Hyperinflation, 1923

What caused the hyperinflation crisis in Weimar Republic?

To pay reparations and the workers striking in the Ruhr, Germany printed more money. This led to hyperinflation and had a disastrous effect on the economy. The value of the German mark fell and the prices of goods increased.

What were the economic consequences of the hyperinflation crisis in the Weimar Republic?

There were 7 main economic consequences of hyperinflation.

• ❖ With prices rising by the hour, people began to buy goods as soon as they were paid. A loaf of bread in 1922 cost 200 marks. By 1923 it cost 200,000 million marks.
• ❖ Many people used a barter system and traded items instead of paying with money to get around the problems of hyperinflation.
• ❖ As money became worthless, those with savings lost their money. This especially affected the middle classes.
• ❖ People used the money in other ways, such as burning it for fuel. Children would also play with it, while some even made dresses from it!
• ❖ People on fixed incomes could not renegotiate their earnings and the elderly on fixed pensions received no increases. This meant their incomes became almost worthless.
• ❖ Many small business owners went bankrupt.
• ❖ Foreign businesses would not accept the worthless currency which led to shortages of imported goods.

Who benefitted from the hyperinflation crisis in the Weimar Republic?

There were 3 main benefits of hyperinflation:

• ❖ Those with debts found it easier to pay off what they owed.
• ❖ Farmers benefitted from the increase in food prices because people were paying more for food.
• ❖ Foreign visitors benefitted. They could buy more with their money because they could exchange their currency for more German marks. This made the people very angry.

What was the solution to the hyperinflation crisis in the Weimar Republic?

The hyperinflation crisis was solved in 3 key ways:

• ❖ Stresemann, as chancellor, replaced the worthless currency with a temporary one called the Rentenmark in October 1924.
• ❖ Eventually the Rentenmark became the new Reichsmark in 1924. This was a stable currency that remained for the next 25 years.
• ❖ Stresemann, as foreign secretary, signed the Dawes Plan in 1924 which organised American loans to German banks and businesses and temporarily lowered annual reparation payments to help the German economy recover.

How successful was the solution to the hyperinflation crisis?

Stresemann's solution to the hyperinflation crisis had 2 main successes:

• ❖ People accepted the new currency and hyperinflation ended.
• ❖ The Dawes Plan, 1924 helped to restore economic stability.

How did the solution to hyperinflation fall short?

Stresemann's solution to the hyperinflation crisis had 3 main failures:

• ❖ People who lost savings, mainly the middle classes, never received their money back and they blamed the Weimar Republic for this.
• ❖ People who had suffered during the hyperinflation crisis were bitter about their experience and blamed the Weimar Republic.
• ❖ One of the reasons the Nazi Party organised the Munich Beer Hall Putsch in 1923 was because of the hyperinflation crisis.