Work In Progress
From "The Great Inflation" packet.

1) Economic background
· By 1914 Germany was arguably the most powerful economy on the continent because of its natural resources, well-developed industrial base, well-educated population and its advanced banking system.
· After WWI Germany faced economic problems due to the loss of resources from former territories, the cost of reparations, the increase in prices and national debt, and the collapse of world trade.
2) The causes of German Inflation
· Some blamed the hyper-inflation on the Treaty of Versailles and on the financial greed of the Jews.
  • The fundamental causes of inflation can be separated into three groups:

Long Term:

  • Germany did not prepare for the financial aspects of a long drawn-out war.
  • Rather than raising taxes, the government decided to sell war bonds which led people to invest money into government funds with the assurance that their savings would be secure.
  • 84 % of war expenditure was borrowed money
  • There was a shortage of consumer goods because of the mass production of military weapons. This pushed prices up.

Medium Term:

  • The government decided to increase taxation on profits, wealth and income.
  • The government also adopted a policy of deficit financing[[#_ftn1|[1]][1] with the hope of reducing the value of national debt.
  • Reparations also add to the economic crisis because the payments had to be in hard currency (like dollars or gold).
  • In an effort to pay the reparations, the government printed more marks, which caused inflation to rise.
Short Term:
  • Germany asked for a delay in the their reparation payments which caused the French to question German intentions.
  • French and Belgium troops occupied Ruhr[[#_ftn2|[2]][2].
  • As a result the government started a policy of passive resistance and urged workers to go on strike against the French.
  • The French did not permit the government to collect taxes from Ruhr or the delivery of coal to the rest of Germany and the mark no longer had any value.
3) After/During the Inflation

How did inflation affect Germany?:
  • Unemployment rose
  • Decrease in health safety and sanitation
  • Decline in law and order
  • Increase in crime
  • Growth in suicides
  • Decline in morality (i.e. prostitution)
  • Increase in prejudice
  • Rise in radical ideas (i.e. Nazism)
  • Public dissatisfaction of government
  • Increase in violence
  • Many people lost savings and pensions
Who is Stressman and what were his achievements?:
  • Chancellor of Germany in 1923
  • Social Democrat
  • Cancelled passive resistance against the French
  • Government expenditure out to reduce deficit (basically, fire people)
  • Rentenmark (new currency)
  • Got Allies to agree to Dawes Plan, which earned German sympathy and reduced reparation payments
  • Extreme rights and lefts were defeated

external image 288px-GermanyHyperChart.jpg
This is a graph of the value of one gold Mark in paper Marks in Germany between
1919 and 1923. This graph was found on Wikipedia.

external image 180px-50_millionen_mark_1_september_1923.jpg
This is an image of a 50 million mark banknote from 1923 in
Germany. This image was found from Wikipedia.

[[#_ftnref1|[1]][1] Deficit Financing means planning to increase the nation’s debt by reducing taxation in order to give the people more money to spend and so increase the demand for goods and thereby create work. This policy allowed inflation to continue.
[[#_ftnref2|[2]][2] The industrial heartland of Germany.