Hyperinflation in Germany

Hyperinflation in Germany: Germany printed paper currency abundantly. It resulted in a fall of the value of the German mark. In April 1923, the US dollar was equal to 24000 marks, but it rose to 98860000 marks by December. As the mark value declined sharply, prices of goods increased. The image of Germans carrying cartloads of currency notes to buy just a loaf of bread evoked sympathy worldwide. This crisis came to be known as ‘Hyperinflation in Germany’. At last, the Americans introduced the Dawes Plan. It helped Germany to overcome the crisis. The plan reworked the terms of reparation to ease the financial burden on Germans.

Hyperinflation:

Germany was already suffering from high levels of inflation due to the effects of the war and the increasing government debt.

‘Passive resistance’ meant that whilst the workers were on strike fewer industrial goods were being produced, which weakened the economy still further.

In order to pay the striking workers the government simply printed more money. This flood of money led to hyperinflation as the more money was printed, the more prices rose.

Prices ran out of control, for example a loaf of bread, which cost 250 marks in January 1923, had risen to 200,000 million marks in November 1923.

By autumn 1923 it cost more to print a note than the note was worth.

During the crisis, workers were often paid twice per day because prices rose so fast their wages were virtually worthless by lunchtime.

Hyperinflation winners:

Borrowers, such as businessmen, landowners and those with mortgages, found they were able to pay back their loans easily with worthless money.

People on wages were relatively safe, because they renegotiated their wages every day. However, even their wages eventually failed to keep up with prices.

Farmers coped well, since their products remained in demand and they received more money for them as prices spiralled.

Hyperinflation losers:

People on fixed incomes, like students, pensioners or the sick, found their incomes did not keep up with prices.

People with savings and those who had lent money, for example to the government, were the most badly hit as their money became worthless.

Sample Questions

(More Questions for each concept available in Login)

Question : 1

What was ' Dawes Plan ' ?
A. A plan secure loans from US bankers
B. A plan to ease reparation terms on Germany
C. A plan to overtake Rhineland mines
D. An extension of Versailles treaty
Right Option : B
View Explanation