hyperinflation

• Hyperinflation


  The effect of a government printing money is that the value of the money goes down and prices go up. As more and more money is printed, so prices rise higher and higher. More money then has to be printed to meet the increasing prices. As a result, money becomes worthless
• The value of the German Mark against the Dollar

  • 1914: $1 = 4 marks
  • 1922: $1 = 7000 marks
  • July 1923: $1 = 160,000 marks
  • Nov 1923: $1 = 4,200,000,000 marks
• Effects of hyperinflation


  • As prices rose, people's savings became worthless (this hit the middle classes particularly hard). In 1923 prices in shops were increased almost every hour
  • At times the workers were paid twice a day so that they could buy food before the prices rose again
  • People on fixed incomes (such as pensioners and the war wounded) suffered badly
  • Prices rose much faster than incomes and many people starved as they were unable to buy food or fuel
  • Many small businesses collapsed
• Some people gained from hyperinflation - People with debts could afford to pay off their loans
• Gustav Stresemann


  • 1878-1929
  • German People's Party, Conservative
  • Chancellor (Prime Minister) briefly in 1923
  • Foreign Minister, 1923-1929
  • Centre-right on the political spectrum
  • Prepared to work with other parties including the SDP
  • Seen as a crucial person in improving Germany in the Golden Twenties
• How Stresemann improved the economy


  1. Rentenmark: He stopped the printing of paper money in November 1923. He created a new currency called the Rentenmark and introduced it slowly into the economy to give it value. He called off the policy of passive resistance against the French occupation of the Ruhr

  2. Dawes Plan: The Dawes Plan of April 1924 made a huge loan of 800 million marks available to Germany. The idea was that the money would help rebuild German trade and industry. Money would then flow into the German government and they could pay regular reparations. Industrial production grew and the Dawes Plan also restored confidence in the German economy, and investment poured in from abroad

  3. Young Plan: In 1929 the Young Plan, which was arranged by a US businessman named Owen D. Young, reduced the total amount of reparations (to £2.2 billion) and extended the deadline for payments by a further 59 years
• The success of the German economy depended on US loans
• Weaknesses of the German economy in the Golden Twenties


  • It depended on American loans which could be withdrawn at any time
  • Unemployment was a serious problem. The economy might be growing, but it wasn't creating jobs fast enough for Germany's rising population - in 1928 it was 6%
  • Employers complained taxes were too high
  • There were extremes of wealth and poverty in Germany
  • Large groups of Germans were poor eg farmers and the middle classes who lost their savings in the hyperinflation of 1923
• Stresemann did not improve Germany's political stability, 1924-29
• The German economy still had serious weaknesses: it depended on American loans which could be withdrawn at any time, unemployment was a serious problem, employers complained taxes were too high, and there were extremes of wealth and poverty in Germany
• Large groups of Germans were poor eg farmers and the middle classes who lost their savings in the hyperinflation of 1923