January 8, 1835 When the Dollar Dies

You’ve worked all your life. You’ve supported your family, paid your taxes, and met your every obligation. You even managed to put a few bucks aside, in hopes of a long and happy retirement. What happens to that retirement “nest egg”, when the cost of the coffee in your hand doubles in the time it takes to drink it?

You’ve worked all your life. You’ve supported your family, paid your taxes, and met your every obligation. You’ve even managed to put a few bucks aside, in hopes of a long and happy retirement.

The subject of currency devaluation is normally left to eggheads and academics, the very term sufficient to make most of us tip over and hit our heads on the floor, from boredom. But, what happens to that “nest egg”, when the cost of the coffee in your hand doubles in the time it takes to drink it?

History records 58 such instances of hyperinflation. The economic train wreck socialism has wrought on Venezuela, constitutes #59. This in a country with the largest proven oil reserves on the planet.

In antiquity, Roman law required a high silver content in the coinage of the realm. Precious metal made the coins themselves objects of value. The Roman economy remained relatively stable for 500 years. Republic morphed into Empire over the 1st century BC, leading to a conga line of Emperors minting mountains of coins in their own likeness. Slaves were worked to death in Spanish silver mines. Birds fell from the sky over vast smelting fires, yet there was never enough to go around. Silver content was inexorably reduced until the currency itself collapsed in the 3rd century reign of Diocletian.

An Empire and its citizens were left to barter as best they could, in a world where money had no value.

The assistance of French King Louis XIV was invaluable to Revolution-era Americans, at a time when colonial inflation rates approached 50% per month. Even so, French state income was only about 357 million livres at that time, with expenses exceeding one-half Billion.

France descended into a Revolution of its own, in the wake of the American conflict. The government printed “assignat”, notes purportedly backed by 4 billion livres in property expropriated form the church. 912 million livres were in circulation in 1791, rising to nearly 46 billion in 1796.

One historian described the economic policy of the leftist radicals behind the Reign of Terror: “The attitude of the Jacobins about finances can be quite simply stated as an utter exhaustion of the present at the expense of the future”.

Somehow, that sounds familiar.

Paper money crashed in the post-Revolutionary Articles of Confederation period as well, when you could buy a live sheep for two silver dollars, or 150 “Continental” (paper) dollars.

Roles reversed and creditors hid from debtors, not wanting to be repaid in worthless scrip. Generations after our founding, a thing could be described as worthless as “Not worth a Continental”.

Germany was a prosperous country in 1914, with a gold-backed currency and thriving industries in optics, chemicals and machinery. The Deutsche Mark had approximately equal value with the British shilling, the French Franc and the Italian Lira, with an exchange rate of four or five to the dollar.

That was then.

While the French third Republic levied an income tax to pay for the “Great War”, the Kaiser suspended the gold standard and fought the war on credit, believing he’d get it back from conquered territories.

Except, Germany lost. The “Carthaginian peace” described by British economist John Maynard Keynes saddled an economy already massively burdened by war debt, with reparations. Children built ‘forts’ with bundles of hyperinflated, worthless marks. Women fed banknotes into wood stoves, while men papered walls with them. By November 1923, one US dollar bought 4,210,500,000,000 German marks.

The despair of the ‘Weimar Republic’ period resulted in massive political instability, providing rich soil for the growth of the National Socialist German Workers’ Party, of Adolf Hitler.

The Austro-Hungarian Empire was also on the losing side, and broken up after the war. Lacking the governmental structures of more established states, a newly independent Hungary began to experience inflation. Before the war, one US Dollar bought you 5 Kronen. In 1924, it was 70,000. Hungary replaced the Kronen with the Pengö in 1926, pegged to a rate of 12,500/1.

Hungary became a battleground in the latter stages of WW2, between the military forces of Nazi Germany and those of the USSR. 90% of Hungarian industrial capacity was damaged, half destroyed altogether. Transportation became difficult with most of the nation’s rail capacity, damaged or destroyed. What remained was either carted off to Germany, or seized by the Russians as reparations.

The loss of all that productive capacity resulted in scarcity of goods, and prices began to rise. The government responded by printing money. Total currency in circulation in July 1945 stood at 25 Billion Pengö. Money supply rose to 1.65 Trillion by January, 65 Quadrillion that Spring and 47 Septillion, in July. That’s a Trillion Trillion. Twenty-four zeroes.

Banks received low rate loans, so that money could be loaned to companies to rebuild. The government hired workers directly, giving out loans to others and in many cases, outright grants. The country was flooded with money, the stuff virtually grew on trees, but there was nothing to back it up.

Inflation approached escape velocity. The item that cost you 379 Pengö in September 1945, cost 1,872,910 by March, 35,790,276 in April, and 862 Billion in June. Inflation neared 150,000% per day, making the currency all but worthless. Massive printing of money accomplished the cube root of zero. The worst hyperinflation in history peaked in 1946, when the item that cost you 379 Pengö last September, now cost 1,000,000,000,000,000,000,000,000.

The government responded by changing the name, and the color, of the currency. The Pengö was replaced by the Milpengö (1,000,000 Pengö), which was replaced by the Bilpengö (1,000,000,000,000), and finally by the (supposedly) inflation-indexed Adopengö. This spiral resulted in the largest denominated note in history, the Milliard Bilpengö. A Billion Trillion Pengö.

The thing was worth twelve cents.

One more replacement and all that Keynesian largesse would finally stabilize the currency, but at what price? Real wages were reduced by 80% and creditors wiped out. The fate of the nation was sealed when communists seized power in 1949. Hungarians could now share in that old Soviet joke. “They pretend to pay us, and we pretend to work”.

The ten worst hyperinflations in history occurred during the 20th century, including Zimbabwe in 2008, Yugoslavia 1994, Germany 1923, Greece 1944, Poland 1921, Mexico 1982, Brazil 1994, Argentina 1981, and Taiwan 1949. The common denominator in all ten were massive government debt and a currency with no inherent value, excepting what a willing buyer and a willing seller agreed it was worth.

In 2015, Boston University economist Laurence Kotlikoff testified before the Senate Budget Committee. “The first point I want to get across” he said, “is that our nation is broke. Our nation’s broke, and it’s not broke in 75 years or 50 years or 25 years or 10 years. It’s broke today”. Kotlikoff went on to describe a “fiscal gap”, the difference between US’ projected revenue, and the obligations our government has saddled us with. “We have a $210 trillion fiscal gap at this point”. Nearly twelve times GDP – the sum total of all goods and services produced in the United States.

American public debt hit zero for the first and only time in history on this day in 1835. The number now approaches twenty-two Trillion, more than the combined GDP of the bottom 174 nations, on earth. All that, in a currency unmoored from anything of objective value. What could go wrong?

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December 17, 1865 Horrors of the Congo

Rubber plantations took space and clear-cutting old-growth rain forest took time, so the king’s agents drove villagers from their homes, to fend for themselves. Problem solved, instant space for the most important cash crop, of the era.

President Robert Mugabe of Zimbabwe once orchestrated the murder of 20,000 civilians from a single province, after failing to receive a single vote. Josef Stalin deliberately starved as many as ten million Ukrainians to death, in a political “terror famine” known as the Holodomor. Pol Pot and a revolutionary socialist cadre of nine – the Ang-Ka – killed between 1.7 and 2.5 million fellow citizens of late 1970s Cambodia: about 1/5th of the entire population. Mao Tse-Tung’s policies and political purges killed between 49 and 78 million of his own citizens, between 1949 and 1976.

You’re really playing in the Big Leagues, when they can’t get your body count any closer than the nearest thirty million.

From Adolf Hitler to Idi Amin, the top ten dictators of the last 150 years account for the loss of nearly 150 million souls. We remember the names of these people, or most of them, as some of the great monsters of history.

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December 10 1892 satirical cartoon depicts Cecil Rhodes as the New Colossus bestriding the continent, from Cape Town to Cairo. Hat tip, Punch

Yet, one man escapes notice, though his crimes rival and even exceed the worst atrocities carried out by twentieth century dictators. He is King Leopold II of Belgium.  For nearly thirty years, the undisputed slave master of a personal plantation some 76-times the size of Belgium itself, and run for the personal enrichment of this one man.

As late as 1870, the European powers controlled barely ten percent of the African continent, with most of those holdings, along the coast.  By the outbreak of the Great War in 1914, only Ethiopia and Liberia remained independent of European control.

From German East Africa to Italian Somaliland, most of the continent was carved into colonies of the various European powers, administered by governments in France, Britain, Germany, Italy, Portugal and Spain.

Leopold II ascended to the throne to become King of the Belgians on this day in 1865. Like most of the statesmen of the era, Leopold was convinced that a nation’s greatness, lay in proportion to its overseas empire. He first cast his gaze on the Philippines, then a Spanish possession, but negotiations broke down when Queen Isabella II was deposed in the “Glorious Revolution” of 1868.

Leopold next set his sights on Africa.  Henry Morton Stanley may never have ‘presumed’ to meet up with Dr. Livingstone in “Darkest Africa”, had it not been for the personal assistance of one Tippu Tip, the most powerful of Zanzibar’s Arab slave traders. This was an execrable lot, Stanley himself once lamented the lack of a heavy machine gun, on witnessing the abject misery of 2,300 unfortunates, held captive by these people: “Would to God I could see my way to set them all free and massacre the fiends guilty of the indescribable inhumanity I have seen today.

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His Majesty, King Leopold II of Belgium

Leopold buttressed what was at fist a weak position with an alliance with the Arab slave trader, and later raised an army of Congolese mercenaries, to wrest control. The two year Congo-Arab war was a proxy war, fought mostly by native Congolese aligned with one side or the other, and sometimes switching sides.

Leopold emerged victorious from this Imperial double-cross, and set about reorganizing his mercenaries into a Force Publique, charged with enforcing his will across a region three-times the size of Texas and cynically called, “The Congo Free State”.

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Portrait of Tippu Tip, House of Wonders Museum, Stone Town, Zanzibar.

Leopold’s Congo was divided into districts for the purpose of extracting all the region could produce, in ivory, gold, diamonds, rubber, and more.   Provincial governors were paid by commission, and press-ganged enormous numbers of Congolese into agricultural labor, or worked them to death in the mines.

Entire ecosystems were denuded of large animals, as beaters in the hundreds or thousands drove ivory-bearing elephants by raised shooting platforms, where European “hunters” awaited, armed with a dozen rifles apiece.

Rubber plantations took space and clear-cutting old-growth rain forest took time, so the King’s agents drove villagers from their homes, to fend for themselves. Problem solved, instant space for the most important cash crop, of the era.

The greed of these overseers is hard to get one’s head around. Failure to meet quotas for gold or ivory would be met with mutilation, most often taking the form of amputation of a foot, or a hand. If a man needed both hands to work or if he couldn’t be caught, hands and feet would be cut from his wife, or his children.

While the King never personally set foot on African soil, the savagery inflicted on the Congolese by Leopold’s agents has been compared with the Mongol rampage across Asia, of a thousand years prior.  It’s impossible to know how many died of overwork, starvation or disease, or the infection caused by mass amputations.  An estimated twenty million populated the Congo Free State in 1885. By the time of the 1924 census, that number had fallen to ten million, with no corresponding influx into neighboring regions.

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The Belgian government reluctantly took over administration in 1908, but the whippings and mutilations continued in Leopold’s Congo, long past the time of Leopold himself.  The wealth of the region continued to be siphoned off until Congolese independence, in 1971.

Today, the “Democratic Republic of Congo”, sometimes referred to by a former name of “Zaire”, has yet to recover.  The “Great African War” swept over the region in the 1990s, killing some six million and overturning one dictator in Kinshasa, for yet another.  The Tutsi genocide led by Hutu-militia in 1990s Rwanda, is familiar to the modern reader.

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“Nsala of Wala contemplates the severed hand and foot of his five-year-old daughter in 1904” – H/T Allthatsinteresting.com

Today, one of the most resource-rich regions in the world remains in abject poverty, with infant mortality twelve times higher and life expectancy 23 years shorter, than that in the United States.

Leopold II, King of the Belgians and at one time the largest landowner on the planet, died peacefully on December 17, 1909, forty four years to the day, from his coronation.

If you enjoyed this “Today in History”, please feel free to re-blog, “like” & share on social media, so that others may find and enjoy it as well. Please click the “follow” button on the right, to receive email updates on new articles.  Thank you for your interest, in the history we all share.

 

December 16, 1773 The Boston Tea Party

The Tea Act of 1773 actually reduced the price of tea, but Colonists saw the measure as an effort to buy popular support for taxes already in force, and refused the cargo.  In Philadelphia and New York, tea ships were turned away and sent back to Britain while in Charleston, the cargo was left to rot on the docks. 7,000 gathered at Old South Meeting house in Boston, to decide what they would do.

In the time of Henry VIII, British military outlays averaged 29.4% as a percentage of central government expenses.   That number skyrocketed to 74.6% in the 18th century, and never dropped below 55%.

The Seven Years’ War alone, fought on a global scale from 1756 – ‘63, saw England borrow the unprecedented sum of £58 million, doubling the national debt and straining the British economy.

the-american-revolution-10-638For the American colonies, the conflict took the form of the French and Indian War.   Across the “pond”, the never-ending succession of English wars meant that, not only were colonists left alone to run their own affairs, but individual colonists learned an interdependence of one upon another, resulting in significant economic growth during every decade of the 1700s.

Some among the British government saw in the American colonies, the classically “Liberal” notion of the Free Market, as described by intellectuals such as John Locke:   “No People ever yet grew rich by Policies,” wrote Sir Dudley North. “But it is Peace, Industry, and Freedom that brings Trade and Wealth“.  These, were in the minority.  The prevailing attitude at the time, saw the colonies as the beneficiary of much of British government expense.  These wanted some help, picking up the tab.

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King George, III

Several measures were taken to collect revenues during the 1760s.  Colonists bristled at what was seen as heavy handed taxation policies.  The Sugar Act, the Currency Act:  in one 12-month period alone, Parliament passed the Stamp Act, Quartering Act, and the Declaratory Act, while deputizing Royal Navy Sea Officers to enforce customs laws in colonial ports.

The merchants and traders of Boston specifically cited “the late war” and the expenses related to it, concluding the Boston Non-Importation Agreement of August 1, 1768. The agreement prohibited the importation of a long list of goods, ending with the statement ”That we will not, from and after the 1st of January 1769, import into this province any tea, paper, glass, or painters colours, until the act imposing duties on those articles shall be repealed”.

The ‘Boston Massacre’ of 1770 was a direct result of the tensions between colonists and

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Burning of the Gaspee, Narragansett Bay, Rhode Island

the “Regulars” sent to enforce the will of the Crown.  Two years later, Sons of Liberty looted and burned the HMS Gaspee in Narragansett Bay, Rhode Island.

The Tea Act, passed by Parliament on May 10, 1773, was less a revenue measure than it was an effort to prop up the British East India Company, by that time burdened with debt and holding some eighteen million pounds of unsold tea.  The measure actually reduced the price of tea, but Colonists saw it as an effort to buy popular support for taxes already in force, and refused the cargo.  In Philadelphia and New York, tea ships were turned away and sent back to Britain while in Charleston, the cargo was left to rot on the docks.

British law required a tea ship to offload and pay customs duty within 20 days, or the cargo was forfeit.  The Dartmouth arrived in Boston at the end of November with a cargo of tea, followed by the tea ships Eleanor and Beaver.  Samuel Adams called for a meeting at Faneuil Hall on the 29th, which then moved to Old South Meeting House to accommodate the crowd.  25 men were assigned to watch Dartmouth, making sure she didn’t unload.

sons-of-liberty7,000 gathered at Old South Meeting House on December 16th, 1773, the last day of deadline, for Dartmouth’s cargo.  Royal Governor Hutchinson held his ground, refusing the vessel permission to leave.  Adams announced that “This meeting can do nothing further to save the country.”

That night, anywhere between 30 and 130 Sons of Liberty, many dressed as Mohawk Indians, boarded the three ships in Boston Harbor.  There they threw 342 chests of tea, 90,000 pounds in all, into Boston Harbor.  £9,000 worth of tea was destroyed, worth about $1.5 million in today’s dollars.

In the following months, other protesters staged their own “Tea Parties”, destroying imported British tea in New York, Philadelphia, Charleston, and Greenwich, NJ.  There was even a second Boston Tea Party on March 7, 1774, when 60 Sons of Liberty, again dressed as Mohawks, boarded the “Fortune”.  This time they dumped a ton and one-half of the stuff, into the harbor.  That October in Annapolis Maryland, the Peggy Stewart was burned to the water line.

For decades to come, the December 16 incident in Boston Harbor was blithely referred to as “the destruction of the tea.” The earliest newspaper reference to “tea party” wouldn’t come down to us, until 1826.

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John Crane of Braintree is one of the few original tea partiers ever identified, and the only man injured in the event. An original member of the Massachusetts Society of the Cincinnati and early member of the Sons of Liberty, Crane was struck on the head by a tea crate and thought to be dead.  His body was carried away and hidden under a pile of shavings at a Boston cabinet maker’s shop.  It must have been a sight when John Crane “rose from the dead”, the following morning.

Great Britain responded with the “Intolerable Acts” of 1774, including the occupation of intolerable-actsBoston by British troops.    Minutemen clashed with “Lobster backs” a few months later, on April 19, 1775.  When it was over, eight Lexington men lay dead or dying, another ten wounded. One British soldier was wounded.  No one alive today knows who fired the first shot at Lexington Green.  History would remember the events of that day as “The shot heard ’round the world”.

If you enjoyed this “Today in History”, please feel free to re-blog, “like” & share on social media, so that others may find and enjoy it as well. Please click the “follow” button on the right, to receive email updates on new articles.  Thank you for your interest, in the history we all share.

December 11, 1970 The Man who saved a Billion People

It’s hard to get the modern head around the notion of “food insecurity”.  We’re not talking about what’s in the fridge. This is the problem of acute malnutrition, of epidemic starvation, of cyclical famine and massive increases in mortality, due to starvation and hunger-induced disease.

All too often, history is measured in terms of the monsters. The ten worst dictators of the last 1½ centuries account for the loss of nearly 150 million lives. Most of us remember their names. At least some of them. Who remembers the name of the man who Saved the lives of seven times the number, of this whole Parade of Horribles, put together?

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We live in a time and place where the National Institutes of Health (NIH) can report “The U.S. is one of the wealthiest countries in the world and accordingly has high obesity rates; one-third of the population has obesity plus another third is overweight”.

It wasn’t always so. In 1820, 94% of the world’s population lived in “absolute poverty.” American economic historian and scientist Robert Fogel, winner of the 1993 Nobel Prize in Economics, wrote that: “Individuals in the bottom 20% of the caloric distributions of France and England near the end of the eighteenth century, lacked the energy for sustained work and were effectively excluded from the labor force.”

It’s hard to get the modern head around the notion of “food insecurity”.  We’re not talking about what’s in the fridge. This is the problem of acute malnutrition, of epidemic starvation, of cyclical famine and massive increases in mortality, due to starvation and hunger-induced disease.

Nels Olson Borlaug once told his grandson Norman, “You’re wiser to fill your head now if you want to fill your belly later on.” An Iowa farm kid educated during the Great Depression, Norman Ernest Borlaug periodically put his studies on hold, in order to earn money. A Civilian Conservation Corps leader working with unemployed people on CCC projects, many of his co-workers faced persistent and real, hunger. Borlaug later recalled, “I saw how food changed them … All of this left scars on me”.

norman-borlaug1Borlaug earned his Bachelor of Science in Forestry, in 1937. Nearing the end of his undergraduate education, he attended a lecture by Professor Elvin Charles Stakman discussing plant rust disease, a parasitic fungus which feeds on phytonutrients in wheat, oats, and barley crops.

Stakman was exploring special breeding methods, resulting in rust-resistant plants. The research greatly interested Borlaug, who later enrolled at the University of Minnesota, to study plant pathology under Stakman. Borlaug earned a Master of Science degree in 1940, and a Ph.D. in plant pathology and genetics, in 1942.

Borlaug attempted to enlist in the military following the attack on Pearl Harbor, but his application was rejected under wartime labor regulations. He was put to work in a lab, doing research for the United States armed forces.

Between 1939 and ’41, Mexican farmers suffered major crop failures, due to stem rust. In July 1944, Borlaug declined an offer to double his salary, traveling instead to Mexico City where he headed a new program focusing on soil development, maize and wheat production, and plant pathology.

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“Pure line” (genotypically identical) plant varieties possess only one to a handful of disease-resistance genes. Random mutations of rusts and other plant diseases overcome pure line survival strategies, resulting in crop failures. “Multi-line” plant breeding involves back-crossing and hybridizing plant varieties, transferring multiple disease-resistance genes into recurrent parents. In the first ten years Borlaug worked for the Mexican agricultural program, he and his team made over 6,000 individual crossings of wheat. Mexico transformed from a net-importer of food, to a net exporter.

In the early sixties, Borlaug’s dwarf spring wheat strains went out for multi-location testing around the world, in a program administered by the US Department of Agriculture. In March 1963, Borlaug himself traveled to India with Dr. Robert Glenn Anderson, along with 220-pounds of seed from four of the most promising strains.

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The Indian subcontinent experienced minor famine and starvation at this time, limited only by the US’ shipping 1/5th of its wheat production into the region in 1966 – ’67. Despite resistance from Indian and Pakistani bureaucracies, Borlaug imported 550 tons of seeds.

American biologist Paul Ehrlich wrote in his 1968 bestselling book The Population Bomb, “The battle to feed all of humanity is over … In the 1970s and 1980s hundreds of millions of people will starve to death in spite of any crash programs embarked upon now.” Ehrlich went on: “I have yet to meet anyone familiar with the situation who thinks India will be self-sufficient in food by 1971…India couldn’t possibly feed two hundred million more people by 1980.”

Ehrlich could not have been more comprehensively wrong.

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Borlaug’s initial yields were higher than any other crop, ever harvested in South Asia. Countries from Pakistan to India to Turkey imported 80,000 tons and more of seeds. By the time of Ehrlich’s book release in 1968, massive crop yields had substituted famine and starvation, with a host of new problems. There were labor shortages at harvest, and insufficient numbers of bullock carts to haul it to the threshing floor. Jute bags were needed, along with trucks, rail cars, and grain storage facilities. Local governments even closed school buildings, to use them for grain storage.

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In three years, the world increase in cereal-grain production was nothing short of spectacular, dubbed a “Green Revolution”.   Borlaug won the Nobel Peace Prize in 1970, protesting to be only “one member of a vast team made up of many organizations, officials, thousands of scientists, and millions of farmers – mostly small and humble…”

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Norman Borlaug works with Chinese agricultural leaders, 1974

With mass starvation or widespread deforestation being the only historic alternatives, the “Borlaug Hypothesis” introduced a third option, that of increasing yields on existing farmland.  The work however, was not without critics. Environmentalists criticized what they saw as large-scale monoculture, in nations previously reliant on subsistence farming. Critics railed against “agribusiness” and the building of roads through what had once been wilderness.

David Seckler, Director General of the International Water Management Institute said “The environmental community in the 1980s went crazy pressuring the donor countries and the big foundations not to support ideas like inorganic fertilizers for Africa.”

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Norman Borlaug, Nobel Prize Acceptance Speech, December 11, 1970

The Rockefeller and Ford foundations withdrew funding, along with the World Bank. Well fed environmentalist-types congratulated themselves on “success”, as the Ethiopian famine of 1984-’85 destroyed over a million lives. Millions more were left destitute, on the brink of starvation.

Borlaug fired back, “[S]ome of the environmental lobbyists of the Western nations are the salt of the earth, but many of them are elitists. They’ve never experienced the physical sensation of hunger. They do their lobbying from comfortable office suites in Washington or Brussels. If they lived just one month amid the misery of the developing world, as I have for fifty years, they’d be crying out for tractors and fertilizer and irrigation canals and be outraged that fashionable elitists back home were trying to deny them these things.

Borlaug became involved at the invitation of Ryoichi Sasakawa, chairman of the Japan Shipbuilding Industry Foundation, who wondered why methods used so successfully in Asia, were not being employed in Africa. Since that time, the Sasakawa Africa Association (SAA) has trained over 8 million farmers in SAA farming techniques. Maize crops developed in African countries have tripled, along with increased yields of wheat, sorghum, cassava, and cowpeas.

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The world population when Ehrlich released his book in 1968, was about 3.53 billion. Today, that number stands at 7.7 billion and, when we hear about starvation, such events are almost exclusively, man-made. The American magician and entertainer Penn Jillette once described Norman Borlaug as “The greatest human being who ever lived…and you’ve probably never heard of him.” Let that be the answer to the self-satisfied and well-fed, environmentalist types.

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“I now say that the world has the technology—either available or well advanced in the research pipeline—to feed on a sustainable basis a population of 10 billion people. The more pertinent question today is whether farmers and ranchers will be permitted to use this new technology? While the affluent nations can certainly afford to adopt ultra low-risk positions, and pay more for food produced by the so-called ‘organic’ methods, the one billion chronically undernourished people of the low income, food-deficit nations cannot.” – Norman Borlaug, 2000

November 23, 1932 Holodomor

“I must have looked unbelieving at this, for a tall, gaunt woman started to take the children’s clothes off. She undressed them one by one, prodded their sagging bellies, pointed to their spindly legs, ran her hand up and down their tortured, mis-shapen, twisted little bodies to make me understand that this was real famine”.

In 1928, Josef Stalin introduced a program of agricultural collectivization in Ukraine, the “Bread Basket” of the Soviet Union, forcing family farmers off their land and into state-owned collective farms.

Ukrainian “kulaks”, peasant farmers successful enough to hire labor or own farm machinery, refused to join the collectives, regarding them as a return to the serfdom of earlier centuries. Stalin claimed that these factory collectives would not only feed industrial workers in the cities, but would also provide a surplus to be sold abroad, raising money to further his industrialization plans.

Armed dekulakization brigades confiscated land, livestock and other property by force, evicting entire families. Almost half a million individuals were dragged from their homes in 1930-’31, packed into freight trains and shipped off to remote areas like Siberia and often left without food or shelter. Many of them, especially children, died in transit or soon after arrival.

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Resistance continued, which the Soviet government could not abide. Ukraine’s production quotas were sharply increased in 1932-’33, making it impossible for farmers to meet assignments and feed themselves, at the same time. Starvation became widespread, as the Soviet government decreed that any person, even a child, would be arrested for taking as little as a few stalks of wheat from the fields in which they worked.

Military blockades were erected around villages preventing the transportation of food, while brigades of young activists from other regions were brought in to sweep through villages and confiscate hidden grain.

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Eventually all food was confiscated from farmers’ homes, as Stalin determined to “teach a lesson through famine” to the Ukrainian rural population.

At the height of the famine, Ukrainians starved to death at a rate of 22,000 per day, almost a third of those, children 10 and under.  How many died in total, is anyone’s guess.  Estimates range from two million Ukrainian citizens murdered by their own government, to well over ten million.

Millions of tons of grain were exported during this time, more than enough to save every man, woman and child.

2,500 people were arrested and convicted during this time, for eating the flesh of their neighbors. The problem was so widespread that the Soviet government put up signs reminding survivors: “To eat your own children is a barbarian act.”

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Stalin denied to the world that there was any famine in Ukraine, a position supported by the likes of Louis Fischer reporting for “The Nation”, and Walter Duranty of the New York Times. Duranty went on to win the Pulitzer Prize for his “coverage”, with comments like “any report of a famine in Russia is today an exaggeration or malignant propaganda”.  Such stories were “mostly bunk,” according to the Times.  Duranty even commented that “You can’t make an omelet without breaking eggs.”

To this day, the New York Times has failed to repudiate Walter Duranty’s Pulitzer.

Like many on the international Left, Canadian journalist Rhea Clyman had great expectations of the “worker’s paradise” built by the Communist state, where no one was unemployed, everyone was “equal”, and Everyman had what he needed. Unlike most, Clyman went to the Soviet Union, to see for herself.

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To do so at all was an act of courage: a single Jewish woman who’d lost part of a leg in a childhood streetcar accident, traveling to a place where the Russian empire and its successor state had a long and wretched history, when it came to the treatment of its own Jews.

Virtually all of the international press preferred the comfortable confines of Moscow, cosseted in the heart of the Soviet propaganda machine and ignorant of the world as it was.

In four years, Clyman not only learned the language, but set out on a 5,000-mile odyssey to discover the Soviet countryside. Duranty’s idea of “good-bye” was offering to write her obituary.

It is through this “Special Correspondent in Russia of The Toronto Evening Telegram, London Daily Express, and Other Newspapers“, that we know much about the government’s extermination of its own citizens, in Ukraine.

To read what she wrote about abandoned villages, is haunting.  And then the moment of discovery:

“They wanted something of me, but I could not make out what it was. At last someone went off for a little crippled lad of fourteen, and when he came hobbling up, the mystery was explained. This was the Village of Isoomka, the lad told me. I was from Moscow, yes; we were a delegation studying conditions in the Ukraine, yes. Well, they wanted me to take a petition back to the Kremlin, from this village and the one I had just been in. “Tell the Kremlin we are starving; we have no bread!”

18telegramA tall, bearded peasant was spokesman. His two sons and the rest of the men and women nodded approval at every word. The little crippled boy stood with his right hand on his crutch, translating everything he said into Russian for me, word by word.

“We are good, hard-working peasants, loyal Soviet citizens, but the village Soviet has taken our land from us. We are in the collective farm, but we do not get any grain. Everything, land, cows and horses, have been taken from us, and we have nothing to eat. Our children were eating grass in the spring….”

I must have looked unbelieving at this, for a tall, gaunt woman started to take the children’s clothes off. She undressed them one by one, prodded their sagging bellies, pointed to their spindly legs, ran her hand up and down their tortured, mis-shapen, twisted little bodies to make me understand that this was real famine. I shut my eyes, I could not bear to look at all this horror. “Yes,” the woman insisted, and the boy repeated, “they were down on all fours like animals, eating grass. There was nothing else for them.”

“What have you to eat now?” I asked them, still keeping my eyes averted from those tortured bodies. “Are all the villages round here the same? Who gets the grain?”” – Rhea Clyman, Toronto Telegram, 16 May 1933

22,000 of these poor people were starving to death every day, and they still thought the Kremlin was going to help them.

Today, the province of Alberta is home to about 300,000 Canadians of Ukrainian Heritage. About a week ago, Alberta Premier Rachel Notley explained “Holodomor is a combination of two Ukrainian words: Holod, meaning hunger, and moryty, meaning a slow, cruel death. That is exactly what Ukrainians suffered during this deliberate starvation of an entire people“.

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The Holodomor Memorial to Victims of the Ukrainian Famine-Genocide of 1932–1933 was opened in Washington, D.C. on November 7, 2015

Ukrainians around the world recognize November 23 as Holodomor Memorial Day, commemorated by a simple statue in Kiev.  A barefoot little girl, gaunt and hollow eyed, clutches a few stalks of wheat.

Here in the United States, you could line up 100 randomly selected individuals.  I don’t believe that five could tell you what Holodomor means.   We are a self-governing Republic.  All 100 should be well acquainted with the term.

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Please feel free to re-blog, “like” & share on social media, so that their story is not forgotten. Please click the “follow” button on the right, to receive email updates on new articles.  Thank you for your interest, in the history we all share.

October 24, 1929 Black Thursday

The man who had a family to support was grateful for work on a WPA project, but every dollar spent had first to be extracted from the wealth producing part of the economy. The government doesn’t produce wealth it can only take it. You can’t fill a swimming pool by draining one end of it, into the other.

Warren Harding entered office on March 4, 1920, in the midst of the sharp recession following WWI.

HardingHarding’s Treasury Secretary, Andrew Mellon, believed that money was driven underground or overseas as income tax rates increased. Mellon held the heretical belief for that time, that lower tax rates led to greater levels of economic activity and that, as people had more of their own money to work with, increased activity resulted in higher tax revenues.

Based on Mellon’s advice, Harding cut taxes, starting in 1922. The top marginal rate was reduced annually in four stages from 73% in 1921 to 25% in 1925. Taxes were cut for lower incomes starting in 1923.

President Calvin Coolidge became President in August 1923, following Harding’s untimely death, by heart attack. Coolidge would follow Harding’s economic policies of low taxation and high growth, resulting in the “Roaring 20s”.

“Supply Side Economics”, was born.

Revenues to the treasury increased substantially, resulting in a 36% reduction of the national debt.

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Supply side tactics worked as well in the 1960s, as it did in the 1920s.

Unemployment and inflation both declined throughout the 1920s, while wages, profits and productivity, increased.  The decline in what would come to be called the “Misery Index” in the Carter years, was the sharpest in history.

The twenties became a time of wealth and excess, and speculation in the stock market increased exponentially. New investors poured into the market in the belief that, like the housing market of the 2000s, prices could never go down. It was a nine-year run when the Dow Jones Industrial Average increased tenfold, peaking at 381.17 on September 3, 1929.

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Rising share prices encouraged more people to invest, even if they didn’t have the money to do so. Brokers routinely lent investors up to two thirds of the face value of the stocks. Over $8.5 billion was hanging out on such loans, more than the entire amount of US currency in circulation, at that time.

As with 2007-’08, early tremors showed that the bubble was about to burst. Then as now, such signals were seen only in hindsight, and the rising crescendo that was 1929, continued.3-0

There was a brief contraction in March, but the “Crash” began in earnest on “Black Thursday”, October 24, 1929. The market lost 11% at the opening bell, amidst heavy trading.   To quell the frenzy, Wall Street financial firms Morgan Bank, Chase national and National City Bank of New York stepped up and bought large blocks of US Steel and other “blue chip” stocks, at prices well above where they were trading.

The tactic had the effect of stopping the slide, much as it did during the Panic of 1907. This time however, the relief would be short lived. “Black Tuesday”, October 29, saw the Dow Jones contract by 12% on a volume record which would stand unbroken for forty years. The president of the Chase National Bank said at the time “We are reaping the natural fruit of the orgy of speculation in which millions of people have indulged. It was inevitable, because of the tremendous increase in the number of stockholders in recent years, that the number of sellers would be greater than ever when the boom ended and selling took the place of buying“.

stock-market-crash-1929Fears of the Smoot-Hawley tariff act fueled a further contraction in the following weeks, for apparently good reason.  When President Hoover signed the protectionist measure into law in 1930, American imports and exports plunged by more than half.

Historians debate whether the stock market crash led to the Great Depression, or if the two events coincided. Only 16% of US households were actually invested in the stock market at the time, but the psychological effect was profound.

Easy credit and unbounded confidence had led to a speculative bubble which had finally burst.

Economists still argue about the interventionist policies which followed. The man who had a family to support was grateful for work on a WPA project, but every dollar spent had first to be extracted from the wealth producing part of the economy. The government doesn’t produce wealth it can only extract it.  You can’t fill a swimming pool by draining one end of it, into the other.

stock-market-crash-1929

The stock market and unemployment rates staggered throughout the 1930s.  It was WWII that finally put people back to work.

Yet that was merely activity from an economic point of view. It wasn’t growth, it was more like giving the kids sugar and watching them run around the house. A convincing case may be made that the Reduction of government spending in the years following WWII, put wealth back in the pockets of the people who created it in the first place, and finally ended the Great Depression.

The Dow Jones Industrial Average, as an indicator of that wealth, wouldn’t retake the high ground of ‘29, until 1954.

“It’s not Republican, it’s not Democratic, it’s not conservative, it’s not liberal, it’s not left-wing, it’s not right-wing, it’s economics.” – Arthur B. Laffer

July 10, 1946 Going for Broke

As inflation approached escape velocity, the government responded by changing the name, and the color, of the currency.  The Pengö was replaced by the Milpengö (1,000,000 Pengö), and then the Bilpengö (1,000,000,000,000) and, finally by the (supposedly) inflation-indexed Adopengö. This spiral resulted in the largest denominated note in history, the Milliard Bilpengö. A Billion Trillion Pengö. The thing was worth twelve cents.

You’ve worked all your life. You’ve supported your family, paid your taxes, and paid your bills. You’ve even managed to put a few bucks aside, in hopes of a long and happy retirement.

The subject of currency devaluation is normally left to eggheads and academics, the very term sufficient to make most of us tip over and hit our heads on the floor, from boredom.  But, what happens to that “nest egg”, if the cost of the coffee in your hand doubles in the time it takes, to drink it?

Germany_Hyperinflation.svgHistory records 58 such instances of hyperinflation.  Current events in Venezuela constitute #59 despite the largest proven oil reserves on the planet, while certain American politicians and celebrity types, are nowhere to be found.

In antiquity, Roman law required a high silver content in the coinage of the republic. Precious metal made the coins themselves objects of value, and the Roman economy remained relatively stable for 500 years. Republic morphed into Empire over the 1st century BC, leading to a conga line of Emperors minting mountains of coins in their own likenesses. Slaves worked to death in Spanish silver mines. Birds fell from the sky over vast smelting fires, yet there was never enough to go around. Silver content inexorably reduced, until the currency itself collapsed in the 3rd century reign of Diocletian. An Empire and its citizens were left to barter as best they could, in a world where currency had no value.

The assistance of French King Louis XIV was invaluable to Revolutionary era Americans, at a time when American inflation rates approached 50% per month.  Yet, French state income was only about 357 million livres at that time, with expenses exceeding one-half Billion. France descended into its own Revolution, as the government printed “assignat”, notes purportedly backed by 4 billion livres in property expropriated form the church. 912 million livres were in circulation in 1791, rising to nearly 46 billion in 1796. One historian described the economic policy of the Jacobins, the leftist radicals behind the Reign of Terror: “The attitude of the Jacobins about finances can be quite simply stated as an utter exhaustion of the present at the expense of the future”.

Somehow, that sounds familiar.

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Confederate Inflation

In the waning days of the Civil War, the Confederate dollar wasn’t worth the paper it was printed on. Paper money crashed in the post-Revolutionary Articles of Confederation period as well, when you could buy a live sheep for two silver dollars, or 150 paper “Continental” dollars. Roles reversed and creditors hid from debtors, not wanting to be repaid in worthless paper money.  Generations after our founding, a thing could be described as worthless as “Not worth a Continental”.

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Germany was a prosperous country in 1914, with a gold-backed currency and thriving industries in optics, chemicals and machinery. The German Mark had approximately equal value with the British shilling, the French Franc and the Italian Lira, with an exchange rate of four or five to the dollar.

That was then.

While the French third Republic levied an income tax to pay for the “Great War”, the Kaiser suspended the gold standard and fought the war on borrowed money, believing he could get it back from conquered territories.

Except, Germany lost.  The “Carthaginian peace” described by British economist John Maynard Keynes saddled an economy already massively burdened by war debt, with reparations. Children built ‘forts’ with bundles of hyperinflated, worthless marks. Women fed banknotes into wood stoves, while men papered walls. By November 1923, one US dollar bought 4,210,500,000,000 German marks.

The despair of the ‘Weimar Republic’ period resulted in massive political instability, providing rich soil for the growth of the National Socialist German Workers’ Party (‘Nationalsozialistische Deutsche Arbeiterpartei’) of Adolf Hitler.

Using banknotes as wallpaper during hyperinflation, Germany, 1923
Papering the walls with worthless currency in 1923 Weimar Germany

The Austro-Hungarian Empire was also on the losing side, and broken up after the war. Lacking the governmental structures of established states, a newly independent Hungary began to experience inflation. Before the war, one US Dollar bought you 5 Kronen.  In 1924, it was 70,000.  Hungary replaced the Kronen with the Pengö in 1926, pegged to a rate of 12,500/1.

Hungary became a battleground in the latter stages of WW2, between the military forces of Nazi Germany and the USSR.  90% of Hungarian industrial capacity was damaged, half destroyed altogether. Transportation became difficult with most of the nation’s rail capacity, damaged or destroyed. What remained was either carted off to Germany, or seized by the Russians as reparations.

10-hyperinflation-horror-stories-of-the-20th-centuryThe loss of all that productive capacity led to scarcity of goods, and prices began to rise. The government responded by printing money. Total currency in circulation in July 1945 stood at 25 Billion Pengö. Money supply rose to 1.65 Trillion by January, 65 Quadrillion and 47 Septillion July. That’s a Trillion Trillion. Twenty-four zeroes.

Banks received low rate loans, so that money could be loaned to companies to rebuild. The government hired workers directly, giving out loans to others and in many cases, outright grants. The country was flooded with money, the stuff virtually grew on trees, but there was nothing to back it up.

Inflation approached escape velocity. The item that cost you 379 Pengö in September 1945, cost 1,872,910 by March, 35,790,276 in April, and 862 Billion in June. Inflation neared 150,000% per day, making the currency all but worthless. Massive printing of money accomplished the cube root of zero. The worst hyperinflation in history peaked on this day in 1946, when the item that cost you 379 Pengö last September, now cost 1,000,000,000,000,000,000,000,000.

The government responded by changing the name, and the color, of the currency.  The Pengö was replaced by the Milpengö (1,000,000 Pengö), which was replaced by the Bilpengö (1,000,000,000,000), and finally by the (supposedly) inflation-indexed Adopengö. This spiral resulted in the largest denominated note in history, the Milliard Bilpengö. A Billion Trillion Pengö. The thing was worth twelve cents.

One more currency replacement and all that Keynesian largesse would finally stabilize the currency, but at what price? Real wages were reduced by 80% and creditors wiped out. The fate of the nation was sealed when communists seized power in 1949. Hungarians could now share in that old Soviet joke. “They pretend to pay us, and we pretend to work”.

hyperinflation-in-zimbabwe-4-638The ten worst hyperinflations in history occurred during the 20th century, including Zimbabwe in 2008, Yugoslavia 1994, Germany 1923, Greece 1944, Poland 1921, Mexico 1982, Brazil 1994, Argentina 1981, and Taiwan 1949. The common denominator in all ten were massive government debt and a currency with no inherent value, excepting what a willing buyer and a willing seller agreed it was worth.

In 2015, Boston University economist Laurence Kotlikoff testified before the Senate Budget Committee. “The first point I want to get across” he said, “is that our nation is broke. Our nation’s broke, and it’s not broke in 75 years or 50 years or 25 years or 10 years. It’s broke today”.  Kotlikoff went on to describe the “fiscal gap”, the difference between US’ projected revenue, and the obligations our government has saddled us with. “We have a $210 trillion fiscal gap at this point”.   Nearly twelve times GDP – the sum total of all goods and services produced in the United States.

This morning, Treasurydirect.gov quotes US’ total outstanding public debt at $21,205,959,245,607.94, more than the combined GDP of the bottom 174 nations, on earth.  All that, in a currency unmoored from anything objective value. What could go wrong?