Economic development and policies - Early crisis years(1919-23)

Question 1

What is hyperinflation?

Answer 1

Where prices spiral out of control because the government increase the amount of money being printed. It leads to money becoming worthless.

Question 2

How did WWI contribute to hyperinflation crisis?

Answer 2

• Germany was not prepared for such a long war and borrowed money to pay for the increasing costs (85% of money was borrowed by 1918) rather than raise taxes.
• The reparations demanded of Germany in the Treaty of Versailles had to be paid in gold marks which held their value as the currency declined. This forced the Weimar government to print larger quantities of money to meet the payment deadlines

Question 3

How did Weimar Republic’s constitution contribute to the hyperinflation crisis?

Answer 3

The constitution made social security a constitutional right - the government had to support the unemployed. The costs of introducing social reforms and welfare (e.g. housing and benefits for the disabled, orphans, war windows etc) increased national debt and worsened inflation of the currency.

Question 4

What event triggered the hyperinflation crisis of 1923?

Answer 4

The French occupation of the Ruhr in 1923 (in revenge for Germany’s failure to pay its reparations) resulted in the government ordering German workers to adopt passive resistance. The Weimar government had to rely on expensive imports of essential raw material (e.g. coal), printing more banknotes to pay for its. This led to hyperinflation.

Question 5

Who suffered during hyperinflation?

Answer 5

• Anyone with savings saw them become worthless

- People of fixed incomes/pensioners - wages became worthless

Question 6

Who benefited during hyperinflation?

Answer 6

-Anyone with debts, mortgages or loans were able to pay these off easily with the inflated money. Groups of businessmen and homeowners took advantage and brought businesses/houses at fraction of the cost