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From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of 1914-23 © Dr. Heinrich Kahlert GOC+Partner, Crisis.

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Presentation on theme: "From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of 1914-23 © Dr. Heinrich Kahlert GOC+Partner, Crisis."— Presentation transcript:

1 From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of © Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, © Dr. Heinrich Kahlert, GOC+Partner, Crisis Conf., Durham UK, From ‘War Profiteer’ to ‘Inflation Underdog’: the German Chemical Industry during the Inflation Crises of Heinrich E. R. K. KAHLERT During hyperinflation, banknotes had lost so much value that they were used as wallpaper, being much cheaper than actual wallpaper.hyperinflation

2 From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of © Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, Motivation Introduction Methodological Discussion: Can we obtain real data? Results: a.) General Economic Trend b.) German Chemistry c.) From War Profiteer to Underdog Summarisation Overview: -2-

3 From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of © Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, “Reviving” my PhD-Thesis caused this part was not (yet) quoted Searching new Partners for Multi-Discipline Project (EU) (Historical) Consequences of Earthquake, Flood, Fire, Tornado Our (GOC+Partner) Competence: Modelling Risk on NPP with so called PSA-Methodology Concrete: We are experts on Time-Series Analysis, Risk Hazard Modelling, Geochemical Modelling etc. The lectures of Bruce Campbell & Mark Casson were good examples to give examples for collaboration Motivation: -2-

4 From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of © Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, Introduction 20 Billion Bill -3-

5 From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of © Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, Introduction Sergey Potashov (2012)  German Inflation „Third Kind Crisis“  Energy Crises „Second Kind“  Depresson „First Kind“ -4-

6 From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of © Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, Introduction Gutenberg and the Billions-Press, “I never intended this!” From the German satirical magazine Simplicissimus,

7 From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of © Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, Introduction Holtfrerich (1984); -6-

8 From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of © Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, Introduction Widdig (2001) -7-

9 From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of © Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, Methodological Discussion: Purchasing Power Parity (PPP) 1.2 $ 0.6 $  WWI First Level Crisis  Depression Second Rate -8-

10 From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of © Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, Check historical data on Consistency (here US with German data)  Surprising good, although inflation years were “Data Deserts” (Feldman) Methodological Discussion: Comparison of Data Kahlert,

11 From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of © Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, Still today PPP is used as suitable indicator Advantage: Historic data can be obtained Disadvantage: Equilibrium method However: Hyper-Inflation results Non-Equilibrium Condition, e.g. Currency velocity change rapidly (t) (see lecture of Mark Casson his chapter “quantity theory”) Methodological Discussion: -10-

12 From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of © Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, The consequence of pressing money can historical be investigated in the present time with various sources (quantity theory) The velocity of money, however, hardly  Appropriate Method only the relation between Wholesale Price Index (WPI) as most time sensitive indicator and exchange rate (here: $/ Mark  unweighted PPP) Methodological Discussion: -11-

13 From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of © Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, Methodological Discussion: Precision versus Historian Approach Pearson CF > 0.92 !! Equilibrium Condition by Introduction of “Rentenmark” Kahlert, Unweighted (only $/Mark, 20% external trade) and weighted PPP (Holtfrerich 70% external trade; Bundesbank Method, all Currency/Mark)  Method are nearly identical (PCF=0.92) Unweighted=Historical (Decision making); Weighted more correct  Difference neglectable

14 From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of © Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, Using the right basket of commodities (goods) (here US-results) Index reference preferable near your historical problem But keep in mind: Still comparing apples with oranges (but not eggs) Methodological Discussion: Suitability of WPI Kahlert,

15 From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of © Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, Can we obtain real data? Yes, we can… (Kahlert not Obama) to some extend Methodological Discussion: -14-

16 From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of © Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, Third highest inflation rate in modern history  But the most important economic power of all these  Using the most stable currency (Gold, $) in comparison with inflated currency to obtain real data Results : General Economic Trend Bernholz

17 From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of © Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, Results : WPI (all Prod.) US, GB, in comparison with inflat. WPI Germany Kahlert,

18 From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of © Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, Results : Revenue & Earnings “IG-Group” during WWI Kahlert,

19 From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of © Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, Real Price Maximum Germany 1918 (Indicator for loosing the economic war) regardless basket of goods, US Maximum 1920, but WPI Chemistry high since beginning WWI!  war profiteer (DuPont etc.)  Decoupling German economic history with rest of world Results : Comparison WPI (Indust. & Chem. ) US with DR WWI was for Chem. Ind. Ideal caused by military actions: “Geld verpulvern” (=“to shoot one’s wad”) by artillery Kahlert,

20 From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of © Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, Results : “Deflated” WPI for German Chemical Products Kahlert,

21 From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of © Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, Results : From War Profiteer to Underdog to Profiteer Hindenburg Program Loosing War (Economic) Hunger- Blockade finished London Ultimatum 226, 132 Bill. GM (=real Mark) “Ruhrkampf” (=French Occup.) Introduction Rentenmark Violating “Shannon Theorem”  Pearson CF (> 0.75) “World “ US- Recession 20 Bill. GM= 7000 t Gold Kahlert,

22 From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of © Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, Exkursion: Explaining Shannon Theorem

23 From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of © Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, Results : From War Profiteer to Underdog to Profiteer (IG-Group) Kahlert,

24 From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of © Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, WWI produces War Profiteer until 1916 Then loosing real money, but thinking (chemical industry), that they earning money until 1918 (=Underdog) 1919 lost year (no war material, limited export possible caused by British blockade), the money reserve were sucked by inflation, but the non-current assets (plants, human capital) is match decisive in long term (  Haber-Bosch, Methanol etc.) Export very profitable caused by low PPP in comparison foreign PPP  War profiteer Summarisation -22-

25 From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of © Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, WWI ending in terms of economic history at end 1923 for GERMANY (and Austria, Serbia) The increase of German Chemical Industry after WWI was heavily influenced by inflation effects, hence through PPP, and technological revolutions (not discussed here) Summarisation : -23-

26 From “War Profiteer” to “Inflation Underdog”: the German Chemical Industry during Inflation Crises of © Dr. Heinrich Kahlert GOC+Partner, Crisis Conf., Durham UK, Discussion Sponsor : GOC+Partner Ltd. CH-2502 Biel Hans-Peter Gutknecht, Architect; CH 2540 Grenchen; Sponsor : GOC+Partner Ltd. CH-2502 Biel Hans-Peter Gutknecht, Architect; CH 2540 Grenchen;


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