February 25th

Today in 1923 the price of bread in the city of Berlin hit 2,000 marks, demonstrative of the growing hyperinflation problem and economic crises in Germany in the aftermath of World War I (1914-18), a far cry from the flourishing German economy of recent years. By November 1923, a loaf of bread cost 200,000,000 marks.


Hyperinflation, Germany, 1923. Source:rarehistoricalphotos.com

Germany’s economic downturn principally derived from problems surrounding the war. The government had spent all of its gold reserves during the war, and was having to resort to printing more and more money. From 6,300 marks in circulation in June 1914, by December 1918 there was over 33,000. The rapid printing of currency inevitably resulted in severe inflation, as prices shot up wages and savings lost value, people were unable to spend, businesses collapsed and unemployment ensued. Furthermore, the allies had imposed the tough post-war Treaty of Versailles, which took away agricultural and industrial land, and demanded heavy reparations for Germany’s responsibility in starting the war. The clear inability of the debt-ridden German government to pay fixed reparation payments in turn meant the foreign investors lost confidence in the German currency, and they demanded high conversion rates which left Germany unable to buy cheaper food and raw materials from abroad.

The economic downturn was exacerbated in January 1923 when the French government sent troops into the Ruhr, Germany’s main industrial region, in retaliation for their failure to meet reparation installments. The German government ordered passive resistance in the region, essentially a general strike, however the necessary financial assistance for the striking workers was found through printing more money. Inflation became hyperinflation.

Germany’s economic woes were recovered somewhat from through the policies of the new chancellor Gustav Stresemann of the DVP, which saw Germany introduction of new currency, limits on the printing of money and negotiation of foreign agreements to make the payment of reparations more manageable, such as the Dawes Plan 1924. Unfortunately, economic stability was only temporary before the Great Depression ruthlessly hit the Weimar Government in 1929. There is no question that this second period of economic deterioration, preyed on by Adolf Hitler, set the climate for the rise of the Nazi party to power.

Reference: White, A & Hadley, E. Germany 1918-1949 (1990)


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