The 1920's Hyperinflation in Germany
Germany hoped and expected for a short, sharp and speedy victory in World War I, however the Great War went on for four years costing millions of dollars and lives. Due to the cost of the war the Germany economy was in trouble and the punishments set by the Treaty of Versailles put even more pressure on it. In 1922, Germany ordered increased print runs of banknotes in order to stimulate the economy and pay striking industrial workers. The 1923 hyperinflation was the result of paper money being pumped into the economy to such an extent that it effectively became worthless. The amount of paper currency floating around in Germany caused the price of regular day objects to rise significantly. Bread 1918 - 0.25 Reichsmark 1922 - 3 Reichsmarks 1923 January - 200, May - 1,200, July - 100,000, September - 2,000,000, October - 670,000,000, November - 80,000,000,000 Eggs (Dozen) 1918 - 0.5 Reichsmark 1921 - 3 Reichsmarks 1923 January - 500, September 30,000,000, October 4,000,000,000 Currency - Reichsmark to the US dollar During World War I the Reichsmark was not as strong as the US dollar meaning the US dollar was more valuable than the German currency. After the war the affect of the Treaty of Versailles and the reparations involved meant that Germany needed more paper Reichsmarks to pay off their debts. The results are seen below in Marks per US dollar; 1914-1918 - Fell from 4.2 to 8.91 Marks per US dollar 1919 - 32 Marks per US dollar 1921 June - 90 1922 June - 300, August - 2,000, December - 500,000 1923 August - 3,500,000, September - 60,000,000, October - 4,200,000,000, November - 4,210,500,000,000 In 1923 it cost five billion Reichsmarks to post an ordinary letter and by October the Government released a banknote with a face value of 120 trillion Reichsmarks. Add these key points to a Germany Hyperinflation summary in your workbooks and add the relevant dates to your timeline. Five Key Points: 1. The hyperinflation of 1922-23 came after an emergency decision to print additional currency became standard policy. 2. By mid-1923 the printing of banknotes, which were not backed by gold, had reached unsustainable levels. 3. As banknotes flooded the economy their value plummeted, leading to rapid increases in prices and wages. 4. Hyperinflation eroded the cash savings of the middle class and disrupted commercial activity. 5. The crisis was eventually ended with the formation of a new reserve bank and the issue of a new national currency. |