if yes, what could be the catalyst?

Easily. But Covid is not the culprit: it has merely accelerated underlying tendencies. Weimar Germany was printing money. The USA is printing money.
 
Easily. But Covid is not the culprit: it has merely accelerated underlying tendencies. Weimar Germany was printing money. The USA is printing money.
Couldn't agree more. That's why I think Jens' phrase that 2010-2020 has been the gestation of what is to follow is spot on. The questions that come to mind though
1) How bad can it get? Will it be contained to just the bubbly overbought stocks, such as emerging tech (Ray Dalio) or will it bring down the entire market. Will the CBs be in a position to mitigate?
2) What could be the catalyst, if not covid (assuming that covid has been already priced in)
3) How can one mitigate the downside? Gold? Silver? Treasuries?

In addition, it's not just USA that is printing money. Almost everyone has.. If we assume the Weimar parallelism is somewhat justified then we all know (believe) how this will end. I am genuinely worried about the future
 
Last edited:
Couldn't agree more. That's why I think Jens' phrase that 2010-2020 has been the gestation of what is to follow is spot on. The questions that come to mind though
1) How can experienced finance professionals not share the same conviction
2) How bad can it get? Will it be contained to just the bubbly overbought stocks, such as emerging tech (Ray Dalio) or will it bring down the entire market. Will the CBs be in a position to mitigate?
3) What could be the catalyst, if not covid (assuming that covid has been already priced in)
4) How can one mitigate the downside? Gold? Silver? Treasuries?

In addition, it's not just USA that is printing money. Almost everyone has.. If we assume the Weimar parallelism is somewhat justified then we all know (believe) how this will end. I am genuinely worried about the future

This forum is probably not the place to talk about these things. Finance professionals are not trained to think and talk about these things -- more accurately, they're trained to not think and talk about these things. The global economic system is in a state of slow-motion collapse. Financial alchemy has been used to camouflage this.

You are right that everyone is printing money. This is one reason why real assets have been increasing in price vis-a-vis fiat currencies. The official rate of inflation in the US is a complete joke (like the official rate of unemployment).
 
This forum is probably not the place to talk about these things
Why do you think so if you don't mind me asking? IMHO this forum is - if not better - at least as good as any other to talk about these things. I much more prefer picking the brains of people who either are already working as quants or are planning to become one. I find this profession one of the most intellectually challenging (if not the most) in the finance industry. In most cases people are both clever and informed. + I have followed the forum for quite a long time and I personally believe that people in here are quite literate - and not just in finance. Unless of course I am violating any of the forum's rules. In that case, I will definitely refrain from touching similar subjects in the future.

This is one reason why real assets
You forgot the king of "real assets" - Bitcoin.
 
Top