Hyperinflation

The reparations bill caused the Allies to pay large sums of money which had a great impact on the German economy. It meant that a large proportion of the income they earned had to leave the country to settle the post war bills. However, in order to manage reparation payments, stringent economic control practices were needed. It can be said that the Weimar Government had deliberately failed to place many of these things into place, trying to force the allies to rethink on the level of reparations that Germany had to pay. The consequences of this include the French occupation of the Ruhr, the cost of the war, the loss of land and colonies, and the printing of more money.

The French occupation of the Ruhr: The Ruhr valley was the Industrial heart of Germany. While it was occupied by the French, the German economy could not benefit from the industrial output, therefore straining the economy event to a greater extent.

The cost of the war: Even if the reparations were ignored, the war had a high cost on Germany.

The loss of land and colonies: This was followed by the rise in the cost of raw materials as the German economy could no longer be dependent on the cheap imports from her own colonies or produce raw materials in the same quantity from German sources. The increase in the cost of raw materials was due to hyperinflation, which also meant that the cost of living in Germany had to rise

The printing of more money: In order to control hyperinflation, a Government should limit the amount of currency in circulation. However, the Weimar Government did the Opposite of the above mentioned strategy by printing more money causing the value of German money to decrease.

Sources:

At eleven in the morning a siren sounded. Everybody gathered in the factory yard where a five-ton lorry was drawn up, loaded with paper money. The chief cashier and his assistants climbed up on top. They read out names and just threw out bundles of notes. As soon as you caught one you made a dash for the nearest shop and bought anything that was going....

       You very often bought things you did not need. But with those things you could start to barter. You went round and exchanged a pair of shoes for a shirt, or a pair of socks for a sack of potatoes; some cutlery or crockery, for instance, for tea or coffee or butter. And this process was repeated until you eventually ended up with the thing you actually wanted.

Willy Derkow, who was a student at the time, remembering in 1975

Inference:

From this source, I can infer that during hyperinflation, the common people received more than enough money to buy all necessary items. This is evident from the source where it state, “They read out the names and just threw bundles of notes. As soon as you caught one, you made a dash for the nearest shop and bought anything that was going.” This shows that money had no value during that period of time in Germany and the poor people benefitted the most as they could afford to buy things to fulfil their daily necessities.  

Sources:

Effects

This table shows what happened to the price of bread in Berlin (prices in marks):

  

	December 1918	0.5
	December 1921	4
	December 1922	163
	January 1923	250
	March 1923	463
	June 1923	1,465
	July 1923	3,465
	August 1923	69,000
	September 1923	1,512,000
	October 1923	1,743,000,000
	November 1923	201,000,000,000

   Inference:

From this source I can tell that the cost of living in Germany had risen as the government had printed more money to pay for the post war reparation s. This can be seen from the table where it shows one piece of bread in Berlin costing 0.5 marks in December 1918 increased to 201,000,000,000 marks within 5 years. This shows that since the value of the German currency decreased due to the printing of more currency notes, the value of all inventory increased.

 

Source C: A German woman writing about the effects of hyperinflation.

As soon as I received my salary I rushed out to buy what I needed. My daily salary was just enough to buy one loaf of bread and a small piece of cheese.... A friend of mine, a vicar, came to Berlin to buy some shoes with his month's wages for his baby. By the time he arrived, he only had enough to buy a cup of coffee.

What can you study from Source C?

I can infer from Source C that the economic situation in Germany is in shambles. This is evident as Source A states ‘’ my daily salary was just enough to buy one loaf of bread and a small piece of cheese.... A friend of mine, a vicar, came to Berlin to buy some shoes with his month's wages for his baby. By the time he arrived, he only had enough to buy a cup of coffee’’ This shows that the reparation terms of the Treaty of Versailles led the Weimar Government to print more money as a solution.

Citation

Source B and C  from http://www.johndclare.net/Weimar_hyperinflation.htm

Hyperinflation picture from en.wikipedia.org