Hyperinflation in Weimar Germany, A Collection of Twelve Notes


When naysayers warn of the perils of inflation, what they’re really talking about is hyperinflation, defined
as a monthly rate of inflation in excess of 50 percent. This is a chaotic period of economic upheaval, when
fixed incomes become worthless, when wheelbarrows are required to transport paper money to the
market for simple transactions, when restaurants write menu prices in pencil because they change every
hour. No modern incidence of hyperinflation is as notorious—or as historically significant—as that which
befell the Weimar Republic of Germany in 1921-24.

In 1914, Germany under the Kaiser was a prosperous country, a center of industry and culture, and
arguably the most powerful nation on the continent. The loss in the Great War, while deleterious to
national pride and disastrous to the House of Hohenzollern, was not as ruinous to the economy. Because
the theater of war was mostly in France and Belgium, Germany survived the war with its vast industrial
power intact; if anything, indicators in 1921 hinted at growth. Two years later, however, the German
economy was a shambles, its currency trading an at unfathomable one trillion marks to the U.S. dollar.
The causes of the economic collapse are complex, but they begin with the Great War. A prosperous,
heavily industrialized, and populous nation, Germany believed it would win. The government financed the
war exclusively through deficit spending, gambling that the abundant spoils of a quick victory would cover
the debt. That did not come to pass. Instead, millions of soldiers deserted the army because they were not
being paid. Thus when the war finally ended, Germany had already racked up a big deficit—and that was
before the terms of the peace were considered.

The aftermath of the war was even worse. The Treaty of Versailles compelled Germany to pay prohibitive
reparations to the Allies—in hard currency. This meant that German marks, which were no longer pegged
to gold as of 1914, were not accepted as payment. Negotiations with France, Belgium, and Great Britain
failed to convince the Allied powers to accept a drastic reduction in reparations from Germany, as they
had with Austria, Bulgaria, Hungary, and Turkey. On 5 May 1921, the so-called “London Ultimatum”
called for Germany to pay 2 billion goldmarks, plus an additional 26 percent of the value of German
exports, in war reparations—a figure that, when added to the internal war debt, proved prohibitively
expensive. The stage was set for the financial disaster that followed.

To generate the needed revenue, the Reichsbank printed vast quantities of paper money, exchanged it for
foreign currency, and used that to pay its war debts. After the first month, the rest of the world caught on
to this financial smoke and mirrors, and the value of the mark began to fall precipitously. Meanwhile,
prices soared. Hope for any sort of return to normalcy was extinguished when the French occupied the
Ruhr valley—Germany’s industrial heartland—in January of 1923, to ensure reparations were paid in
kind. Exacerbating an already chaotic market was a huge increase in commodity speculation, as
businessmen quit their jobs to engage full time in speculative ventures


Hyperinflation in Weimar Germany, A Collection of Twelve Notes
  • Weight/Dimensions: 500 g (1.1 lb) | 9 x 6.25 x 1

Additional information

Weight 17 oz
Dimensions 9 x 6.25 x 1 in


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