Hyperinflation of 1923 and Stressemann's foreign policy Flashcards
1918-1923: Inflation
Price was rising at increasing speeds, wages dropped, and the value of savings, payments and wages also dropped, high levels of unemployment
-due to this, the government began printing more money which reduced the value of the Deutschmark
–> June 1914, 6300 million marks in circulation by 1918, this had increased to over 33000 million.
During WW1 What had developed in Germany? What other fields had dropped?
A black market had developed as inflation shot up
–> Agricultural farm production fell by 20% during the war and industrial output nearly halved
Economic crises that the govt faced 1918-1923?
Social welfare
debt and reparations
Ruhr
Hyperinflation
Why was Social welfare a crisis?
government set up retraining schemes for veterans and provided loans to help them find work. Pension payments had also been set up
1. Weimar govt faced significant economic instability (hyper inflation, depression and unemployment) = difficult to provide programmes due to lack of financial resources
- significant political polarisation ( unstable coalitions with variety of parties= difficult to pass legislation due to different parties having different priorities)
- Right wing opposition: conservatives and right-wing groups opposed these programmes (seen as threats to tradition & had enough political influence to block such legislation)
- Left wing opposition: socialists and communists opposed these as they did not address root causes of inequality and poverty
Social welfare statistics: Weimar
Beginning of 1920:around 1.6 million disabled veterans and 2 million survivors not classified as disabled
By 1924, Govt was still financially supporting 800K veterans, 420K war widows and 1 million children.
–> All of these payments were made by the govt which caused them to go into debt
Why was Debt and reparations a crisis?
Government had borrowed heavily in 1918 (150 billion marks) & reparations from treaty of Versailles (132 billion gold marks every year) until 1987
-people with saving suffered because it was now worthless and so were those with fixed incomes
What was the Ruhr?
The Ruhr region was Germany’s industrial heartland, and the occupation severely disrupted the country’s economy. The occupying forces seized control of key industries and raw materials, leading to a sharp decline in production and exports.
January 1923: Germany failed to deliver reparation payments in full so allies decided to occupy the Ruhr (London ultimatum in 1921)
French troops invaded and the Weimar government instantly stopped all reparation payments to France (not others)
-told all german officials to not accept orders and urged workers to passive resistance (slow work strikes and sabotage)
-132 deaths and 150,000 people exiled
French response to the Ruhr
they cut the Ruhr off by setting up a border, patrolled by armed forced and took control of postal and telegraph services
- actions of French were reported in 1923, with photographic evidence that suggested their horrific treatment, acts of murder and rape
-Neither France nor Germany benefitted
1923: new German coalition called for a stop
Why was the Ruhr a crisis for the Weimar government?
National humiliation:
was widely seen as a violation of Germany’s sovereignty and a humiliation for the country.
–> Many Germans felt anger and resentment towards the occupying forces and towards the Weimar government, which they felt had failed to protect the country’s interests.
Political instability:
occupation of the Ruhr exacerbated the already-existing political instability in the Weimar Republic.
–> The government was divided over how to respond to the crisis, with some advocating for military action against the occupying forces and others urging restraint.
–>This division= loss of confidence in the government and contributed to the rise of extremist political parties, such as the Nazis.
Financial strain:
The costs of the occupation and the resulting economic crisis placed a significant financial strain on the Weimar government.
–> govt had to continue to pay workers in the Ruhr even though they were not working= further increase in inflation and a deterioration in the government’s financial position.
Hyperinflation
People lost faith in money and relied on bartering and the black market
-terrible economy, floundering government but those with goods made huge profits in the black market
-Government cut down on staff, releasing 750k employees
Hyper inflation: cost of bread
1918 0.63 marks for one loaf
1923 September: 1,512.000 marks
1923 November: 201 billion marks
Stressemann’s new coalition government
September 1923, a new government was formed with Stressemann as chancellor (emergency decrees made rapid decision making possible)
-he called off passive resistance and abolished the mark in October, replacing it with a new currency called the Rentenmark (overseen by Hjalmar Schacht, made president of the Reichsbank in December 1923)
How was the Renten mark stabilised?
-various forms of emergency money were banned
-emergency decrees were used to control rent, wages and prices (stabilised currency)
- savings were objected to Renten mark
-hoarded foreign currency and emergency money could be traded in for Renten mark
Reichsmark began in August 1924
What is a cartel?
group of businesses in the same industry or retail sector that made agreements to set and control prices
- gives stability to stop prices moving as much
- cartels can fix higher prices than charged when operating separately
Recovery of businesses for the economy
They formed cartels with fixed prices and some formed associations of shared interests e.g. I.G. Farben which was set up in 1925 which united various chemical-based cartels
Factories were rebuilt using the latest mass production lines
–> 1925: Chemical industry was producing 1/3 more than in 1913 and 2/3 more by 1930
