Hyperinflation Flashcards
What did Germany do to try and cover the economic cost of WW1?
They financed much of the cost by printing more money - causing the currency to decline in value (inflation).
Why did German spending remain high after WW1?
It remained high because they had to support war veterans, widows and demobilised soldiers. 10% of people were receiving federal welfare payments by 1924 - more were on regional poor relief.
The Weimar Constitution made social security a constitutional right - government had to support the unemployed.
How did the Treaty of Versailles contribute to inflation?
Germany’s £6,600 worth of reparations were to be paid in gold which held it’s value against the declining German mark.
As the mark’s value decreased, paying reparations became more expensive.
What other problems were caused by reparations?
- German gold reserves were inadequate for the scale of reparations that were to be paid in gold
- they lost a large part of their coal reserves but had to pay some reparations in coal
- the allies refused to accept manufactured goods so not to hurt their business
- the Allies confiscated Germany’s export fleet and imposed tariffs on German goods
How did the government respond to the economic challenge of the treaty?
They tried to pay reparations by borrowing and printing more money which worsened inflation.
They sought to pause payments in 1922 but were refused. By early 1923, they failed to pay them.
What did the French do after Germany failed to pay their reparations?
The French and Belgians responded by invading the Ruhr - a key German industrial region. Their armies seized raw materials and goods to the value of the reparations (Jan 1923).
How did the German government respond to the invasion of the Ruhr?
They stopped all reparation payments to France all German workers / business owners to follow a policy of passive resistance.
What was passive resistance?
Examples of passive resistance included sabotages and strikes. The government paid the wages of striking workers and compensated business owners for lost revenue.
Importing necessary fuel stocks added to debt - the government continued to print more and more money.
What was the hyperinflation crisis from 1923-24?
Inflation in Germany spiralled out of control following the Ruhr crisis - confidence the currency collapsed and the mark became worthless.
It now cost more to print a bank note than the note was worth. People were forced to reduce to black market and bartering.
Who were the winners in the hyperinflation crisis?
- black marketeers - bought up food stocks and sold them at vastly inflated prices
- people with debts, mortgages & loans could pay off what they owed in worthless currency
- business people - took out new loans and repaid them when the currency further devalued
- foreigners / owners of foreign exchange
- farmers - food was in demand and money was less important rurally
Who were the losers in the hyperinflation crisis?
- pensioners including war widows on state pensions
- people who had purchased war bonds : interest rates decreased in value
- landlords who were reliant on fixed rents
- unskilled workers - wage increases did not match rising prices and standard of living declined. Unemployment spiked - 29.3% by the end of 1923
- the Mittelstand - artisans and small business owners who could not keep pace with inflation and paid a disproportionate share of taxes
- the sick - cost of medical care increased / rise in food prices caused malnutrition. Death and suicide rates increased and diseases such as tuberculosis and rickets in children increased
