“Don’t tell the hen that her eggs sell for 1.2 million marks a piece, she’ll have a fit of megalomania.” With this vitriolic humor, a reader of the Frankfurter Allgemeine Zeitung commented on the uncontrollable rise in prices in Germany in September 1923. The continuous revaluations after the Russian attack on Ukraine in February 2022, with the inflation rate occasionally registering double-digit rates, cause and today a strong concern among German consumers.

The good news: The worst is probably over, the ever upward trend has been halted. Based on October data, inflation in Germany is moving at 3.8% on an annual basis. These are the lowest levels since August 2021. Analysts estimate that in the coming months, inflationary pressures will weaken further, among other things, due to the increase in interest rates by the European Central Bank (ECB). Since July 2022 the custodians of monetary stability in the eurozone have proceeded with ten consecutive interest rate hikes.

The devaluation of the currency in 1923

After World War I the German economy had collapsed. The public debt was constantly increasing and the state was printing money to refinance it, causing a vicious circle of devaluations of the mark. By 1923 the value of the currency had shrunk so much that many businesses were paying wages every day, people were carrying huge amounts of notes to the grocer and everyone was trying to get rid of their money as quickly as possible. Because many times, from the time they entered the queue to pay until they reached the checkout, the prices of the goods multiplied…

“When hyperinflation prevailed, money had completely lost its value as a medium of exchange,” notes the Deutsche Bundesbank, Germany’s central bank. In November 1923 a kilo of rye bread cost 233 billion marks, while a kilo of beef reached 4.8 trillion marks. Many merchants did not even accept money, only payments in kind. Others closed their shops for good. It took a brave monetary reform to end the currency’s utter debasement. With the “new mark”, established on November 15, 1923, the German economy began to recover.

Inflation benefits borrowers

Everyone benefited from the “new brand”, but especially the state itself. And that’s because with the monetary reform of 1923 Germany’s war debts were reduced to… 15.4 pfennigs (subdivision of the mark, one mark was equal to 100 pfennigs), according to the calculations of the Bundesbank. That is, they were practically eliminated.

Many analysts are now wondering whether Germany is once again threatened with “hyperinflation”. In the fall of 2022, the inflation rate had jumped to 8.8%, the highest levels since German reunification, while energy and food prices were in double digits for a long time. Inflationary pressures have been easing in recent months, but household purchasing power has already taken a serious hit. Experts estimate that private consumption is no longer a pillar of growth.

However, everything points in favor of finding that today’s conditions do not compare to the hyperinflation of 1923, if only because of the targeted intervention by central banks to tame inflation. Moreover, there is no simultaneous increase in prices for all basic necessities. To get to the eggs: In Easter 2023, the German Statistical Office had calculated that the increases, compared to April 2022, reached 16.6%, a rate certainly remarkable, but rather low compared to the EU average (31.1%)