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The hyperinflation crisis of the Weimar Republic in Germany after the
history. The war left Germany in great debt, which was added to by
the eventual rise of the Nazi party, bringing Germany and the rest of the
1
Before the First World War, Germany had a booming economy. As a highly
1914 than an economic powerhouse such as Britain was. While most modern
countries can thank their economy to immigrants coming in, Germany can
thank it to the drop in emigrants during this time. Germany had seen a steep
decline in the amount of Germans leaving the country, most likely due to the
exports were 63% finished goods in 1913, an increase from the previous 33%
in 1873. Overall the country became a very urban based country, with 60%
of citizens living in urban areas2. Perfect for factory workers. Overall with
2 Geary, Patrick J., James J. Sheehan, Charles C. Bayley, Lawrence G. Duggan, and
Theodore S. Hamerow. Britannica18 Aug. 2016,
https://www.britannica.com/place/Germany/Germany-from-1871-to-1918. Accessed
11 Dec. 2016
such a good economy, no German
coming years.
income tax to fund a majority of their war efforts, Germany did no such
thing. These two forms of payment for the war came from a pre-existing war
plan.
from the Franco-Prussian War. The government decided that part of this new
sum of money would be set aside for any future war and that wars
expenses. The total that was decided on was 120 million Marks, an amount
that was stored as gold coins in 1,200 wooden boxes. It was decided that if
that total amount could not fully pay for the next war, then the extra costs
would be paid for by both short term credit and long term loans. During the
1880s, the finance minister had realized that this plan would not work, due
to the fact that any future war would be much more costly than what they
had originally planned for. It was now agreed that any future war would have
to be fully financed by credit, due to the 120 million Marks not making a dent
in any war costs. They believed that the coming generations would be able
to benefit from investing into wars, not realizing that would only work if
Germany was to win the war. Other than having future generations invest for
the war, the German government was to borrow from their central bank
called the Reichsbank. The Reichsbank was privately owned but was still held
Reichsbank was to hold a total of one third of notes in circulation in gold and
in treasury notes. A special tax would be implemented if the amount that the
Reichsbank had in circulation passed the legal limit in note circulation. The
When it came to financing the First World War, all measures were
taken. When Germany had truly put themselves in the war on August 4,
1914, they needed to create finance laws. These laws were quickly drawn up
and unanimously voted for in a rapid and frantic manor. Imperial gold
equaling 240 million Marks was given to the Reichsbank days before. The
Reichsbank had already given out its money supply to the German
government to help finance the war. This caused payments within their gold
war cost. It paid for this in short-term credit given to the German
for war finance, which could increase if need be. While gold standard rules
were suspended, the government convinced the public that their currency
was still stable, even though this was untrue. While these practices worked
for their borrowing portion of financing the war, more measures were taken.
A big part of Germanys financing of the war came from war bonds,
similar to those of the United States. German propaganda was sent out
stating how great a war bond is. They used tactics such as stating that the
war bonds had high interest rates and the war was going to be a big win for
Germany. The German population believed this and jumped right on board
with buying war bonds. The German government gain four and a half billion
Marks from a little over one million subscriptions. Unfortunately in 1914 the
German population did not know that they were actually in fact going to lose
the war and that the subscriptions in bonds would soon be worthless. Buying
bonds was not the only thing the German government was able to convince
the German people to do. To maintain the gold reserve, the Reichsbank had
the people of Germany exchange gold coins in for notes. The Reichsbank
received over one billion gold coins traded in within 1914 alone. Again the
people had no idea that these notes would be worthless come the end of the
war. German financial minister Karl Helfferich, who served from 1915 to
1916, dropped the idea of paying for the war in taxes. He believed that the
war was going to be short and it would not be worth it to finance through
taxes3.
It would be thought that with all the gold the Reichsbank had reserved
that it would be hardly impossible for Germany to be so in debt after the First
World War. There were multiple things that attributed to Germanys debt. In
1914, Germany faced a trade deficit from British ships setting a blockade to
stop imports and exports in Germany. The Reichsbank had lost over 100
million Marks worth of gold from funding the smuggling of goods from the
blockade. This was all by 1914 alone. The loss of gold continue throughout
the war, leading Germany into a debt before the war was even over.
Although Germany had already started to see debt before the First
World War had ended, most of its debt that lead to the hyperinflation that it
saw, came from right after the war ended. First off Germany lost the war.
This meant that all their promises to the German people of winning went
away. As if the debt Germany was already facing and the low German morale
After WWI the Treaty of Versailles was the Allied forces put in place to
punish Germany. It caused Germany to pay extreme debts from the war and
Keynes, and can be seen through his book Economic Consequences of Peace.
The part of the treaty in which Keynes focused the most on was the
reparations portion. Keynes stated that since the Allied countries would be
the ones deciding the damages in which that Germany would pay for, they
would use the power they had gained to write a bill that would only benefit
themselves, not realizing or caring about the damage that it could due to
Germany. He argued that the bill in which the Allied countries came up with
would only be able to be paid off in the German people became enslaved4.
The estimated a total cost of debt neared 132 billion gold marks, which was
added to the debt gained during the war, of 140 billion marks for Germany.
The gold mark was valued at how much gold a mark could buy before the
war, not its actual value which was much less. Without these reparations
Germany may have been able to come out of debt. The only other thing truly
stopping them from coming out of debt were the protective tariffs put on
buy they goods with the tariff restrictions, Germans would have been able to
sell them in foreign countries for income if it werent for those restrictions.
This was all a part of why World War I was an embarrassment for the
Germans. It was the first major World War, which so they lost. Not only did
they lose the war to power house countries such as the United States and
four million to become wounded. The loss of men lead to a lack of Germans
The best thing the Germans thought of doing was creating a new
name given to Germany between 1919 and 1933. Their government was now
both the economic and political problems were significant, one of the most
1923, it took 4.2 trillion marks to match one US dollar, even though the value
5
of the US dollar was down. There are pictures that circulate today of young
German children during this time playing with stacks of money, basically
using them as blocks, while adults would use the paper money as wallpaper.
Those pictures themselves proves just how worthless all the currency was.
The question behind this is why Germany was affected so much more than
The United States was even though they were both going through a
First off United States had given loans to Germany, which they sought to
market crashed, known today as Black Tuesday. That was an isolated invent
that was no ones fault but the stock market. The German depression
however was put onto them by other countries after World War I. Germany
was hit so much worse because the Allied countries made them get hit with
countries turning their backs on Germany and cutting political ties, there was
early 1930s, helped cause the depression Germany faced by raising taxes
and cutting public expenditure. In The United States during this time Franklin
D. Roosevelt was working on the New Deal to help stabilize the economy. The
programs he had which, provide jobs while also providing real tangible things
for the United States, were not seen anywhere in Germany. Bruenings
reasoning for feeding into the depression was the sole purpose of
hated Germany, and one would think that if the rest of the world hated a
country, that the country would work to improve its own country rather gain
allowing the German economy to become so bad, was able to get the debt
Germany would keep gaining debt, which they could never pay off. With the
strengthen their own country and putting any monetary values to that cause.
Although this did not fully bring Germany back to what it once was, it was a
starting point.
With Reichsbank marks still being worthless, a new currency was put in
Rentenmark. The plan was that the Rentenmark was backed by bonds tied to
the market price of rye and that gold was substituted out for rye. This beat
out another plan by Karl Helfferich, which would have had a currency called
bonds tied to the market price of rye. While old Reichsbank Marks stayed in
was passed that allowed the exchange of the one trillion Reichsbank Mark to
the Rentenmark. Once the economy became more stable, previous debts
Eventually the German economy became steadily stable. With the gold
standard back in place7 and the new currency bringing the inflation down;
Germany was beginning to look how it did before the First World War. Overall
the German people had lost faith in the Weimar Republic, eventually leading
Republic, came the rise of Hitler and Nazi party. With this came the economic
rise of the nation but the downfall of many with World War II and the
Holocaust just a few years away. Hitler had used the economic fears that the
German people had just seen years before as his platform in convincing
Germany that the Jewish population was to blame for their overall economic
depression. Without the hyperinflation crisis, Hitlers reign and World War II
learned in the course Money and Banking came to mind. Germany and The
politics, yet they have some similarities in economics. Both countries our
6 "Hyperinflation in the Weimar Republic."
researchonline.jcu.edu.au/21599/3/21599.pdf. Accessed 11 Dec. 2016
the Mark at that point. The concept that is hard to grasp is both countries
face debt and a depression but one made it out easier than the other.
Franklin D. Roosevelt was able to bring The United States out of their
depression with the New Deal. He was able to create jobs that worked to
create real things in the American society. This was due to The United States
President Roosevelt and the government could provide a job to anyone who
was willing and able to work in The United States. Germany on the other
hand did not do anything like this. They just printed money without ever
producing anything along with it. Eventually the money would lose value if it
is so easy to come by. That seems like it would be almost obvious that
workers went on strike once the Allied countries took control of their factories
in the Ruhr Valley8. This was the most likely case that the Weimar Republic
did not try to create jobs, since although citizens were able to work, none
were willing. The only thing in Germany during this time that was being
Republic or at least could become it. The United States have been
economically instable the past few years and citizens fear the trillions of debt
that The United States is in. Also there is a newfound fear of terrorists,
especially Middle Easterners, resembling the same fear as Germany with the
going to become anything like the Weimar republic due to it having the
The Weimar Republic was not the first case nor the last case of
hyperinflation. There was hyperinflation in France during the late 1700s, and
more modernly there has been hyperinflation seen in Zimbabwe during the
21st century.
Zimbabwes inflation grew rapidly over a four year span. In 2005 the
inflation. What differs in Zimbabwe than the Weimar Republic and other
the World Wars, or any war, to blame for the debt and inflation. The citizens
bank notes are worthless. Currently the main currency in Zimbabwe is the US
9 Pettinger, Tejvan. "Hyperinflation in Zimbabwe." Economics Help1 Apr. 2011,
www.economicshelp.org/blog/390/inflation/hyper-inflation-in-zimbabwe/. Accessed
11 Dec. 2016.
dollar, as the bank notes of the Zimbabwe currency were getting up to
hoped that the country of Zimbabwe can learn from the twenty-nine previous
starting, and how to hopefully prevent any future cases. It was extremely
dealing with it; such as The United States keeping their currency while
Germany had to change theirs. Next is to see what Zimbabwe does, seeing
how they have adopted the United States Dollar. It is hoped that Zimbabwe
is the final hyperinflation crisis, even though that will not be the case.
5. Voth, H. (2012, May 22). Did High Wages or High Investment Bring
Down the Weimar Republic? Retrieved December 8, 2016, from
http://www.piketty.pse.ens.fr/files/capitalisback/CountryData/Germany/
Other/Pre1950Series/RefsHistoricalGermanAccounts/Voth95.pdf
6. In dollars they trust. (2013, April 27). Retrieved December 11, 2016,
from http://www.economist.com/news/finance-and-
economics/21576665-grubby-greenbacks-dear-credit-full-shops-and-
empty-factories-dollars-they
a. This article goes into detail about the Zimbabwe dollars value
and reflect well with the Weimar Republic. Given their own
experience with money-printing, locals are queasy about
quantitative easing as practised by the Fed and other rich-
world central banks. Yet for all the printing of electronic dollars
by the Fed, the greenback is a hard currency in Zimbabwe. Few
are clamouring for its replacement by a local brand.
7. Pettinger, T. (2011, April 1). Hyper Inflation in Zimbabwe. Retrieved
December 11, 2016, from
http://www.economicshelp.org/blog/390/inflation/hyper-inflation-in-
zimbabwe/
13. "Quantitative Easing Worked For The Weimar Republic For A Little
While Too." The Economic Collapse. Economic Collapse Blog, 2016.
Web. 11 Dec. 2016.
a. The research done by the Economic Collapse Blog talked about
Quantitative Easing in the Weimar Republic. Their thesis is that
quantitative easing practiced in the former German government
actually worked, but only for a little while. It explains how every
fiat currency in history has eventually failed due to governments
temptation to print more money. This source details that even if
the motivation for doing so is good, an economy will easily fall
for the falsehood that things would be better if people just had
more money. The research also parallels the Weimar Republics
economic policies with the economy of modern day America,
giving it a unique approach to how the former government can
be viewed.
14. "The Best and the Worst." The Economist. The Economist Newspaper,
22 Sept. 2007. Web. 11 Dec. 2016.
a. The research presented by The Economist goes deep into the
best and worst aspects of the Weimar Republics economic
outlook. It asks and answers the question of if the German
democracy ever even stood an economic chance in the world. It
goes into the worst of the Republics economy where there was
hyperinflation, mass unemployment, and political assassination.
The author also describes the best of the economy, where the
Weimar Republic went into a brief unsustainable golden age that
was ruined by the poor practices of the government, immense
debt, hardship of war, and loans from America that got affected
by the Great Recession.
17.