Weimar And The Ecomomy 1919-1923 Flashcards
What were Germanys economic strengths in 1914
-Many natural resources such as coal
-Advanced industries eg engineering
-Educated work force
-An advanced banking system
What were the impacts of WW1 on Germanys economy
-National debt rose
-Cost of reparations
-Loss of resources
-Inflation
What were the long term causes of Hyperinflation
-Kaisers government devised against increases in taxation and instead borrowed massive sums by selling war bonds to the public. This proved insufficient from 1916 and simply allowed national debt to grow bigger
By end of 1918 only 16% of war expenditure had been raised from taxation. 84% was borrowed. Debts only grew larger as they had to pay reparations to the allies.
Economy’s main focus was on production of military weapons and did not satisfy growing requirements of the civilian customers. Consequently, the high demand for and shortage of costumer goods began to push prices up.
What were the medium term causes of hyperinflation
Deficit financing- financial policy of a government to spend more than it receives as revenue, in order to stimulate the economy. In this way it gives the people more money to spend and so, in theory, increases the demands for goods and thereby creates work.
Hard currency- currency that market considers to be strong because its value does not depreciate (strongest was US Dollar.) Any reparations had to be payed in hard currency.
In order to pay reparations the governments printed larger quantities of marks and sold them to obtain other countries stronger currencies. Due to this the value of the mark went into sharp decline and inflation climbed even higher.
What were the short term causes of hyperinflation and how did this worsen Germanys existing economy
In December 1922 French and Belgian troops occupied the Ruhr
-Inflation spiralled out of control
-Government unable to collect taxes from that area and French prevented the delivery of coal, thus forcing stocks of fuel to be imported. Governments finances collapsed and mark fell to worthless levels
-The passive resistance policy did help unite German people
How was Hyperinflation solved?
12th August 1923 until November 1923 Stresseman was German Chancellor
-He ended passive resistance
-He introduced the Rentenmark
-He promised Germany would repay reparations
-He cut government spending by sacking over 700,000 public employees which cut the government debt
Why did Stressemans solutions work
-French were no longer hostile as reparations were being paid
-The allies were impressed by the restructuring of government finances and were ready to negotiate on reparations (The Dawes plan of 1924)
