Hyperinflation in Germany

• This learning resource discusses how well the Weimar Republic dealt with its problems from 1919-1923, focusing on the Occupation of the Ruhr and Hyperinflation.

Key Words

• Economic: Pertaining to money and financial matters.
• Ruhr: A significant industrial region in Germany.
• Passive Resistance: Non-violent opposition to authority.
• Strike: Refusal to work as a form of protest.
• Inflation: The decrease in the value of money, leading to higher prices.
• Hyperinflation: Extreme, rapid, and out-of-control inflation.

Germany's Economic Problems in 1923

• Germany faced near bankruptcy in 1918 due to World War I costs.
• The Treaty of Versailles worsened the situation by demanding reparations and seizing German industrial territories like the Saar and Silesia.
• In 1921, Allies set reparations at £6.6 billion to be paid yearly.
• Germany struggled with payments by 1922 and requested a reduction.
• Allies declined payment reductions due to their own WWI debts.
• Germany defaulted on its payments to France in January 1923.

Occupation of the Ruhr

• French and Belgian troops occupied the Ruhr legally as a result of the Treaty of Versailles and in response to the default
• The occupation aimed to seize owed resources, including raw materials, manufactured goods, and machinery
• Ruhr produced 80% of Germany's steel and was a hub of industry.
• The German government pursued a policy of passive resistance with striking German workers, stopping production.
• The government supported striking workers financially by printing extra banknotes, worsening hyperinflation.
• The French brought in their own workers, but some Germans sabotaged factories and mines.
• Resistance leaders were imprisoned and deported.
• Violent clashes occurred between the Germans and French forces resulting in over 100 workers killed, and over 100,000 protesters expelled.
• France and Belgium did not withdraw until July 1925 after the Dawes Plan.

Effects of the Ruhr Crisis

• Initially, the Weimar government gained popularity due to its resistance against French and Belgian invaders.
• The passive resistance and strike pay boosted the Weimar Republic's image.
• The German economy, already struggling before 1923, was further damaged by the occupation.
• Germany lost revenue as France and Belgium confiscated products.
• Production halts further damaged the economy, but the government continued to pay striking workers resulting in more money printing.
• Printing more money devalued it, causing inflation.
• Less production coupled with high demand increased value resulting in hyperinflation.
• These events triggered hyperinflation and the collapse of the German currency.

Hyperinflation

• Hyperinflation means out-of-control inflation occurs rapidly
• The occupation of the Ruhr led to significant shortages of goods/food which were rationed and rose prices..
• By November 1923, the German mark was worthless.
• Workers rushed to spend wages immediately due to quickly rising prices.
• Shops weighed notes instead of counting them; some workers were paid twice a day.
• Fuel became cheaper than wood.
• People carried money in wheelbarrows; bartering became common practice.
• A shocking decline in health and increased death rates were noticed in towns.
• Those with fixed incomes/pensions suffered most severely as savings became worthless.
• Middle-class savings disappeared; many businesses went bankrupt.
• Increased middle-class poverty led to support to extremist parties.
• People with loans benefitted from inflation.
• Farmers benefited by growing and trading their own food.
• The wealthy could barter possessions or buy struggling businesses.

Rate of Inflation in Germany (1914-1923)

• July 1914: £1 = 20 marks
• January 1919: £1 = 35 marks
• January 1920: £1 = 256 marks
• January 1921: £1 = 256 marks
• January 1922: £1 = 764 marks
• January 1923: £1 = 71,888 marks
• September 1923: £1 = 1,413,648 marks
• October 1923: £1 = 3,954,408,000,000 marks
• November 1923: £1 = 1,680,800,000,000,000 marks

Inflation

• Inflation is the increase in the average price of goods and services over time
• Governments monitor how inflation rises, usually reported as a percentage.
• Hyperinflation occurs when governments print too much money, causing rapid price increases.