Postwar Problems-German Inflation

Objective: Assess the global impact post-WWI economic turmoil—

Worldwide Depression

Loss of life was not the only cost of World War I.

The loss property and the tremendous costs of fighting the war led to financial collapse.

Most of the nations of Europe were economically devastated by the conflict.

The nation that suffered the most was Germany.Smashed grocery store

windows in hungry Berlin - 1919

1. Besides loss of life, what were other costs associated with WWI?

2. What did these costs lead to?

3. Which nation suffered the most?

During the war, Germany had simply printed more money to finance its war efforts.

Terms of the Treaty of Versailles added to the debt it had incurred by this measure.

The reparations Germany owed the Allies increased its economic woes.

By the early 1920s, its economy had collapsed.

To pay its debts, the German government printed even more paper money.

By 1923, the German government was printing 400 quadrillion (400,000,000,000,000,000) marks a day!

4. How did Germany deal with paying for the war effort?

5. What document contributed to Germany’s debt?

6. What part of this document specifically increased Germany’s economic problems?

7. How did Germany deal with paying its debts after WWI?

This caused

hyperinflation (a sharp rise in prices).

Money became worthless.Wheelbarrows full of paper

money were necessary to purchase basic necessities.

American loans and investments helped somewhat to improve the German situation. (Dawes Plan)

German children

use stacks of

money as

building blocks

during the 1923

inflation.

Postwar Problems

Inflation=steady rise in prices

German

inflation in the

1920s: woman

burning

worthless

banknotes

(paper money)

for fuel

8. By printing more money, this caused what in Germany?

9. Compare inflation/hyperinflation?10. What happened to money?11. How much money did it cost to purchase basic necessities?

12. What are two examples of how much money is worth (valued) in Germany post-WWI?

Wheelbarrow full of money to buy basic necessities.

The German mark in 1923: good for building towers, but not much else.

Inflation 1923-24: A German woman feeding a stove with currency notes, which burn longer than the amount of firewood they can buy.

A 50,000,000 (50 million) mark banknote from 1923.

A 1000 Mark banknote, over-stamped in red with "Eine Milliarde Mark" (1,000,000,000 mark), issued in Germany during the hyperinflation of 1923.

A medal commemorating Germany's 1923 hyperinflation. The engraving reads: "On 1st November 1923 1 pound of bread cost 3 billion, 1 pound of meat: 36 billion, 1 glass of soda: 4 billion."

Germany, 1923: banknotes had lost so much value that they were used as wallpaper.

During the immediate post-war years the value of the German mark deteriorated, largely as a result of reparation payments. In 1922 the exchange rate fell from 162 marks to the US dollar to 7000. By November 1923 it was down to 4200 billion marks to the dollar.$1=162 Marks

$1=7,000 Marks$1=4,200,000,000,000 Marks

There were no marks to be had in Strasburg, the mounting exchange had cleaned the bankers out days ago, so we changed some French money in the railway station at Kehl. For 10 francs I received 670 marks. Ten francs amounted to about 90 cents in Canadian money. That 90 cents lasted Mrs. Hemingway and me for a day of heavy spending and at the end of the day we had 120 marks left!

Our first purchase was from a fruit stand beside the main street of Kehl where an old woman was selling apples, peaches, and plums. We picked out five very good-looking apples and gave the woman a 50 mark note. She gave us back 38 marks in change. A very nice-looking, white bearded old gentleman saw us buy the apples and raised his hat.

“Pardon me, sir,” he said, rather timidly, in German, “how much were the apples?”

I counted the change and told him 12 marks.He smiled and shook his head. “I can’t pay it. It is too much.”Twelve marks, on that day, amounted to a little under 2 cents.