The UNBELIEVABLE HYPER-INFLATION In Post WW1 GERMANY - a Loaf of Bread Cost $100 MILLION...

The ramifications and global effects of World War 1, which lasted between July 14th, 1914 and November 11th, 1918, are too massive and extensive to possibly cover in one video. At least 17 million people lost their lives, including at least 7 million civilians, and many more were left severely injured or disabled. That number could be considered much higher if one accounts for the deadly influenza epidemic of 1918, known as the Spanish Flu, which was a direct result of the war. The death toll from the epidemic is unknown but could be as high as 50 million.

Friedrich Ebert

There were also some everyday customs that derived from the war, such as men wearing the wristwatch as opposed to the pocket watch, which was completely impractical in war. The war led to the downfall of four monarchies – Russia, Austria-Hungary, Turkey, and the country we’ll be focused on today, Germany.

Some of the biggest effects of the war were economical. The sheer costs of the WW1 could not compare to any previous war as it was the first to employ planes, tanks and submarines. The war derailed the economies of many European countries but also set the stage for the United States to become the world’s industrial power. On the other side of the coin, Germany was thrown into economical and social disorder, and they suffered from one of the worst cases of hyperinflation ever seen. Today we’ll look into the post-war years of Germany and find out how it got so bad, that it was cheaper to just burn money than go out and buy firewood.

Before World War 1, Germany was also known as the German Empire, a monarchy that had been ruled by Emperor Wilhelm II, since 1888. During the war, the emperor’s power diminished greatly and by 1916, the empire had effectively become a military dictatorship with Wilhelm mostly only participating in award ceremonies and honorary duties. By 1918, as the war was coming to end, the German military was defeated and desperate. U.S. President Woodrow Wilson had declared that the war could only end with the complete overthrowing of the monarchy. A rebellion broke out among the German troops, which led to a full fledged mutiny, calling for the abdication of Wilhelm II. Despite his attempts to maintain power, Wilhelm was forced into exile and with the end of the war and collapse of the monarchy, Germany, for the first time, became a federal republic.

The republic that began in Germany after WW1 was known as the German Reich and is historically referred to as the Weimar Republic. Instead of an emperor, there would be a president, elected every seven years. The Republic was split into 18 different states called Länder, each of which had their own local government. The first elections were held in January of 1919 and the constitution was written up in the town of Weimar, hence the name the Weimar Republic. Frederich Ebert was elected as the first president of Germany.

Although all the details of the democracy sound promising, the country was not in a stable situation in the aftermath of the war, which caused massive debt along with severe food shortages caused by blockades. With the signing of the Treaty of Versailles, which ended the war for Germany and many other countries, the republic was forced to reduce its military and pay massive amounts of money in reparations. It was determined that Germany owed 132 billion marks, known at that time as papiermarks, but they would only be accepted in gold or foreign currency. The German papiermark had already lost value during the war – falling from 4.2 marks to the dollar to 8.9. By the end of 1919, 48 papier marks could buy a dollar. And this was only the beginning.

With the mark continuing to lose value over the next 3 years, Germany struggled to meet the reparation payments. The government tried to print more and more money to exchange for foreign currency, causing the mark to fall even faster, increasing the amount of marks needed to buy foreign currency.

By 1921, the value of the mark had fallen to 330 per dollar. This continued and Germany could not make the full payments. By 1923, France declared Germany in default. French and Belgian troops entered Rhineland, Germany’s most productive area, and took over the mining and manufacturing plants and businesses in order to produce coal and other materials as payment. This zone was demilitarized by the treaty, so Germany could not forcibly remove the invaders and, with their recently depleted military, did not wish to do so. So, the German government made a passive aggressive decision to encourage the workers to go on strike, while paying them to facilitate doing so. This caused coal production to come to a halt and, combined with the printing of more and more money to help pay off the workers along with their massive debt, inflation began to take off at a rate never before seen or imagined. As people began to realize what was happening, they tried to spend all their money as quickly as possible, causing prices to skyrocket even more, exacerbating the problem and creating a vicious cycle.

Hugo Stinnes

There were several international reparations conferences held to try to find a solution to this issue, but nothing helped. The mark fell to 7,400 marks per US dollar and as 1923 went on, inflation turned to hyperinflation and prices rose so fast that people tried to take their lunch breaks as early as possible before their money lost even more value. The situation quickly turned absurd as the rate of inflation grew to astronomical levels as high as 3,250,000% per month. Prices for typical products doubled every two days. For example, a loaf of bread that cost about 160 marks at the end of 1922 would cost a buyer 200,000,000,000 marks by late 1923. A good deal on meat might set you back a few billion marks per pound. Personal savings became absolutely worthless as did personal debts. People were able to pay off their houses with ease as what they owed – an amount that used to be substantial – became basically what we would look at in the United States as a few pennies.

Some businessmen and industrialists who had built their riches by borrowing money and purchasing hard assets thrived in these conditions. Hugo Stinnes earned the title of “Inflation King” by amassing controlling interests in over 1,500 businesses by 1924, creating a massive empire, while his previous debts were easily paid with worthless marks. The government had to start printing billion mark notes and then even trillion mark notes. By November of 1923, that trillion mark note was worth about one U.S. dollar and still falling. Children began to play with bricks of real money, which was completely worthless. A gigantic vault or wheelbarrow of money might not buy an apple or newspaper. Farmers could not sell food and people began to loot the farms as peace along with law and order began to deteriorate. Rioting started and the German people began to turn against each other. Many people who lived off pensions could not buy a thing with their now tiny paychecks. Crime on the street rose to levels never before seen and the conditions were nearly apocalyptic.

To attempt to keep up with this hyperinflation, the government commissioned 130 printing companies to keep churning out more piles of money, which just made it all the more worthless. The money was so worthless, one story goes that a distracted man had his suitcase full of money stolen. When he realized it was gone and went to look for who took it, he found all the money discarded on the ground. The thief kept the suitcase. It got to the point where when people went shopping, they brought along their goods and valuables to use as currency instead of the papiermark.

One Berlin resident wrote in a letter to her son “Conditions have taken a catastrophic turn here. This letter cost 15 million marks to send and it will be 30 million beginning the day after tomorrow.”

Something had to be done to end the absurdity and avoid more violence and unrest among the people. So, the government introduced the new retenmark in late 1923, which was backed by mortgages on agricultural and industrial land. The retenmark had the same pre-war exchange rate as the previous mark - one US dollar to 4.2 retenmarks. The people were so desperate, they accepted and trusted the new currency and the crisis had came to an end when France and other countries agreed to a new plan to help Germany stabilize its economy while still keeping the ability to pay their reparations. The next year, the retenmark was replaced by the more permanent Reischmark. However, anger, bitterness and trauma was now embedded in many German people after years of war, poverty and unrest, which would aid in the rise of radicalism and new horrific policies in the years to come. The people in large part blamed this new republic – the Weimar Republic – for the horrible postwar years, and this set the stage for the revolts and protests, many led by a man named Adolf Hitler. When the next financial crisis hit in the form the Great Depression, the people of Germany were ripe to be taken advantage of and influenced in a most horrible manner.

After years of wars, conflicts, changes in leadership and payment plans, Germany finally made its final reparation payment on October 3rd, 2010.