German Hyperinflation Crisis
German prices rose by a factor of about a trillion between 1919 and November 1923. The origin was the war. Germany had funded it almost entirely by borrowing rather than taxing, on the assumption that the defeated enemy would pay, and came out with enormous debt, no gold backing and a printing press. Reparations then added a foreign-currency obligation that could only be met by buying foreign currency with marks, which drove the mark down, which raised the cost of the next payment. The collapse became vertical in January 1923, when France and Belgium occupied the Ruhr over missed deliveries of coal and timber, and the German government called for passive resistance and paid the striking workers of the entire industrial heartland with printed money while receiving no output from them. By November a loaf cost some 200 billion marks. Wages were paid twice a day so that they could be spent before lunch, notes were burned as cheaper than firewood and used as wallpaper, and pensioners and anyone holding savings, bonds or life insurance was wiped out. Farmers would not sell food for paper. It was stopped in a matter of weeks by the Rentenmark, a new currency notionally secured on land and issued in strictly limited quantity, together with the end of passive resistance and a rescheduling of reparations under the Dawes Plan. The political damage outlasted the monetary damage. It destroyed the savings of exactly the middle class that a republic needed, and both Hitler and the Communists made their first serious attempts on power that year.
- Year: 1923 CE
- Category: Economic
