The secular threat of inflation and debt
COMMENT BY PRINCE MICHAEL OF LIECHTENSTEIN
Today’s irresponsible economic policies are repeating historical mistakes, risking catastrophic consequences similar to those experienced in the past.
In November 1923, a century ago, Germany’s post-war inflation reached its peak. One kilogram of rye bread was priced at 223 billion marks, and beef prices had soared past the trillion mark.
Post-war Germany was facing exorbitant reparation demands imposed by the Treaty of Versailles – less a peace treaty than a vengeful arrangement dictated by the victors, intended to perpetually weaken the German state. Ironically, it set the stage for the rise of the Nazis and the subsequent outbreak of World War II.
Lessons from Germany’s past
The already fragile German government had to contend not only with war debts but also with these inflated reparation demands. By 1922, Germany could no longer adhere to the reparation schedule. Consequently, France and Belgium invaded and occupied Germany’s crucial industrial Rhine-Ruhr region. The German government’s only form of protest was to endorse passive resistance and ensure payment to striking workers. To pay these wages, along with the ongoing reparation payments, Germany had to print money, triggering a tsunami of inflation.
The extreme situation necessitated a total monetary reform and a restructuring of reparation payments. Unlike Great Britain and France, the United States was notably supportive, and through the Dawes Plan Germany achieved stabilization. However, this came at a cost: all Germans lost their savings.
This scenario exemplifies the severe consequences of government overspending.
In Germany’s defense, it must be acknowledged that the government was dealing with an unprecedented situation, and the overspending was largely imposed externally.
Yet, this extreme case serves as a stark warning for contemporary times. Today, many governments engage in voluntary overspending, often underpinning their actions with frameworks like Modern Monetary Theory, while disregarding mathematical realities. Despite warnings, institutions like the European Central Bank overlooked the looming threat of inflation. Unforeseen events, such as Covid-19 and war, have transformed what was once only inflation in asset values into a broader inflationary trend affecting the general economy.
It is critical to remember that inflation is cumulative: a three percent inflation rate this year adds to the inflation rates of previous years, continuously affecting the economy and especially the purchasing power of society .
A cautionary tale for modern economies
With soaring government debts and ongoing deficits, institutions like the ECB are hesitant to sufficiently raise interest rates to combat inflation. Such a move could increase the cost of debt and potentially hinder the already very modest growth rates.
We find ourselves in what can be described as an inflationary trap.
This predicament might be concealed temporarily, but persistent and excessive government overspending lays the foundation for further inflation.
New fiscal stimuli and squandering are often packaged attractively, as seen in the U.S. with the ironically named Inflation Reduction Act , or in Germany with the term Sondervermogen, or special assets. (Labeling additional debt as “special assets” is a misnomer, to say the least.)
The current minor decrease in inflation should not be a source of complacency.
Tightening measures, particularly in the U.S., are having an impact. However, it is important to recognize that inflation persists, and the current reduction is largely due to falling energy prices and eased trade tensions. It is unsettling that wage-price spirals have emerged in several European countries.
In response to these challenges, populist rhetoric often identifies inequality as a culprit, leading to calls for wealth redistribution and slogans like “make the rich pay.”
Such approaches, however, will exacerbate the situation by setting the wrong economic incentives.
Tax systems are becoming increasingly byzantine, leading to arbitrary and unpredictable tax collection and enforcement. This complexity results in a significant tax burden.
Inflation, high debt levels and excessive taxation are deeply interconnected. Deficit spending typically fuels inflation.
Both inflation and debt ultimately strain citizens and are indicative of weak and irresponsible governance.
In today’s world, there are no valid excuses for such self-destructive policies.
One is reminded of Lenin’s assertion that the best way to achieve the dictatorship of the proletariat is to crush the bourgeoisie between the millstones of inflation and taxation.
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Palestinians Count Losses on Second Day of Gaza Cease-Fire
By Sune Engel Rasmussen - Abeer Ayyoub - Nov. 25, 2023
A fragile cease-fire held in Gaza on Saturday as residents surveyed the human loss and material damage of nearly seven weeks of devastating war, and Palestinians and Israelis prepared for a second exchange of hostages and prisoners later in the day.
On the first day of the temporary cease-fire on Friday, Hamas released 24 of the roughly 240 hostages it took during the Oct. 7 attack on southern Israel. Israel in turn freed 39 Palestinians from prison.?
On Sunday, Hamas was expected to release 13 or 14 Israeli hostages and a number of Thai citizens, according to Egyptian officials. Forty-two Palestinian prisoners were prepared for release on Saturday, according to Israel’s Prison Service. The release is expected to take place in the afternoon.?
The four-day pause in fighting has brought a measure of relief to Palestinians in the Gaza Strip, where an Israeli military campaign so far has killed more than 14,500 Gazans, the majority women and children, according to authorities in the Hamas-controlled enclave. The numbers don’t distinguish between civilians and combatants.?
The Israeli campaign came in response to the Oct. 7 attack on southern Israel by Hamas, which Israel says killed 1,200 people, including some 850 civilians. Hamas has been designated a terrorist organization by the U.S.?
The halt in fighting has allowed some displaced Palestinians to briefly return home to check on their houses and belongings. At least 1.7 million people, or roughly 75% of Gaza’s population, have been displaced by the conflict, and nearly half of the enclave’s residences are destroyed or severely damaged, according to the United Nations.?
Fatin Salim, a 35-year-old mother of two, left her house in al-Bureij, a refugee camp in central Gaza near the border with Israel, on the first day of the war, anticipating that it would be damaged in the fighting. But she wasn’t prepared for the destruction she saw when she finally returned home on Friday.?
“I went to check on the house first thing in the morning. I was hoping to see that it was partially damaged, or to be able to get some of my children’s’ clothes,” she said. “I was shocked. It was totally destroyed, flattened to the ground.” She said the only thing she was able to retrieve from her belongings was her university certificate.
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“I spent the whole day crying. I don’t know where we will end up after this war is over,” Salim said.
In the first diplomatic breakthrough of the war, Israel this week agreed to release 150 Palestinian prisoners from Israeli jails and Hamas agreed to release a total of 50 hostages over four days, during which the fighting would be halted. On Friday, Hamas handed over 13 Israelis. It also liberated 10 Thais and a Philippines citizen, who weren’t part of the deal.?
On Friday, Israel released 39 Palestinians, largely made up of women and teenagers. Some of them were welcomed by jubilant crowds in the occupied West Bank.?
Palestinians across the Gaza Strip await news of their loved ones, as telecommunications have been damaged and disrupted by the war. The Palestine Telecommunications Company, or Paltel, said its teams had managed to reach Gaza City and northern Gaza on Friday evening to begin repairs.
Israeli authorities didn’t allow displaced people to return north where Israel has focused most of the fighting, including in and around Gaza City, in its effort to destroy Hamas. Yet, several thousand Palestinians attempted to move from southern Gaza to the north on Friday, resulting in several incidents of Israeli forces opening fire and using tear gas, according to the U.N.?
Despite the cease-fire, 34-year-old Nour Ahmad, who fled Gaza City to the south with her husband and children, has still not been able to reach her parents for a week. Ahmad’s sister was killed early in the war, and her parents refused to leave their home in Al-Shati, a refugee camp near the beach in the city, even as clashes intensified.?
Ahmad has been posting on social media requests for anyone in Gaza City to check on her parents, who had been living without phone lines or electricity, not knowing whether they were still alive.?
“If just one person could go to my parents’ house and tell me they are fine, I would be relieved,” she said. So far no one responded to her calls.
Israeli hospitals that received hostages released Friday described their condition as good or stable.
The Israel-Hamas deal also provides for more aid to enter Gaza.
Four tankers of fuel and four trucks carrying cooking gas designated for essential humanitarian assistance were transferred from Egypt to the U.N. in southern Gaza on Saturday morning, said Cogat, the Israeli military body responsible for liaising with Palestinians and for the border crossing into the strip.?
Hundreds of Gazans lined up at gas stations to get fuel and waited alongside the road in the border town of Rafah to fill cylinders with cooking gas.?
The U.N. on Friday received the largest convoy of humanitarian aid to enter the Gaza Strip since Oct. 7, unloading 137 truckloads of goods, the U.N.’s Office for the Coordination of Humanitarian Affairs said. The deliveries included 129,000 liters of fuel and four trucks of natural gas for cooking.
A U.N. convoy was also able to reach two facilities sheltering internally displaced persons in the north, the first aid delivery to a shelter in the north in over a month.?
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Palestinians and Israelis Lose When Leaders Choose Violence
Ultimately, it will take substantial political courage to right the wrongs of the past and present in this conflict.
by Alexander Langlois - November 23, 2023
As reports indicate that a short-term humanitarian ceasefire is nearly complete after weeks of negotiations during the Israel-Hamas war, it is obvious that military action is not a solution to the broader conflict. Coined as so-called “cycles of violence,” decades of death on each side have fueled the extremism and violence that produced today’s fighting.
A new path is necessary—one that goes beyond empty rhetoric and blind support for any actor.
Multiple significant players are making this case, renewing calls for a serious political solution resulting in a state for both Israelis and Palestinians. Heavy hitters like Jordanian King Abdullah II and former Palestinian Authority (PA) Prime Minister Salam Fayyad produced notable arguments in this regard. Other scholars and analysts echo their sentiments, including Arab Barometer heads Amaney A. Jamal and Michael Robbins, who intricately highlight the Palestinian political temperature to argue for a path to peace.
The list goes on. Ultimately, there is strong support for a political solution to this devastating conflict. However, it must be sustainable and backed by forceful and verifiable action. While that outcome is ultimately for Palestinians and Israelis to decide for themselves, it must end in a viable state for both parties as supported by basic United Nations principles and international law. Empty rhetoric , conflict management , and bypassing Palestinian interests via the Abraham Accords were never solutions, as evidenced by the current conflict.
The inverse of a new, substantive approach is more of the same. While terminology like “cycles of violence” and “escalation” often do more to downplay sustained, decades-long violence—particularly Israeli actions against significantly weaker Palestinian communities —they are useful to understand how violence fuels the conflict while hardening negative attitudes on both sides.
In this context, Palestinian deaths are historically much higher than Israeli deaths when a cycle of violence repeats. This issue partly stems from the power asymmetry between the two groups that defines the conflict. For example, Israeli policies like the Dayiha Doctrine —developed during the 2006 Israel-Hezbollah war in southern Lebanon that advocates for maximum disproportionality in military operations to establish lasting deterrence—produce substantial civilian harm impacting Palestinians.
As such, spikes in violence between Israel and Palestine in 2008, 2009, 2014, 2018, 2021, and 2022 reflect substantial Palestinian death totals of 899, 1066, 2329, 300, 349, and 191, respectively. These numbers coincide with Israeli deaths reaching thirty-three, eleven, eighty-eight, thirteen, eleven, and twenty-one, respectively, across the same years. Notably, most Israeli deaths during these years were soldiers, whereas most Palestinian deaths were civilians. Tens of thousands of Palestinians were injured in these conflict years as well.
To be sure, such numbers are not to suggest that Israeli deaths are less significant, nor that they contribute differently to violent responses in Israel or the Occupied Palestinian Territories (OPT). Indeed, Israel experienced the highest mass-casualty event since its founding on October 7 , with approximately 1200 civilians and soldiers massacred by Hamas and another 230 taken hostage in a stunning act of brutality. In response, Israel unleashed a land, sea, and air campaign of historic proportions on the Gaza Strip, killing well over 13,000 people as of this writing. Most of these individuals are civilians, with nearly half constituting children.
The escalating scale and frequency of violence is a concerning trend. While deaths during these major spikes in violence gradually decreased before the October war, destruction increased in scale. The World Bank estimated that roughly $485 million was necessary to rebuild Gaza after the 2001 war between Israel and Hamas. Reports on the ground today suggest that the number will be exponentially higher as many areas in the Gaza Strip have become unlivable.?
These are factors that force people into destitution as they witness loved ones die while fleeing on opaque evacuation orders . It is a level of violence that will severely and negatively impact the roughly 1 million youth struggling to survive in Gaza, traumatizing them for life in ways that regularly result in violent futures. With no home to return to amidst valid fears of a second Nakba —the 1948 event Palestinians describe as their expulsion from their lands upon the creation of Israel—what are Palestinians to do?
The answer is sadly quite simple—address the status quo or risk repeating history and “cycles of violence.” Many Palestinians have and will continue to resort to violence as a response to Israeli occupation. We are witnessing the inverse of this issue today—Israel’s fury is driving it to level Gaza and directly support far-right settler pogroms against entire Palestinian communities in the Occupied West Bank. This operation is not unlike Israel’s actions against Hezbollah when the latter struck military targets in northern Israel in 2006, killing three soldiers and taking two hostages. This event formed the basis of the Dahiya Doctrine implemented today, just as today’s events could produce the October 7 attack of tomorrow.
Ultimately, it will take substantial political courage to right the wrongs of the past and present in this conflict. That means difficult decisions, including intense public pressure on all parties to finally sit down and address grievances. It means freeing hostages and the wrongfully detained. The West—particularly the United States—has the largest role to play in pushing Israel to either implement a reformed Oslo Accords roadmap or accept a one-state solution. Similarly, those backing Hamas, Fatah, and the other Palestinian factions must reform the Palestinian Liberation Organization (PLO) so that it can truly represent the people’s will—namely, sincere negotiations that lead to a state in some form.
In this regard, some world leaders are right to think about the future. But their assessment of the context itself is inherently flawed, risking sustainable progress at a moment when everyone should be saying “never again” for all civilians stuck in this nightmare. A sober assessment of the situation shows that leaders must consider power asymmetry when pressuring these actors—considerations the West must transform into serious policy given Israel’s outsized role in this conflict as an occupying state.
About: Alexander Langlois is a foreign policy analyst focused on the Middle East and North Africa. He holds an MA in International Affairs from American University’s School of International Service.
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