Adam Fergusson: Inflation Lessons for the UK
THE TELEGRAPH: Adam Fergusson's 1975 book on hyper-inflation in the Weimar, When Money Dies, has become a cult read among Europe's top financiers after the Sage of Omaha Warren Buffet is said to have recommended it. He tells Robert Miller where parallels could occur if inflation were to take hold in Britain.

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The Death of Paper Money
THE TELEGRAPH: As they prepare for holiday reading in Tuscany, City bankers are buying up rare copies of an obscure book on the mechanics of Weimar inflation published in 1974.

Ebay is offering a well-thumbed volume of "Dying of Money: Lessons of the Great German and American Inflations" at a starting bid of $699 (shipping free.. thanks a lot).

The crucial passage comes in Chapter 17 entitled "Velocity". Each big inflation -- whether the early 1920s in Germany, or the Korean and Vietnam wars in the US -- starts with a passive expansion of the quantity money. This sits inert for a surprisingly long time. Asset prices may go up, but latent price inflation is disguised. The effect is much like lighter fuel on a camp fire before the match is struck.

People’s willingness to hold money can change suddenly for a "psychological and spontaneous reason" , causing a spike in the velocity of money. It can occur at lightning speed, over a few weeks. The shift invariably catches economists by surprise. They wait too long to drain the excess money.

"Velocity took an almost right-angle turn upward in the summer of 1922," said Mr O Parsson. Reichsbank officials were baffled. They could not fathom why the German people had started to behave differently almost two years after the bank had already boosted the money supply. He contends that public patience snapped abruptly once people lost trust and began to "smell a government rat".

Some might smile at the Bank of England "surprise" at the recent the jump in Brtiish inflation. Across the Atlantic, Fed critics say the rise in the US monetary base from $871bn to $2,024bn in just two years is an incendiary pyre that will ignite as soon as US money velocity returns to normal. >>> Ambrose Evans-Pritchard | Sunday, July 25, 2010

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Obscure Book by British Adviser Becomes Cult Hit After Warren Buffett Tip
THE SUNDAY TELEGRAPH: An obscure book about the collapse of the German economy in the 1920s has become cult reading among leading financiers, after a tip from billionaire investor Warren Buffett.

Mr Buffett, known as the Sage of Omaha because of his shrewd investments, apparently told friends that When Money Dies illustrated what could happen today if European governments attempt to spend their way out of the downturn.

Written in 1975 by Adam Fergusson, a one-time adviser to Tory minister Lord Howe, the book charts how the German economy was ruined by hyperinflation after the Weimar government allowed public spending to run out of control.

The collapse of the Weimar Republic cleared the way for Adolf Hitler’s Nazis to seize power in 1933.

After Mr Buffett tipped off a Dutch financier friend about the wisdom of Fergusson's analysis, his book became the talk of right-wing blogs and economics websites, with copies changing hands for up to £1,600.

Old Street Publishing, a small British publisher, has rushed out a new edition to meet demand. >>> Matthew Moore | Sunday, July 11, 2010