Germany, Venezuela, American Inflation

The Impact of Chronic Inflation on Germany

Chronic inflation hit Germany hard in the early 20th century.

The government allowed an unbalanced budget to persist, borrowing heavily from the Central Bank.

20 marks In 1920, twenty German marks could buy one British pound

20 billion marks By the end of 1923, it took

The value of German money evaporated at an alarming rate.

Workers were paid twice a day, with wives rushing to buy necessities before the next price increase.

Fear and desperation were rampant.

The middle class was virtually wiped out.

Those who owned real wealth—property, land, factories—benefited, paying off debts in inflated marks.

Germany asked for a moratorium on reparations.

The request was denied, and France, Belgium, and Italy seized valuable areas in the Ruhr.

This put a strain on the already crumbling German economy.

The stalemate was broken with the Dawes Plan, a compromise solution drawn up by J.P. Morgan.

$800 million in loans to Germany for reconstruction. It called for

With these loans, Germany rebuilt her industrial system, maintained her standard of living, and paid reparations without a balanced budget or a favorable balance of trade.

However, the system was unsustainable and debts were merely being shifted around.

The Dawes Plan was replaced by the Young Plan, which also failed to solve Germany's financial issues.

The International Bankers established the Bank of International Settlement in Switzerland, simplifying reparation payments but also earning them hefty fees and commissions.

The chronic inflation and subsequent financial manipulations set the stage for a strong man promising freedom from international financial predators, leading to a tumultuous period in German history.