Hyperinflation in the Weimar Republic, 1921-1924

Episode #4 of the course “World’s biggest financial crises”

The United States was not the only country to experience significant financial struggles. Germany, one of the largest developed countries in the world, also had its share of difficulties. The hyperinflation in the Weimar Republic is an example. The crisis began when Germany could not make one of their payments for war reparations in 1923.

The government issued more money, causing the value of the German mark to decrease. This was also in addition to a general strike, which meant that no goods were being created. The economy was weak to begin with, but these two factors only added to the problems. There was more money and not enough goods to buy to match the money.

Prices were out of control, leaving the mark virtually worthless. For example, in January 1923, a loaf of bread cost 250 marks, but by November of the same year, the same loaf of bread now cost 200,000,000,000 marks. People were literally burning the money and using it as fuel instead of attempting to buy anything with it. Workers collected their wages in suitcases and rushed money to loved ones immediately so they could spend it before it was worthless. Prices were rising so quickly that it was difficult to combat. For example, if a family sold their house in attempt to live off of the money from it, the money that they gained from the house wouldn’t even be enough to buy a meal in just a few weeks. Bartering became more and more common. Menus at restaurants had to be revised every half an hour to keep up with the outrageous inflation.

In 1923, the new Chancellor created the Rentenmark, which was backed by American gold. A new plan to meet reparation payments was also created in 1924. The American government also loaned the Germans roughly $200 million. These small changes stabilized Germany and it became a booming industrial center.

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