Weimar Republic: The specter of hyperinflation haunts Germany after 100 years

At Weimar Republic hyperinflation caused one of the biggest economic crises in German history. The spike in inflation began in 1923, when Germany was groaning under the exorbitant reparations it had to pay to France as the loser of World War I and under the Versailles Peace Treaty.

The causes of hyperinflation vary. The most important thing, however, was that the German government with its actions dynamited the country’s economy, explains in an interview with DW, Juta Hofrich, economist and author of the book “Dance of Death – 1923 and its consequences”.

According to the German author, when the then-young republic began to fall behind on the payment of reparations, the victorious powers occupied the Ruhr region to gain access to the coal mines. In reaction, the local population offered passive resistance. He went on strike stopping coal mining. And then the Berlin government started printing money to continue paying the “patriotic” strikers part of their wages.

Hundreds of millions for a loaf of bread

With this “patriotic measure” Berlin triggered the devaluation of the national currencyaccording to Utah Hoffrich: “The Germans restricted the mining of coal, the country’s most important raw material at the time, so that it would not fall into French hands, saying we would rather not produce anything.”

When the central bank started printing money, prices skyrocketed. “Where there is inflation, loose monetary policy is usually the next step,” the author explains. When there is a lot of money in circulation, but few raw materials, the value of money falls. In addition, Germany had already proceeded with a significant devaluation of the mark during World War I to finance the war.

Hyperinflation had a devastating effect on the lives of Germans. Prices rose rapidly. A loaf of bread came to cost hundreds of millions of marks in a short period of time. In 1923 in the Weimar Republic money was worth so little that it was weighed instead of counted.

A few elements in common with today’s financial crisis

The financial crisis was tamed when the new president of the central bank stopped printing money and at the same time launched a monetary reform. In addition, he introduced the so-called “rye currency”. It was an alternative currency aimed at restoring the confidence of the Germans. Strange as it may seem, its value was based on arable land and the amount of rye it produced, Hofrich explains.

According to the German author, the success of the alternative currency it was based on an illusion. No one could ever go to the bank with the “rye money” and exchange the notes for land. And because no one tried, the currency remained stable and accepted as a means of payment.
Today’s economic situation is completely different despite the fact that there are common elements, Juta Hofrich answers a related question: “High inflation and hyperinflation are usually associated with wars. Fortunately for us, we are not directly involved in the Ukraine war. However, we are faced with collateral losses because Russia has stopped supplying natural gas to Germany.

“However, this is where the common elements end,” the author emphasizes: “Today we are talking about high inflation hovering around 10%, the highest I have experienced to date. It’s not much, but in 1923 we had hyperinflation, when prices rise from month to month more than 50%”.

DW – Christine Lenen/ Stefanos Georgakopoulos

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