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Hyperinflation (Weimar Germany #AtoZChallenge)

When we hear about the Weimar Republic, most of us think to wheelbarrows of banknotes used to buy one loaf of bread or stakes of notes used to fuel stoves. In short, we think to the hyperinflation of the middle 1920s. We might think hyperinflation was a specific German situation since we seldom heard of any other such. It wasn’t. In fact, most countries after WWI knew a period of hyperinflation, an occurrence that had never been uncommon after a war. But the German case was peculiar, researched and dissected in detail ever since because a lot of data were available in a time when data and charts were becoming more common. And anyway Germany was from the beginning a different case from all the others.
It isn’t easy to explain the hyperinflation, which took into account many different causes, both economic, political and social. What is certain is that it had devastating consequences on the population. Money lost value by the minute. Tales like the one of the man who ordered two coffees at the bar and paid two different prices because between the first order and the second the price had risen might be more legend than reality, but it was close enough. In 1918 one loaf of bread cost a quarter of a Reichsmark. In October 1923, at the height of the hyperinflation, it cost 80 billion Reichsmark. The largest banknote at that time had a face value of 100,000,000,000,000 (100 trillion) Reichsmark. The official change was 4,2 million Reichsmark against 1 dollar.

Hyperinflation was a common occurance after a war. But in post-WWI Germany it played a very peculial role #WWI #Germany #History Click To Tweet

Inflation actually started in Germany before the war. Germany abandoned the gold standard and resorted to borrowing rather than taxation to sustain the increasing war costs. Everyone expected to be short. Germany thought they would be able to repay all debts with the loot of the war and anyway, debts were not going to rise too high.

But the war lasted for years, and in the end, Germany lost it.

Germans met with horror the financial punishment of Versailles and just about met the first instalment in 1922. By then, it was clear to the Weimar government that meeting any subsequent instalment was impossible. But this was only four years after the war and the attitude was still very harsh on Germany. Her requests for a more lenient reparation plan fell in the void.

In that same year, the government order to increase the print of banknotes in the hope to stimulate the economy, a plan that industrials met favourably since this made the mark cheaper, which meant easier exportations. It also meant they had lower costs for their workers. It was risky, German economists understood that, but they thought this was going to be a short-term resource, just intended to help the economy to rise.

But the Allies didn’t take this too happily. Most of them thought that this was a ruse and Germany was intentionally ruining her economy so that it would become apparent that meeting the reparation costs was impossible. In early 1923 France and Belgium – ignoring the rules of the League of Nations – invaded the Ruhr, German industrial district, hoping to get reparations paid with goods.

The German government invited the Ruhr population to a ‘passive resistance’, which essentially meant a general strike. Every activity ceased in the Ruhr, the chief producer of wealth in Germany. Which meant France and Belgium didn’t get their money, but so did Germany.
Even if workers were not producing anything, they still had to be paid, since their strike was supported by the government. The only way to pay such a number of people was to print more money.

That’s when things got out of control. That’s when the banknote-burning stoves happened.

Reichsbank in Berlin Oktober 1923

In September 1923 Germany had a new chancellor, Gustav Stresemann who had different ideas about how to cope with the reparation costs. Rather than playing the ‘impossibility’ card, he thought a parlay with the Allays was the best bet. He immediately started meetings and talks, and in November a plan was in place, the Dawes Plan, devised by an American banker. The US accepted to back a new German currency with gold, the Rentenmark and set more realistic targets for German reparation instalments.
When the Rentenmark replaces the Reichsmark, and twelve zeroes were cut from the prices, prices in the new currency became stable and the inflation normalised.

The worse of the hyperinflation had passed, but not its consequences. It is widely believed that the hyperinflation contributed to the rise of the Nazis. It certainly rose the doubts about how competed a liberal institution would be in weathering an economic crisis. Germany was going to discover this when the 1929 crash came.


RESOURCES

Alpha History – The 1923 Hyperinflation
The History Learning Site – Hyperinflation and Weimar Germany
PBS – The German Hyperinflation in 1923
Hyper inflation in the Weimar Republic (pdf)
Business Inside – The Truth About Hyperinflation: It’s More Than Just A Monetary Phenomenon

Gunther Mai, Die Weimarer Republik, C.H. Beck Verlag, Munchen, 2009


Weimar Republic - HYPERINFATION (AtoZChallenge 2018) Hyperinflation was a common recurrance after a war and all European country suffered for it after WWI. Still we particularly remember Germany hyperinflation, not only because it was crazy, but also because it's well-documented.

26 Comments

  • Hilary
    Posted April 9, 2018 at 01:34

    Hi Sarah – I will definitely be back to re-read this when I can concentrate and not be worried about rushing through … as you say it is complicated – cheers Hilary

    • Post Author
      jazzfeathers
      Posted April 9, 2018 at 18:15

      It is. So many things I had to leave out from this article.

  • Sue Bursztynski
    Posted April 9, 2018 at 03:01

    Yes, you can certainly see why people would be desperate enough to vote for any nut case who promised to fix it! I’ve just been reading Jackie French’s trilogy about this era, Miss Lily – the first two, anyway, as the third is not yet out – and it’s interesting to read this with those novels still in my head!

    H Is For Steven Herrick
    https://suebursztynski.blogspot.com.au/2018/04/a-to-z-blogging-challenge-2018-steven.html

    • Post Author
      jazzfeathers
      Posted April 9, 2018 at 18:17

      I have never heard of that trilogy. Thanks so much for mentining it. I’ll sure check it out.

  • JOHN T. SHEA
    Posted April 9, 2018 at 07:21

    Thanks for this, Sarah! Hyperinflation is certainly a good way to ruin as many people as possible and destroy their faith in their government and country. The inflation after the 1970s oil embargo was less hyper but much more widespread and contributed to lasting and justifiable suspicion of governments in many countries.

    • Post Author
      jazzfeathers
      Posted April 9, 2018 at 18:19

      True. It must have been terrible to see all the money gone, especially after having already suffer through much privation during the war. It’s really no surprise that peopel lost faithin theri politicians.

  • Tasha Duncan-Drake
    Posted April 9, 2018 at 11:13

    I can only imagine what it must have been like to see everything you have worked for in savings becoming valueless before your eyes and good becoming ridiculously priced. Boggles the mind!
    Tasha
    Tasha’s Thinkings – Movie Monsters

    • Post Author
      jazzfeathers
      Posted April 9, 2018 at 18:20

      True. I think it’s quite difficult to understand for us.

  • Leanne | www.crestingthehill.com.au
    Posted April 9, 2018 at 12:40

    I associate hyperinflation with what happened to the currency of some of the African countries when government changed rapidly and money was printed with gay abandon. I hadn’t realized the same thing had happened in Germany – it really is the death knell for a country’s economy.

    Leanne | http://www.crestingthehill.com.au
    H for Hang on to your Dreams

    • Post Author
      jazzfeathers
      Posted April 9, 2018 at 18:23

      From what I understand, it was kind of a gamble. German economists thought it was goingto last only a short time, long enough to give the economy some breath and then things would go back to normal.
      Well… I suppose a gamble is alwasy a gamble. The German government must hav ebeen very irrestonsible or very desperate (and they might as well have been) to try such a risky tactic.

  • Debs
    Posted April 9, 2018 at 13:07

    The difference between how the Germany – as the losers – were treated after WW1 & WW2 is due to the lessons learned after the former. Most historians believe it was the restrictions – financial and otherwise – which produced the conditions allowing the new Nazi regime to come to power and flourish. The treatment of Germany & Japan after WW2 came from a realisation that both countries needed to be allowed to recover economically, in order to gain future stability. [Or that’s my understanding of my historian boyfriend’s teachings, but he says I’m not a patient student!]

    A-Zing this year at:
    FictionCanBeFun
    Normally found at:
    DebsDespatches

    • Post Author
      jazzfeathers
      Posted April 9, 2018 at 18:24

      That’s also my understanding. And it’s kind of encouraging, after all, that we do learn from history, sometimes 🙂

  • Stepheny Houghtlin
    Posted April 9, 2018 at 14:06

    Thank you again for the work it has taken to prepare this post with wonderful information and photo support.

  • Margot Kinberg
    Posted April 9, 2018 at 15:54

    I’m glad you’re exploring this topic. It was the financial situation in Germany that had so many people anxious and worried. And that, I think, played an important part in the failure of the Weimar Republic and the rise of National Socialism.

    • Post Author
      jazzfeathers
      Posted April 9, 2018 at 18:28

      The dire financial situation, the unemployment that became rampant after the Wall Stree Crash, and the fact that the republican government didn’t seem to have the strength to wether that storm, certainly was a heavy factor in the rise of the Nazi.
      And you know? This is what bothers me the most, since it echoes our circumstances of today in an unsetling way.

  • Kristin
    Posted April 9, 2018 at 18:25

    Makes me think of the people here in the ISA who lost pensions and savings and the value of their homes not all that long ago. It does not make for good feelings towards the government or the system. It’s too bad when people react without thinking down the road.

    • Post Author
      jazzfeathers
      Posted April 9, 2018 at 18:31

      I know. But it’s also a very human reaction. There’s a sense of betrayal involved and when that happens, people is just desperate to find someone who won’t betray them again. Or someone who appears the person.

  • Carrie-Anne
    Posted April 10, 2018 at 05:09

    It’s always shocking to read the details of hyperinflation, no matter in which country. In Germany in particular, it was one of the factors leading up to the rise of the Nazis.

    • Post Author
      jazzfeathers
      Posted April 10, 2018 at 15:50

      And it’s not difficult to see why. The Nazis seemed to offer easy solutions to very complex problems.

  • Birgit
    Posted April 10, 2018 at 05:15

    Yes, as you know from my previous words, my grandparents lived right through this. The lived in Wittenberg during this time and it was a crazy time to have a child in 1922 and another in 1924, 1926 and my mom in 1928. ( they had an Oops Baby in 1939 but he died in late 1940. My grandparents didn’t like Hitler but could see why he was so popular. The class distinction was strong and many were upset that the Jewish people seemed to be doing well ( not unlike one hears around us with people commenting how foreigners take t(sir jobs…it sickens me). My grandfather remembers when the Volkswagen came out and that kindergarten came into being. This meant the average person could drive. Car and go to school. This is late, of course but amazing how things start.

    • Post Author
      jazzfeathers
      Posted April 10, 2018 at 15:52

      The similarities between what people thought about Jews back then and what people seem to think now abotu immigrants is soemthign that really upsets me.

  • Arlee Bird
    Posted April 10, 2018 at 15:34

    In my stamp collection from when I was a boy I had a lot of pre-WW2 postage stamps from that era of hyperinflation. Those high numbers baffled me, but I did learn something about why the denominations were so high after researching it. I still didn’t understand it, but I got a child’s concept of the situation.

    Arlee Bird
    Tossing It Out

    • Post Author
      jazzfeathers
      Posted April 10, 2018 at 16:24

      You were a smart boy. Took me soem research before I could start to understnad what this was all about. And I too have just a child’s understanding of it. I sure understand I don’t totally understand 😉

  • Roland R Clarke
    Posted April 10, 2018 at 20:29

    There seems to be an underlying sense that the Allies wanted Germany to fail – and were rewarded with a regime with devastating consequences.

    • Post Author
      jazzfeathers
      Posted April 12, 2018 at 09:25

      Wouldn’t know. I rather have the feeling the Allies didn’t want another Great War to happen (understandably) and since they blamed the war on Germany (because humans always need to blame bad things on someone), the logic solution was to keep Germany down.
      It is very ironic that that’s one of the reasons why WWII bork out.

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