Economics: Why Are The Inflation Expectations Way Too High?

  (Drivebycuriosity) - If we believe the University of Michigan, in the next 12 months the US inflation rate will be 4.2%. This is the result of a poll, called "Michigan 1-Year Inflation Expectations" ( sca.isr). The number is way above the current inflation rate of 2.7%.

The expectation doesn`t make sense. While the US economy,  measured by the GDP, advances about 5%, the monetary volume grew just 4.3% (atlantafed   macromicro.). There is not much space for inflation.

Milton Friedman said "inflation is always and everywhere a monetary phenomenon". The money volume, the amount of money available in the whole economy, restricts how much people can spend. If they - for in instance - pay higher prices for imported goods, then they purchase fewer of them or they spend less for other goods & services.

 

                        Helicopter Money 

Friedman`s claim got confirmed by the recent inflation wave. It was caused by a deluge of money in the years 2020 & 2021. In 2020 & 2021 the Biden government flooded the economy with stimulus checks in the value of trillions of dollars to fight the Covid19 recession (American Rescue Plan). The government checks got financed with massive bond purchases by the Federal Reserve (Quantitative Easing known as QE1,QE2 & QE3).

The government money landed directly on the bank accounts of the Americans, blowing up the money volume M2 (bank notes & coins & deposits at banks). Milton Friedman described this as helicopter money (cato ). As a result in 2021 & 2022 the US money supply M2, the engine of the inflation, jumped 40%. Unfortunately the money deluge met a constrained supply of goods & services partly - partly because of Covid19. So the price level inevitably had to jump and the inflation rate (first derivation) went up.

 

                         Causal Relationship

The causal relationship between the money supply and inflation was already recognized by Nicolaus Copernicus! The astronomer explained in the year 1517 why "too much money" causes inflation. Copernicus` "quantity theory of money" is based on observations: Early in the 16th century Spain conquered today`s Latin America and looted the silver stocks. The Spaniards send the precious metal to Europe where it was printed into coins and used as money.

As a result the European money supply jumped, but the supply of goods & services did not change much. The flood of money raised suddenly the demand for scarce goods & services and caused a jump of the price level.

Elaborated studies by Milton Friedman, Karl Brunner, Allan Meltzer and many other economists (known as Monetarists) confirmed Copernicus & the quantity theory of money. They described in the 1960s elaborately how and why the inflation rate follows the growth rate of money with a time lag (causal connection).

                   Poorly Informed

I assume that the public is as usual poorly informed and misguided by economic illiterate pundits and inadequately educated journalists. The inflation callers focus on the recent tariff hikes, but ignore that rising prices for internationally traded goods & services are just a part of the story and are compensated by falling oil & natural gas prices and do not include the prices for domestic goods & services like dairy products, dentists or the vast leisure industry.

Books: Vile Bodies By Evelyn Waugh

 (Drivebycuriosity) - Evelyn Waugh belongs to the most important English writer of the 20th century and he is loved for his "dark and wicked satire" (libertiesjournal ). I enjoyed the anthology "The Complete Stories Of Evelyn Waugh" (my review ) and liked the TV-adaption of his novel "Brideshead Revisited".

Unfortunately his novel "Vile Bodies" does not work for me (amazon). The satirical novel, set in the 1930s, follows a decadent and hedonistic group of wealthy young London socialites. There is no plot - just some random episodes - and I did not care about the characters, whom I find unbelievable. There are some funny ideas but they do not compensate for the general weakness. Waugh could do better.

 

Books: How The Chicago School Of Economics Influenced Science, Politics & Economy

 (Drivebycuriosity) - Scarcity belongs to the greatest problems of live. We are short of many things: money, capital, time, space, medicine, hospitals, computer chips, etc. Economics is the science of how to overcome scarcity; economists focus on efficiency, rationality & cost-benefit considerations. The most rigorous economists could be find at the University of Chicago, known as Chicago School of Economics, the most famous of them is Milton Friedman. 

Johan van Overtveldt`s describes in "The Chicago School: How the University of Chicago Assembled the Thinkers Who Revolutionized Economics and Business" how Chicago`s economists influenced science, politics & economy ( amazon).

 

        Advocates For Limited Government 

What makes "Chicago" special? Contrary to the followers of John Maynard Keynes, the Keynesians, Chicago economists strongly believe in the power of markets and they advocate for a limited government. They use the tool of economic theory to explain many aspects of live and they claim that the market system possesses inherently more power diffusion than any alternative system. Milton Friedman, the most famous Chicago economist, declared: "Chicago" stands for  belief in the efficacy of the free market as a means of organizing scarce resources. Robert Mundell, who was Professor of Economics and Editor of the Journal of Political Economy at the University of Chicago, describes the credo of Chicago economists: They apply economics for every nook and cranny of human experience. 

Milton Friedman and other "Chicagoans" popularized the Chicago price theory - the analysis of rational human choice under conditions of scarcity. Friedman & Co. taught that human behavior is shaped by price signals, because people want more of what was cheap and less of what of what was dear, or would prefer (by same risk, stress, time etc) a higher income to a lower one. Therefore the price system - the free interaction of buyers and sellers - could produce better social outcomes than the decisions of politicians and regulators.

Chicago largely shaped the economics of regulation and deregulation and criticized government interventions in economic processes. Chicago economist George Stigler noticed that the regulatory process is dominated by specific interest groups—“the industry,” who try to use it to their own advantage. Stigler`s "capture theory" is diametrically opposed to the traditional view that regulation is primarily instituted by a benevolent political authority in order to protect the public.

 

                 Vanishing Monopolies 

Consequentially "Chicago" influenced the discussion about antitrust and monopolies and defended huge corporations against the claim that "big is bad". Chicago economist Yale Brozen explained: If firms grow very big, it must be because of superior management, economies of scale (average costs fall when a firm gets bigger), or the production of better products that satisfy a major portion of buyers at a lower cost to them. Any attempt at monopolistic or collusive behavior requires restriction of output and sacrifice of market share. If those companies tried to exert market power and raise their prices substantially, others would enter the market. And Chicago economist Richard Posner observed: Too often antitrust suits were brought by or on behalf of inefficient competitors against their deservedly more successful rivals. 

Milton Friedman claimed that - government intervention aside - monopolies tend to vanish and competition to revive. He also criticized the idea that companies are responsible for social issues, today known as DEI (Diversity, Equity & Inclusion): "There is one and only one responsibility of business - to use its resources and engage in activities designed to increase its profits as long as it stays within the rules of the game. A corporate executive only had direct responsibility to his employers. To divert resources to other goals would be unethical, spending someone else´s money for a great social interest".

Chicago`s skepticism about the role of the government included taxation. Chicago economist Arthur Laffer explained the consequences of tax hikes with a simple chart. His famous Laffer Curve showed that tax receipts would first increase as the rate of taxation is pushed up. At a certain point, however, the disincentive effects of taxation become dominant, so as the rate of taxation continues to rise, tax receipts actually start to fall.

 

                               New Areas  

Chicago economists expanded economics to new areas. Gary Becker, a student of Milton Friedman, epitomized the Chicago School economics philosophy by applying core economic tools—like cost-benefit analysis and rational choice—to a vast range of human behaviors previously considered outside economics, such as discrimination, the allocation of time within a family, using the economic approach to explain the decisions to have children and to educate them, and the decisions to marry and to divorce and more ( econlib).  

Becker focused on decisions of households, how you and I respond to economic incentives. Becker's Nobel Prize lecture (1992) is entitled "The Economic Way Of Looking At Life". Becker belonged to the pioneers of human capital theory and pointed out - what again seems like common sense but was new at the time -: Education is an investment. Education adds to our human capital just as other investments add to physical capital" (econlib ). 

According to Becker households are producers as well as consumers; they produce commodities by combining inputs of goods and time according to the cost-minimization minimization rules of the traditional theory of the firm. In his book "Human Capital" Becker declared that the decision to invest in human capital (e.g., education, training, and health) can be analyzed in the same way as any other investment. People investment in their human capital when the benefits outweigh the costs.

 

                  Does Crime Pay? 

According to Becker crime only happens because it “does pay.” Criminals respond to incentives as professors and others in choosing their occupations. Potential criminals consider the cost as well as benefits from crime in deciding whether to become criminals. Becker assumed that a better education (investment in human capital) reduces crime by raising earnings from legal activities. Otherwise a greater likelihood of apprehending and punishing criminals also reduces crime by raising the cost to potential criminals of engaging in crime. 

Becker inspired his students to explore religious sects - for instance signaling one`s devotion to the deity - or looked at cheating among Sumo wrestlers. Chicago influenced economists to study non-traditional topics, such as suicide, addiction, riots, warfare, charity and more.

Margaret Reid, another Chicagoan, wrote a dissertation about "The Economics of Household Production". She defined household production as unpaid activities performed by and for the members of the household. To estimate in dollar terms the market value of household production, Reid guessed the opportunity cost, the earnings foregone because of household production.

 

          Chasing Too Few Goods  

Milton Friedman became famous for his work about the role of money and popularized the quantity theory of money. Together with Anna Schwartz he wrote the monumental study "A Monetary History of the United States". Friedman/Schwartz blamed the 1930s depression mainly on the Federal Reserve because the authority allowed a  roughly one-third reduction in the stock of money that was the key element explaining the severity of the Great Depression of the 1930s. 

Merton Miller, who was on the faculty of the University of Chicago's Booth School of Business from 1961 until his retirement in 1993, agreed: "The central banks of the world, have the power, though not always the will or the wisdom, to stop in its tracks any downward cascading financial spiral. Our own Federal Reserve System failed miserably on that count in the early 1930s, but at least learned some important lessons in the process that have made the prospect of a recurrence of the 1930s for the U.S. virtually unthinkable".

Friedman famously claimed that "inflation is always and everywhere a monetary phenomenon", based on the quantity theory of money. He declared "too many dollars chasing too few goods cause a general rise of prices". The recent inflation wave, caused by a deluge of money generated by government checks & massive bond purchases by the Federal Reserve, Friedman´s helicopter money, confirms him again.

Friedman dismissed the counter-cyclical policy, advocated by the Keynesians, where the central bank reduces interest rates to stimulate the economy in a recession and hikes interest rates to fight inflation and an over-heating economy. He justified his critique with the evidence the central bank measures often overshoot, partly because the economy responds with unpredictable time lags. Instead he postulated a monetary growth rule where the central bank attempts a relatively stable growth rate of the money volume. 

Chicagoan Robert Lucas refined Friedman`s thesis. He stated that anticipated changes in money growth have very different effects from unanticipated changes. Anticipated monetary expansions raise inflation, but they do not stimulate employment and production because workers demand higher wages. Unanticipated monetary expansions, on the other hand, can stimulate production as, symmetrically, unanticipated contractions can induce depression, because they can trick workers and investors. 

 

                      Pariah Of The Left 

In their heydays Chicago economists, above all Milton Friedman, influenced the politics in the West and laid the intellectual roots of the Reagan and Thatcher revolutions of the 1980. Friedman also argued for "strengthening of free-market economies in the less-developed nations, the removal of obstacles to private international trade, and the fostering of a climate favorable to private international investment".  

Unfortunately Friedman and other Chicago economists - the so-called Chicago Boys - became a pariah of the left after they visited Chile, where they advised the government and convinced dictator Pinochet to set on market forces instead of government controls and taught the Chilean administration how to reduce Chile`s red-hot inflation by slowing the growth of money. 

Gary Becker may have put the Chicago spirit best. He said in the banquet speech for his Nobel Prize: "Economics surely does not provide a romantic vision of life. But the widespread poverty, misery, and crisis in many parts of the world, much of it unnecessary, are strong reminders that understanding economic and social laws can make an enormous contribution to the welfare of people".  

Books: Vanilla: Travels in Search of the Ice Cream Orchid

 (Drivebycuriosity) - Vanilla seems to be a very simple and boring product, as the slogan "plain vanilla" claims. But I learned from Tim Escott`s book "Vanilla: Travels in Search for the Ice Cream Orchid", that the world of vanilla is anything but boring (amazon ). Escott traveled to Mexico, Tahiti, Madagaskar, Mahé/Seychelles & Réunion, visited plantations, libraries, a historical greenhouse in London and spoke with farmers, historians, traders, speculators and food producers. He dives deep into the history, biology, chemistry and economics of Vanilla, we read about Thomas Jefferson`s cravings and learn about the politics and violence that were sometimes connected with it.

Some tidbits: 

The vanilla plants are the only orchids - from over 25,000 species - which produces an agriculturally valuable crop. There are more than a hundred different species of vanilla orchids, and they grow all over the tropics with the exception of Australia. All of the vanilla orchids produce fruits containing seeds, fruits containing seeds, but only a few species bear the large aromatic pods which can be used commercially. Virtually all of the cultivated vanilla in the world today comes from just one species,  Vanilla panifolia (sometimes called Vanilla fragrans), a plant indigenous to Central America  and particularly the south-eastern part of Mexico.

Vanilla likes moist heat, a hilly well drained site and just the right amount of sunshine and shade. The orchids cannot tolerate temperatures lower than about 6°C, and prefer the temperature range between 21°-32°C. They also need as much as three thousand millimeters of rain, fairly evenly distributed throughout the seasons.

Drying, curing and conditioning the pods is an art, which if done properly takes another nine months. Escott describes in many chapters why vanilla is the most labor intensive agricultural product in the world.

 

                       Surgery And Sex   

Even the pollination is a very delicate and complicated process. Escott writes: "Orchids have a reputation for lewd sexual display. Their intricate and erotic petals and lips are often unavoidably reminiscent of human female pudenda. But, alluring as they may appear to the human eye, they guard their own sexual parts away from view. While ‘ordinary’ flowers will happily display their breeding organs at the heart of their open petals, the orchid is generally more discreet. One of the special features of orchids is that the sexual parts of the flower are fused into a single structure known as the column ...."

Apparently the very specific conditions for natural pollination exist only in the central American home regions. Vanilla planters elsewhere cannot rely on natural pollinators to fertilize their orchids. They must do the job themselves. The author tried it himself: "The whole process felt like a mixture of minor surgery and sex".

 

                Monopolies Are A Fairy Tale 

In the past a dictator of Madagascar, the leading producer of vanilla, created a stabilization fund to control the Vanilla business by buying the product when prices fall and selling when prices rise, but without success. One producer said: "What the people don’t seem to understand is that monopolies are a fairy tale. They only exist under dictatorships where they can be enforced. Anyone who’s ever tried to farm vanilla on a large scale knows what a headache it is. The security you need to protect thousands of acres of plantation is a nightmare, and actually makes it uneconomic. And anyway—even if we dominated the market—we are still going to have to obey the laws of supply and demand. Maybe we could slow a price crash down a little bit because of the volumes we trade in—but when the market falls, it falls.”

Today the Vanilla market is influenced by speculators who are betting on rising or falling prices. Some are spying to get early information or are bringing rumors into circulation.

The book is highly recommended, I did not only learn much about the tasty product, Escott delivers a lot history and reports about the culture & cuisine of the vanilla growing regions and the functioning of a very special market.   

Books: How Did Thomas Mann`s "Der Zauberberg/The Magic Mountain " Age Over The Years?

(Drivebycuriosity) -  Thomas Mann received in 1929 the Nobel Prize in Literature, partly for his novel "Der Zauberberg/Magic Mountain" (first published 1924 amazon). How did this work fare today?

Rereading the book (1142 pages! ) gives me mixed feelings. The novel is set in the pre-WW1 era in a  tuberculosis sanatorium high in the Swiss Alps. The protagonist, a 20 something student of engineering, is visiting a relative. The plot follows him and other patients over some years, often macabre and morbid, sometimes humorous and turning into a kind of absurd theater. Mann´s descriptions of the patients, their behavior and their fashions, are sometimes funny (Ihr Hirn gab nichts weiter her/her brain delivers nothing more"). But the stuttering love story, that stretches through the novel, turns into a soap opera.

I indulged into Mann´s language, his of sentences, often complicated and elaborated, are of a rare beauty. His descriptions of the Alpine landscape, weather situations and other topics are awesome. But the dialogues did not age well, they are often very long and tiresome; satisfied with 19th century philosophy and zeitgeist. There are lengthy parts in French; maybe Mann wanted to give a political statement and signal his sympathy for Germany´s Western neighbor.

 

                          Heavy Smokers 

Some ideas seemed very strange too me, for instance the protagonist, many other patients - and even the lung specialist doctors - are heavy smokers. And the patients, who were obliged, to spend most of the day recumbend, are getting very generously fed 5-times a day: 2 breakfasts, lunch, afternoon tee and dinner. And the meals are usually rich, offering lots of fish, mead, potatoes, cakes, marmalade and much more: "Die nahrhafte Suppe eingerechnet, bestand es aus nicht weniger als sechs Gängen. Dem Fisch folgte ein gediegenes Fleischgericht mit Beilagen, hierauf eine besondere Gemüseplatte, gebratenes Geflügel dann, eine Mehlspeise, die jener von gestern abend an Schmackhaftigkeit nicht nachstand, und endlich Käse und Obst. Jede Schüssel ward zweimal gereicht - und nicht vergebens. Man füllte die Teller und aß an den sieben Tischen, - ein Löwenappetit herrschte im Gewölbe, ein Heißhunger, dem zuzusehen wohl ein Vergnügen gewesen wäre, wenn er nicht gleichzeitig auf irgendeine Weise unheimlich, ja abscheulich gewirkt hätte". 

I assume that Mann`s diet would have led to diabetes, cardiac attacks and worse in a very short time.

"Der Zauberberg" may mirror the zeitgeist of the first decade of the 20th century, today is reads rather strangely.
 

Science Fiction: Who Are The Jules Verne Of The 21st Century?

(Drivebycuriosity) - Soon we will finish the first quarter of the 21rst century. Being a connoisseur of science fiction I wonder who are this century`s most important scifi writers of the genre so far - the heirs of Jules Verne, the father of the genre (driveby). I focus on authors who began publishing serious scifi stories & novels after the turn of the millennium - those who turn speculative science into entertaining tales. 

There are at least 3 authors. My favorite is Chinese author Cixin Liu. His novel "The Three Body Problem" is the start of the trilogy "The Remembrance Of Earth`s Past" (my review ). Liu Cixin`s trilogy defines what science fiction is capable to. "Remembrance" plays with the laws of physics and mathematics and translates relativity theory, astrophysics, string theory, quantum physics and much more science into speculative & fascinating fiction, often apocalyptic and bizarre. 

Liu`s novel "Ball Lightning" toys with physics and mathematics and translates quantum physics, string theory and more science into speculative & fascinating fiction. 

The Chinese-American author Ted Chiang impresses with slick stories based on sharp logic and analysis which gained him already four Nebula awards, four Hugo awards, the John W. Campbell Award for Best New Writer, and four Locus awards. His novelette "The Story of Your Life" - used for the Hollywood movie "Arrival" - focuses on the science of language & communication. In other stories he speculates about AIs and their role in the near future or deals with entropy, multiverse theory, cosmology, mathematics and more. Chiang uses contemporary physics - including quantum mechanic phenomena, probability & many-worlds theory  - to create fascinating tales. 

The American writer Andy Weir became famous with the movie version of his novel "The Martian", where a man is stranded on Mars and is forced to use his skills and scientific knowledge (biology, chemistry, physics) to fight for survival. The "Martian" is a statement pro science, pro technology and pro progress. His novel "Project Hail Mary" is built around tons of sciences (evolution, micro-biology, genetics,  chemistry, quantum physics, cosmology etc.), and the author knotted them together into original & astounding but plausible ideas. Weir created a classic! 

Adrian Tchaikovsky`weaves  complex & fascinating plots, based on logic, biology, evolution & technology . 

James L. Cambias dives deep into the evolution, sociology, psychology & economy.

QNTM - the pen name for the British author Sam Hughes - translates mathematics, information theory, astrophysics and more into bizarre and entertaining plots. 

And more 21rst century authors got my attention with science based fables: Kishore Tipirneni; Olga Werby;  Kevin Schillo; Rich Larson & Dave Hutchinson. 

Enjoy!   

 

Books: What I Have Learned From Jacob Fugger - The Richest Man Who Ever Lived

 (Drivebycuriosity) - It seems that some things never change. Today there is an antitrust campaign against "Big Business". Politicians and bureaucrats claim that big corporations abuse their alleged monopoly power and try to dismantle them. A similar crusade unsettled the Renaissance. Early in the 16th century Jacob Fugger was in the pillory. The banker, investor & industrialist was a champion of free enterprise and unfettered capital markets, a crusader for economic and personal freedom, and a warrior for capitalism. The mogul got attacked by unsuccessful competitors, debtors and political & religious reformers, who all claimed that Fugger`s firm was too big and abused her alleged monopoly power.

Greg Steinmetz`s biography "The Richest Man Who Ever Lived" explains the rise of the Renaissance tycoon and describes how he amassed his wealth, cooperated with popes & emperors and struggled with his enemies (amazon ). The Renaissance story has surprisingly many similarities to today`s developments.

Fugger wasn`t the heir of a dynasty, instead he accumulated his huge wealth on his own and his rise can be explained by education, intelligence and willingness to take high risks. He was born 1459 in Augsburg, a city in Southern Germany, today part of Bavaria. At Fugger´s birth Augsburg was on its way to becoming the money center of Europe, the London of its day. When he was young his mother secured him an apprenticeship in Venice, the most commercial minded city on earth, where young men went to learn about trade and banking. The Italians had invented it, as shown by the words credito, debito and even banca.  

In Venice Fugger got introduced to the advantageous craft of accounting. He learned double-entry bookkeeping, so named because each entry had a corresponding entry to make the books balance. The method helped him to understand a complex business in a quick glance by summarizing the highlights and condensing the value of an enterprise to a single figure, its net worth.

 

                 The Big Picture 

The fact, that Fugger, as a teenager, already understood the importance of bookkeeping and how to do it, gave him an edge over his competitors, who kept sloppy books and overlooked details left money on the table. While his competitors believed that they could live without detailed figures, Fugger had clerks in each of his offices, who monitored every transaction and let nothing sneak through. The offices had to update the figures every week and close the books at year-end, no exceptions.

Fugger could see the big picture like no one else. By knowing exactly where he stood at every moment, he always knew how much he had to lend or whether he had to cut back. And he knew exactly, down to the last kreuzer, how much he was worth.  

Fugger also was innovative. He created a news service, the world`s first. A network of couriers raced to Augsburg with market information, political updates and the latest gossip - anything that would give him an edge.

Fugger benefited also from his political skills. He wove close connections with the uprising Habsburg family and helped at least two of them to become emperor of the Holy Roman Empire by financing them and bribing their electors. He also supported other members of the Habsburg family to secure the kingship of Spain. 

Fugger`s huge loans to the Habsburgs and other rulers were a kind of a highly risky gamble that could have driven him into insolvency, because royals could not be forced to pay them back. But they also made him extremely rich. Being the top financier of the Habsburg family for instance gave him control over highly profitable silver mines in Austria and Hungary, that partly were used a collateral and delivered a large part of his income.

 

                         Promising Projects 

Fugger had lucrative connections with the popes as well. The Vatican amassed a lot money from donations, because people in the Middle Ages and the Renaissance believed that they could avoid hell - even though they had committed sins, even murders - if they donate enough money to the church. 

Fugger dominated the business of transferring collection plate donations from Germany to Rome. Partly because he could move the money more safely and efficiently than the others because of the size of his branch network. He had so many offices and handled so much money that he could create a close loop where he could debit an account in one branch and credit an account in another. Actual coins never changed hands. This made him different from other bankers and endeared him to the Vatican because the pope could get is money without the risk of highway robbers seizing it en route. Like a credit card company taking a cut on every swipe, Fugger collected 3 percent on each transfer. This made him "God´s banker", the top financier to Rome. The taycoon served seven popes and minted coins for four of them.

Besides financing the Habsburgs and popes the entrepreneurial bet his money on other risky but highly promising projects like Portugal´s pepper trade in Asia and Spain`s exploration of their American colonies, the New World.  

 

                       Public Enemy 

Naturally Fugger`s outstanding success created envy & political resistance. Martin Luther pleaded with the princes "to crack down on big business". The knight Ulrich von Hutten, a supporter of Martin Luther, turned Fugger into a public enemy and demanded the execution of Jacob Fugger & Nephews. Thomas Müntzer, a self-proclaimed mystic, lead a peasant revolution army in order to "throw away the profiteering evildoers", especially his arch-enemy Fugger. 

The Renaissance banker defended himself and declared, that companies like his benefited all level of society, producing jobs and wealth for all. Fugger claimed that he and other business leaders knew better than to cheat on their customers. Reputation was everything and the importance of credibility checked the urge to lie, gouge and steal. 

 

                 Richer Than The Medici

Fugger`s balance sheet of 1525 showed that he had a net wealth - assets minus liabilities - of 2.02 million florins, the highest reported wealth so far. That beats the net worth of the Medici family, the richest Italian bankers, by far. Their bank had never more than 56,000 florin. After Jacob Fugger´s death the balance sheets of the family grew  bigger. They opened offices in more cities, became more international and more sophisticated. The Fugger company lasted another hundred years and wrapped up its affairs only because Fugger family members lost interest and preferred to live as country squires rather than businessmen.

As many of the mega-rich (Rockefeller, Carnegie) he also was philanthropic. Fugger started a public housing project in Augsburg, the Fuggerei, that offers rents below market prices, today known as affordable rents.  

Steinmetz`s book is much more than a biography. He depicts political developments in the German speaking lands in the 16th century, than a patchwork of kingdoms, duchies, electorates and free cities like Augsburg, Frankfurt and Hamburg. He writes about the rise and fall of the Hanse (Hanseatic League), an early trade union, containing wealthy free cities like Lübeck, Hamburg, Bremen, Rostock, Stralsund, Tallinn, Riga, Gdansk, and Bruges, an opponent of Fugger. And Steinmetz describes the role of the emperors of the "Holy Roman Empire", who were traditionally members of the Habsburg family. After the death of Charlemagne, the first emperor, Europe split into kingdoms that further split into principalities, duchies or whatever other entities had enough military power to stay independent. The followers of Charlemagne, the emperors (Kaisers) got elected like the popes. Seven princes and bishops - the most powerful territorial leaders in the German-speaking countries - comprised the electoral college that selected the emperor. The emperor received no funding except from his own estates. He was weak because, unlike the centralized states of France and England, Germany´s provincial lords clung to their independence. So the emperors relied on bankers who financed them and the Habsburg emperors relied on Fugger, the most powerful financier of his time. 

 

                  Early Class Struggle 

The German speaking lands experienced a boiling up controversy between the monopolistic Catholic Church, ruled by Rome, and reformers like Martin Luther,  Thomas Müntzer & Ulrich von Hutten, that escalated into a violent class struggle and a bloody revolution, the German Peasant`s War. Fugger sided with Rome, the emperor and the aristocrats, because the church was an important source of his income, and the reformers & revolutionaries wanted to expropriate "the rich" and destroy tycoon Fugger.  

Some things never change.