Let’s go on a blast to the past, all the way to the 1920s in Germany. The scene sets after World War I, right after the Germans surrendered in 1918. The Treaty of Versailles has been made, which forced Germany to pay the equivalent of £6,600,000, which was 10% of their national income. To put in perspective of how drastic this amount was, they only stopped paying the reparations in 2010!
Germany was in a poor state after WWI, and was virtually bankrupt, due to the high war pension and large amounts of loans taken to support them during the war. In 1922, Germany could not afford to pay the reparations because of their crippling debt, causing absolutely disastrous consequences. France and Belgium decided to invade the Ruhr (an incredibly industrialised area) to steal goods in exchange for the money. In retaliation, Germans went on passive resistance, where they simply went on strike and refused to make goods. While this seemed like a smart decision at the time, it caused the government to keep printing more money to pay the strikers so they could afford to strike.
However, this caused a chain reaction: the value of money decreased rapidly and significantly, which meant that they had to pay the workers more so that they could continue to afford striking. This caused the price of goods to increase, because all the industrial workers were not working; prompting wages to increase to be able to afford the sudden increased prices of goods. This cycle continued again and again and again… until eventually hyperinflation was reached.
Hyperinflation was scary and nothing like the inflation we are living in today. A loaf of bread would have cost 0.63 marks in 1918, which increased to 201,000,000,000 marks in 1923, during the peak of hyperinflation. Imagine having to pay billions of pounds just to buy a loaf of bread! People often had to carry their wages in wagons and wheelbarrows, and often all of it would be spent on basic necessities, with prices going up quicker than they were getting paid. The middle classes and pensioners were most affected by this, as they had to use up all their savings.
Luckily, hyperinflation eventually came to an end and the economy became stable again (though not for long!). This was done through the work of Gustav Stresemann, who was Germany’s Chancellor in 1923 to 1924. During this time, he introduced the Renten mark, which was a new currency that was brought into place. Only a limited number of notes were printed, increasing their value, and eventually stabilising the currency. Moreover, he introduced the Dawes Plan - which was an 800 million mark loan from the USA to help pay off the debt - and the Young plan - which reduced the reparations set by the Treaty of Versailles by 67%.
Hyperinflation in Germany was unbelievable and a complete turning point in history as one of the most severe inflations ever seen, as well as being the first to show the common dramatic and unusual behaviours associated with hyperinflation.
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Navya Pillai is a student in year 11, hoping to study an economics course later in university. She is very interested in economics in history, and the impact it has on the modern world.
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