The Hyperinflation Crisis

During passive resistance in the Ruhr, what did the government promise?

That they would continue to pay their workers, in order to incentivise them to act as the government wanted

Why was Germany low on money?

They needed to pay much of their money as part of reparations, and the Ruhr was no longer producing coal, iron or steel to sell to other nations

How did the government pay the workers?

They printed lots of money

What is hyperinflation?

When there is lots of inflation - the price of goods rises, but the wages of workers are not raised enough to keep on top of the inflation

What happened when the government printed money?

Shopkeepers raised their prices, since there was more money around

What happened when the government printed even more money?

Hyperinflation rose faster

What was the impact of hyperinflation on the workers?

They were being paid twice a day and had to carry their wages in wheelbarrows. But even this was not enough to buy a decent meal

Give an example of how rapidly hyperinflation happened

The prices of goods could rise between joining the back of a queue and being served

What was the impact on the government?

They lost lots of support as people looked for someone to blame

Who benefited from hyperinflation?

People with debts, since they were practically worthless now

Who was impacted the worst by hyperinflation?

The middle class, since many had their life’s savings which lost their value. Also, anyone whop had lent money to someone else found that the value of what they had returned to them was a fraction of the initial amount

How did wages change?

People with wages were relatively safe since it was easy to renegotiate what they should be paid. Farmers were also safe since the value of their products was always in high demand and they could ask for any amount of money they liked. People on fixed incomes (like salaries) found that their incomes didn’t rise consistently with inflation

Examples of people on fixed incomes

Pensioners, the sick and students

How did hyperinflation stop?

Streseman called off passive resistance of the German workers in the Ruhr, promised to start paying reparations payments again, introduced the Rentenmark (a new currency), and reduced government spending

What was the impact of calling off passive resistance?

This ensured that goods were being produced and enabled the government to stop printing money as the workers were back to work so could be paid their usual wages

What was the impact of promising to continue making reparations payments?

This persuaded France and Belgium to end their occupation of the Ruhr by 1925, returning the area to relative normality

What was the impact of introducing the Rentenmark?

This stabilised prices as only a limited number were produced, ensuring that the currency rose in value, and more people regained their confidence in the German economy

What was the impact of reducing government spending?

He made 700,000 government employees redundant, which reduced the budget deficit