Germany’s Hyperinflation of 1923
It is said that to the victor go the spoils, and at no time was this more true than in the aftermath of World War I more than a century ago, when the Allied powers imposed crippling damages on Germany. The reparations demanded ensured that the newly birthed Weimar Republic would expire in the bassinet, and that Germany, left with no choice but to print money to cover assets it did not have, would succumb to hyperinflation. No one in 1919 could have foreseen how calamitous and far-reaching the consequences would be of the punitive Treaty of Versailles and resultant German economic policies. But calamitous they were, a sobering lesson on the extraordinary dangers posed by inflationary financial policies.
By 1923, hyperinflation in Germany had wiped out the middle class and paved the way for the rise of Adolf Hitler and National Socialism. After several years of rising prices — the result of years of printing ever-increasing amounts of paper money — the nation’s economy was being destroyed. The cost of living in 1920 was 12 times what it had been in 1914.
By January 1923, an American dollar (which itself had lost purchasing power as a result of the U.S. government’s own inflationary practices) could buy someone 17,000 marks (the German currency). But it would get worse — much worse. By July, that same dollar would reward the buyer with 353,000 marks, and then, just one month later, in August, it would take 4.6 million marks to obtain one American dollar.
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