The German Hyperinflation of 1923:
A Seventy-Fifth Anniversary Retrospective

For reasons that were numerous and complex, economic recovery did not materialize in Germany after the end of World War I in November 1918. Certainly, political instability in Germany was a major factor. In addition, it proved difficult to restore traditional trade patterns. Some partners and competitors, like the United States, had benefited from the wartime absence of the Germans on the international market. Quite generally, Germany's trading partners protected their home markets with tariff legislation, and the Reich inadvertently encouraged such retaliation by shortsightedly engaging in large-scale dumping practices. The low value of the mark made German exports relatively cheap, but this advantage was more than offset by the rapidly rising cost of raw materials and foodstuffs upon which the German economy remained heavily dependent. The country's economic difficulties can be readily gauged by the mark's declining value relative to the dollar, the strongest postwar currency: from January 1919 to January 1922, the value of the mark fell from 8.9 to the dollar to 191.8.

Ten-mark banknote, Germany, February 1920	Fifty-mark banknote, Germany, July 1920

 The Germans certainly recognized the problem, but until the fall of 1923 they also largely ignored it. The primary reason was the ready availability of a scapegoat for inflation and economic difficulties: reparations. This aspect of the Versailles settlement after World War I turned out to be far more complex than it had appeared. Basically, the Allies intended the reparations imposed on Germany to be simple financial transactions to compensate the victors for some of their wartime expenses in the form of cash and goods. In practice, things were considerably more complicated. To begin with, there was disagreement among the Allies on which losses the payments should cover. They agreed that Germany should pay for the recovery of the areas in Belgium and France that had been devastated by war, and compensate the British for the loss of freighters sunk by submarines. Such a view of reparations was a fairly narrow and traditional one. But there were also those in the Allied countries who argued that reparations should encompass a much wider scope. Many also advocated that Germany, for example, should be responsible for underwriting the pensions of Allied war veterans and make good on the problem of inter-Allied war debts.

500-mark banknote, Germany, July 1922	1000-mark banknote, Germany, September 1922

In April 1921 the Allies presented Germany with a reparations bill of 132 billion gold marks (31.4 billion dollars) to be paid over a number of years in the form of both money and goods. The initial German reaction was to reject this sum as far too high and patently unjust. After another government crisis and the occupation by French troops of the city of Duisburg, however, the Reich government agreed to yield to the Allied dictum. That decision began a no-win tug of war that lasted for the next two and one-half years and brought German society to the brink of disintegration. There was almost universal agreement among German labor, business, and government leaders that Germany's gross national product was simply not large enough to bear additional obligations of 132 billion gold marks. Moreover, the reparations bill itself accelerated the inflation rapidly out of control. In June 1922 the dollar stood at 350 marks; in October it had risen to 4,500.

20,000-mark banknote, Germany, February 1923	100,000-mark banknote, Germany, February 1923