Hyperinflation

Why did Germany already have high levels of inflation by 1918?

• The war

• Increasing government debt

  • Kaiser Wilhelm II paid for the war entirely by borrowing

How did the German government believe they would pay off this debt and why didn’t this work?

• Winning the war and imposing reparations on allies

  • Did not work because they lost

Inflation

When price rises in an economy lead to currency buying fewer goods and services.

Hyperinflation

The currency becomes virtually worthless as inflation runs out of control.

In which year did inflation become particularly disastrous?

1923

Why was this?

• Passive resistance in the Ruhr meant no goods were being produced, weakening the economy further

  • The German government tried to combat this by printing more money, which causes prices to rise

How much did a loaf of bread cost in January 1923?

250 Marks

How much did the same loaf of break cost by November 1923?

200,000 million Marks

What did people have to do by autumn 1923 because of hyperinflation?

• By Autumn 1923 it cost more to print a note than the note was work

• Workers were paid twice a day because prices rose so quickly

• People started to barter goods

  • e.g. two eggs for a haircut

Who benefitted from hyperinflation and why?

• Borrowers e.g. businessmen, landowners and those with mortgages

  • They could easily pay off their loans with worthless money

Whose income stayed relatively stable at the start of hyperinflation?

People on wages

• They could renegotiate their wages every day

Why did this change?

Wages eventually failed to keep up with prices

Why did farmers cope well?

Their products remained in demand

• They also received more money for them as prices spiralled

Who were those very badly affected by hyperinflation?

People on fixed incomes

• e.g. students, pensioners, the sick

• people with savings and those who had lent money

Why were students, pensioners and the sick so badly affected?

Their incomes could not keep up with prices

Why were people with savings and those who had lent money so badly affected?

Their money became worthless

When did hyperinflation peak?

November 1923

Who became Chancellor at the end of 1923?

Gustav Stresemann

How did Stresemann end hyperinflation?

By scrapping the old worthless currency.

• Replaced it with a temporary currency, the Rentenmark, which was printed in very limited numbers