The Devil and Jens Weidmann
No signal rings louder in Germany than a reference to Goethe’s Faust. A play in two parts published in the early 19th century, it occupies a place in the German heart similar to Mark Twain’s Huckleberry Finn, if Huckleberry Finn contained between its covers also Shakespeare’s Hamlet and the U.S. Constitution. German soldiers in World War II carried small paperbacks of Faust in their breast pockets. Today, still, it reminds Germans of the centuries they still refer to as the “time of poets and thinkers,” when the land between the Rhine and the Oder was known for producing Leibniz, Schiller, and Beethoven. The only book that approaches the importance of Faust in German culture, is Martin Luther’s Bible.
But the Bible doesn’t quite say about money what Jens Weidmann needed it to. On Tuesday, Weidmann, head of Germany’s central bank, gave a brief speech at an event at the bank’s headquarters in Frankfurt. The city is also the birthplace of Johann Wolfgang von Goethe, and Weidmann gave his speech as part of an annual citywide Goethe festival; “Goethe and Money” was this year’s theme. Weidmann opened with a rhetorical question: What is money? “Money is that,” he answered himself, “which serves as money.”
People have used furs, and mussels, and cows for money. And they have used gold. These are concrete things, he explained, but the money we have now is something different. It’s only printed paper. In saying this, Weidmann is ignoring a wealth of scholarship on how money came to be. In early England, cows were used not for routine transactions among farmers, but for the repayment of ceremonial debts. Empires issued metal coins to their armies, then demanded that the coins be used to pay taxes, in a clever move to feed and house soldiers more efficiently. David Graeber’s Debt: The First 5,000 Years walks through this in detail. It’s not clear that 12 European stars printed on cotton paper is, in fact, all that different from the emperor’s head on a piece of copper. But we’ll forgive Weidmann his simplification, and there’s nothing so far in his speech that you wouldn’t hear at a Ron Paul rally.
“Just to remind us all, briefly,” Weidmann continued, “I’ll walk through the money creation scene in the first act of Faust, Part II.” The first part of Faust is what most people think of as a “play.” It has plausible characters. A scholar. A maid. The devil. The second part of Faust is a talky allegory that ranges over history and is legendarily difficult to stage. Ask an educated German what he can quote, and the answer will likely come from Part I. But there, in Part II, Weidmann reminded us, the devil asks an emperor to sign a piece of paper. It becomes money, and the devil instructs the attendees of a masked ball (Part II is kind of complicated) that they can use it to “Drown their desires with love and wine.” Weidmann made sure to quote this last part in full. And in case the audience had forgotten its Goethe, he pointed out that, eventually, the devil’s paper money breeds inflation.
This is why central banks were created, made independent, and obliged to protect the value of money, Weidmann explained, “explicitly to prevent a state monopoly over money policy.” This is certainly true of Germany’s central bank—and of the European Central Bank, created in its image—but the Federal Reserve, for example, is charged with protecting both money and employment. Weidmann, yesterday, took a German value and explained why it should be universal. He did this in German. In Germany. Referring to a book that only Germans and all Germans have read. Central bankers are allowed to talk; Ben Bernanke gives graduation speeches. But they aren’t allowed to talk freely. They know that what they say gets duly scanned and interpreted, even when speaking to a hall of academics about a 200-year-old play.
Last week the European Central Bank announced an unlimited bond-purchase program, in part to allay fear of a breakup of the currency union. Weidmann has publicly opposed the plan. It represents, just as he fears, monetary policy in service of a state goal. Germany’s chancellor, Angela Merkel, has nodded her reluctant approval of the plan, and Weidmann knows what is going to happen. He is reminding Germans—and himself—that the inflation he thinks surely will follow was not his plan. Not only that, it’s not German. It says so, right there in Faust. Jens Weidmann is keening. He knows the devil has already won.