Inflation in the Weimar Republic

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Weimar Republic notes being used as wallpaper, 1923

The inflation in the Weimar Republic was a period of hyperinflation in Germany between 1921 and 1923. It was one of the most extreme hyperinflations in history.

Before the end of the War

The German Empire in 1914 was economically the most powerful country in Europe. At the outbreak of World War I, the total money supply was at around 6 billion Marks: composed of Reichsbanknoten (banknotes from the Reichsbank), Reichskassenscheine (imperial treasury notes), private banknotes, gold coins and token coins. The duty to redeem the Reichsbanknoten for gold by the Reichsbank was repealed. One third of the nominal value of banknotes still had to be backed by gold, current German money, or the Reichskassenscheine. In addition to these, however, a new type of banknote was also allowed as backing: the Darlehenskassenscheine, which were issued by newly formed Darlehenskassen, that is, loan institutes run by the Reichsbank. The money could be issued up to the value of the granted loans, where collateral could be goods or bonds. These banknotes were not legal tender, but were fully accepted by public cashier's offices and thus their acceptance was assured. This one law removed all limits on the creation of new money.

The public cashier's offices had to deliver all incoming gold coins to the Reichsbank. A massive ad campaign persuaded the population to give their gold coins to the Empire. The people eagerly responded, and about 1 billion in gold was exchanged for Reichsbanknoten.

With the outbreak of the war, Germany's exports shrank dramatically, while imports fell only somewhat, causing significant outflows of gold. This, combined with the cost of the military, made an expansion of the money supply necessary—at the end of 1914 it was at 7.2 billion. The large occupied territories (like Belgium, Russia, Poland, and Romania) needed money in local currencies; their money was backed by the Reichsbank and its notes.

As the inflation continued, the country instituted price controls to attempt to limit the rising prices. First established in 1914 for everyday items, the number of regulated goods grew throughout the war.[1]

The First World War cost Germany in total 160 billion Mark. In 1914–1918 only 13.1 percent of the costs were financed out of recurring revenues. (In World War Two, September 1939 to September 1944 it was about 50% percent of the costs.) Of the costs, 24.8% were paid as "floating debt" (i.e., by printing money), while the remaining 62.1% were state bonds signed by German citizens. In comparison, Great Britain paid 28% out of its recurring tax revenues. The reason for this financing was a lack of tax base: the Reich did not have a unified financial administration, and the German states were still very independent.[2]

After the War

The armistice was signed on 11 November 1918[3], to be followed by a peace treaty.

The Treaty of Versailles was signed on the 28th June of 1919. Germany accepted it under heavy pressure shortly after the blockade of their ports was removed, which allowed much needed resources and food supplies to be imported. Arguably, the reparations were the most important cause of the destruction of the German mark. As a part of the peace conditions, Germany as well as its allies accepted their role as belligerents, and responsibility for all damages and losses caused by their attacks on their neighbours. All damages would be repaid, including pensions for war victims and the costs for the upkeep of the occupation army. All heavy weaponry would be handed over with the entire war fleet and many locomotives and railroad cars. A large part of the business fleet had to be delivered, and millions of tons of coal was to be supplied to several countries for up to ten years.

The German government was in financial trouble even before the Treaty - and the revolutions, uprisings and strikes did little to help. Therefore, several new taxes and tariffs were introduced. The tariffs should be paid in gold and increased dramatically. The expenses were still not covered. The government's debt rose from 38.6 billion in January, 1919, to 176.6 billion in May, 1921, the banknotes in circulation rose in the same period from 23.647 to 71.863 billion. If the public did not take over a large part of the debt, the money supply could have been even higher. The exchange rate to the dollar rose from 7.95 to 65.18 in this time.

Germany had to start paying reparations immediately, their final value was assessed in January 1921. With gradually increasing payments, it should pay 226 billion goldmark over a period of 42 years. In addition, every year should Germany pay 12% of its exports, as security should serve all tariffs and all import and export taxes. The German side agreed to the payments, providing the already paid sums were subtracted from the total; the 12% of all exports were declared to be impossible to accept.

Lloyd George, Britain's Prime Minister strongly refused these suggestions. Several cities in the Rhine area were occupied and the customs in occupied areas were confiscated. A new payment plan was formed in April 1921 and, coupled with an ultimatum of occupying the whole Ruhr region, it was accepted by the German government. The new plan had lowered the total reparations to 136 billion goldmark. 2 billion goldmark should be paid each year, and a higher part of the exports (26%).

For the first down payment of 1 billion goldmarks in August 1921, the German government was able to get, with great difficulties, 600 million in gold. The remaining 400 million came from short-term loans from banks. The exchange rate with the dollar rose to 86.37 marks. The short-term loans needed constant refinancing and the exchange rate rose to to 115.50 in September. By the time of the next payment in November was the rate at 310 mark per dollar. In this period Germany also lost the industrially strong Upper Silesia.

The difficulties of getting the necessary means led the German government to announce, that it could not make the payments in 1922 and requested a reprieve. The attempts to resolve the issue failed and by the end of the year was the exchange rate 7650 marks per dollar. The debt grew from January, 1922 by 52 billion, in the next three months by 150 billion and in the final three months by over 1000 billion. The prices and wages followed the debasement of the mark. While initially was over a half of the debt held by the public, at the end of the year was most of it held by the Reichsbank. As a consequence, the banknotes in circulation rose from 115 to 316 billion, then to 1280 billion in December.

The Reichsbank was made nominally independent from the government, but that action didn't stop the inflation. The backing of banknotes was temporarily repealed. Germany requested to be freed from all payments for at least a few years, until the necessary reforms were made. A conference in Paris in January, 1923, failed to resolve the issues, where Germany was blocked by France. The Ruhr was occupied.

The occupation was considered a breach of the Treaty of Versailles. The German government stopped all payments to France and Belgium and announced passive resistance in the occupied areas. The French army went aggressively after income of any sort, with confiscations and downright theft. The inflation broke out in full. The exchange rate of the dollar rose in the first six months of 1923 to 74 750 mark. In August it was a million, in October a billion, in November it was over a trillion per dollar. The impact on life was unimaginable and the mark effectively stopped being a means of payment.[1]

Reform of the mark

The reform of the mark was considered since 1920. Many called for the return of the goldmark, others suggested backing by other means. By the year 1922, in agricultural areas like Mecklenburg an Oldenburg, prices and rents were based on a pound of rye and several districts issued bonds quoted in the price of rye. Other commodities like coal or potash were also used to back loans and bonds.

The escalating economic situation with plundering and revolts called for action. On the 27th September, 1923, the government declared a state of emergency and abdicated. A new government completed the reform plan: the new currency should be the Rentenmark, based on gold. It was not declared legal tender, no conversion ratio with the paper mark was set, nor was it actually backed by gold - there was not enough of it in Germany. The issuing bank, the "Deutsche Rentenbank" was independent from the outset. The new money was not based on the state, but on the economy itself. The agricultural sector and the industries each took on a half of the bank's capital in the form of debt - mortgages in the value of 4% of all lands used for agriculture and forestry, and debt issued by the industries, crafts and trades, each in amount of 1600 million goldmark. The basic capital of 3200 million mark was the backing of the Rentenmark, and the bank could issue up to this amount of the new money (but the top limit was never reached, the maximum in circulation was 2.1 billion[4]).

Anyone who would deliver at least 500 Rentenmark could redeem them for "Rentenbriefe" - bonds with a 5% interest rate, quoted in goldmark. The Rentenbank issued them in an amount equal to its capital. It could issue money (the Rentenmarks) only up to the amount of Rentenbriefe it held. In this way, the Rentenmark should be a bridge to a new golden mark.

The Rentenbank was founded on 15th October of 1923 and Hjalmar Schacht was put into a key government position to execute the reform plan. The stabilisation was done according to the exchange rate to the dollar on the Stock Exchange in Berlin, which was at the 20th November 4200 billion mark.[1]


Cities have produced metal money during the war and after it. With the ever-growing devaluation of the currency, the demand grew correspondingly.

The Reichsbank had to call upon private printing works for the production of banknotes, in 1923 were 30 paper factories and 133 printing works busy with their production. The number of printing presses (1723 running day and night in autumn 1923) could be still increased, but the capacities for the special paper for banknotes could not keep up with the demand. The Reichsbank therefore welcomed and in many cases supported the issue of Notgeld (emergency money) by municipalities, districts, provinces and private enterprises. It was estimated, that at the end of 1922 there were about 20 billion in circulation - as opposed to 1280 billion of official money. By the end of 1923 there were 400 to 500 billion of Notgeld in value of about 500 million goldmark, so about the same amount as the official banknotes. There was also "value-stable" money in the same amount. The Notgeld was not only used to assist the Reichsbank, but many produced it to great profit.

In November, 1923, the Reichsbank stopped accepting the Notgeld, and wanted to exchange its sizable reserves in their places of issue, causing a great outcry. It took until the end of October, 1924, to exchange most of the Notgeld and the economy could finally stabilize.[1]

Effects of the inflation

Germany had a large and wealthy middle class, and exactly this class was the hardest hit. Especially desperate was the situation of people living off rents. Many families of high repute and constituting a significant part of the higher officialdom lost all of their property and status. Some have chosen the Freitod ("free death"). The Reichsgericht (Imperial Court) decided, that a mark equaled a mark, and that old debts could be settled in worthless paper money. Many did so; the taxes were also paid in this way, leaving the state to live exclusively from the printing press.

The price of a mark differed strongly at the stock exchanges outside from the prices in Germany. This attracted many foreigners to buy and live in Germany for cheap, buying up everything from common goods to company shares and land. The Germans were not less inclined to speculation. From this period comes the term "Luftgeschäft" (lit. "air-business"), trading of nonexistent goods in a long chain, where the last buyer was the fool. By 1922 were most people still not aware of what was going on, and growing loans and prices seemed like great opportunities.

The rationing laws, that basically forced families to break them and use the black market, shook the foundations of trust in laws. The wages of officials were always raised too late, leading to corruption. A shocking number of packages were misappropriated at the railways and the post office. Many felt betrayed by the state.

In 1923 fell the currency apart. The flight into "real values" began, everyone sought to get rid of the money as fast as possible. By that time, it wasn't even worth robbing a money transport, as it was in 1919 or 1920. According to the German economist Adolf Weber, the inflation caused much worse damage than the destructive four years of war.[1]

The last reparation payment of £59m was made on Sunday, October 3, 2010.[5]

Inflation in numbers

Graphical representation on a logarithmic scale of Weimar hyperinflation
Date[1] Exchange rate of the
dollar in marks
Banknotes in circulation,
Floating debt in treasuries,
total, billions of marks
January 1919 7.95 23 647 58.6
April 1919 11.26 26 628 67.2
July 1919 13.75 29 268 76.1
October 1919 23.83 30 928 83.3
January 1920 49.80 37 443 88.3
April 1920 67 47 939 95.1
July 1920 37.90 55 768 112.7
October 1920 61.62 63 596 140.6
January 1921 74.50 66 620 155.5
April 1921 62.62 70 839 172.7
July 1921 75 77 390 190.8
October 1921 124.50 91 527 202.9
January 1922 186.75 115 375 255.9
April 1922 298 140 420 281.1
July 1922 402 189 794 308.0
October 1922 1815 469 456 331.5
January 1923 7260 1 984 496 2081.8
February 1923 41 500 3 512 787 3588.0
March 1923 22 800 5 517 919 6601.3
April 1923 21 100 6 545 984 8442.3
May 1923 31 700 8 563 749 10 275.0
June 1923 74 750 17 291 061 22 019.8
July 1923 160 000 43 594 737 57 848.9
August 1923 1 100 000 663 200 050 1 196 294.7
September 1923 9 700 000 28 228 815 494 46 716 616.4
October 1923 242 000 000 2 496 822 909 039 6 907 511 102.8
November 1923 130 000 000 000 400 267 640 301 854 191 580 465 422.1


  1. 1.0 1.1 1.2 1.3 1.4 1.5 Richard Gaettens. Geschichte der Inflationen Von Altertum bis zum Gegenwart (German: History of Inflations from Old Ages to the Present), Die grosse Deutsche Inflation von 1914 bis 1923 (The Great German Inflation from 1914 to 1923) p. 237-278. ISBN: ISBN 3-87045-211-0. Referenced 2010-11-21.
  2. Götz Aly. "Hitlers Volksstaat" (in English published as "Hitler's Beneficiaries: How the Nazis Bought the German People"), p.33. ISBN 978-3-596-15863-8. Referenced 2011-03-19.
  3. "Nov 11, 1918: World War I ends, referenced 2011-08-15.
  4. Landwirtschaftliche Rentenbank. "Die Geschichte der Landwirtschaftlichen Rentenbank" (pdf, in German), referenced 2010-11-19.
  5. Allan Hall. "Germany ends World War One reparations after 92 years with £59m final payment", Daily Mail Online, 29th September 2010, referenced 2011-08-15