Goethe, money and the Faustian pact
The persuasive Mephistopheles turns up to propose another form of alchemy, turning paper into money. The debt-burdened emperor is intrigued: “I’m sick and tired of how and when/We’re short of money so make it, then.” The notes signed by the emperor spark a consumer boom where “half the world seems obsessed with eating well/the other half with showing off new clothes”.
Only after Mephisto and his partner Faust vanish does anyone notice the value of the notes refer not to any real equivalent – gold in a vault, for instance – but to the promise of gold yet to be mined.
When Mephisto returns to the emperor’s court, raising doubts about the “phantom money” he helped create, inflation takes hold and economic disaster looms.
Faust, meanwhile, has invested his proceeds from the paper money scheme in land reclaimed from the sea. Goethe condemns the endeavour to failure for denying the laws of nature just as its paper money financing ignores the laws of economics.
The parallels were not lost on Goethe’s contemporary readers, between the Faust fable and the capital needed to drive the industrial revolution. His warnings are once more relevant for countless German public figures who have seized on Faust to articulate their own concerns about the euro zone crisis.
The modern role of the emperor’s chancellor in Faust, who warns against the paper money scheme, has been assumed by Bundesbank president Jens Weidmann.
“If a central bank can potentially create unlimited money from nothing, how can it ensure that money is sufficiently scarce to retain its value?” he asked a Frankfurt audience in September. “The temptation certainly exists, and many in monetary history have succumbed to it.”
He warns that the ECB’s unlimited bond-buying programme to stabilise the euro zone is a potential Faustian pact if it offers politicians a more palatable financing alternative to painful economic reform.
The ECB argues that this is not the case and their differing views has revived a cultural ambivalence in Germany to money and debt. This is, after all, the country where the word Schuld means both monetary debt and moral guilt. The ECB’s bond-market interventions have been condemned by the same moralist economists who attack indebted euro zone countries as Schuldensünder or “debt sinners”.
So is there a link between attitudes today and Goethe’s Faust, described by German literary theorist Werner Hamacher as a critique of “credit aesthetics and persuasion economics”.
Former ECB executive board member Ottmar Issing suggests Germans are not doubtful about money itself, but pessimistic that it is ever used wisely. In an essay for the Goethe and Money catalogue, entitled Inflation – the Devil’s Work? Issing argues that “the choice between blessing and curse” offered by paper money “lies in the hand of humankind”.
Former ECB president Jean-Claude Trichet agrees. In another essay, he praises Goethe’s lifelong debate about the dual nature of paper money which “produces the best and the worst in the economic sphere”.