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What Were the Causes of Germany's Hyperinflation of 1921-1923

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===The End of the Cycle and Its Results===

[[File: Freikorps.jpg|250px|thumbnail|left|Freikorps Preparing for Action on the Streets of Germany in the 1920s]]

Although Germany’s bout with hyperinflation was a gradual process and took a while to peak, it ended rather quickly. After numerous failed attempts to alleviate the process, the Weimar government introduced a new currency known as the Rentenmark in 1923. Unlike the Reichsmark, which was not backed by gold or any other tangible asset, the Rentenmark was back by real estate. When the Rentenmark was first introduced in October 1923, one bill was worth an astonishing one trillion Reichsmarks! <ref> Widdig, p. 11</ref> Although the Weimar government was able to effectively end the hyperinflation by the end of the year, the damage had already been done to the German economy, political system, and greater society.

Among the many different groups who suffered due to hyperinflation and never were really able to get back on their feet, were members of the German middle class. Middle-class workers and small business owners were especially hit hard when they saw their savings evaporate overnight. <ref> Widdig, p. 12</ref> Many middle-class retirees found themselves back at work and many others had to rely on the goodwill of friends and family just to make ends meet. All of this resulted in a loss of confidence in the Weimar government, which was further exposed as being weak and ineffective when Germany had a brief economic Depression in 1925-26. Despite the hardships that hyperinflation caused in Germany, there were some who were able to profit from it.

There are always people who prosper during times of economic distress, even during a near collapse. In the case of Germany’s hyperinflation, people who were in debt came out ahead since the amount owed on any debt only increases due to interest rates; debtors were able to use the inflated currency to quickly pay off their debts. Those with a keen sense of business acumen quickly picked up on this and took out loans to buy items of real value – real estate, gold, and artworks for instance – which they were then able to quickly turn into profit. Stock market speculators and exporters of German goods also came out ahead financially once the smoke of hyperinflation cleared in 1923. <ref> Widdig, p. 12</ref>

Perhaps the biggest beneficiaries of Germany’s hyperinflation, though, were the far rightwing and leftwing political parties and paramilitary organizations. As the Weimar government appeared to be unable to deal with the economic problems of the 1920s, more and more Germans began turning to extreme organizations for answers. Rightwing paramilitary groups such as the <i>Freikorps</i> engaged in armed battles with communist organizations like the Spartacus League on the streets of nearly every major German city during the 1920s, which left hundreds dead by the end of the decade. <ref> Rickards, p. 76</ref> Eventually, the National Socialist German Worker’s Party presented itself as a viable alternative to what it described as a weak and degenerate Weimar government.

===Conclusion===

The period after World War I was an extremely critical juncture in world history where the stage was set for World War II. Among the most important factors that led to World War II, albeit indirectly, was the hyperinflationary cycle Germany experienced from 1921 through 1923. During that period, the Weimar government watched as prices soared over 1000% and sat helplessly as its currency essentially lost all of its value. The factors that contributed to that short but devastating cycle can be attributed to excessive printing of currency, the inability to pay off wartime debts and reparations, and a couple of major political events. Although the Weimar government was eventually able to quell the hyperinflationary cycle, the German people lost confidence in the government and so began looking elsewhere for political answers.

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~~[[File: Freikorps.jpg|460px|thumbnail|left|Freikorps Preparing for Action on the Streets of Germany in the 1920s]]~~

Although Germany’s bout with hyperinflation was a gradual process and took a while to peak, it ended rather quickly. After numerous failed attempts to alleviate the process, the Weimar government introduced a new currency known as the Rentenmark in 1923. Unlike the Reichsmark, which was not backed by gold or any other tangible asset, the Rentenmark was back by real estate. When the Rentenmark was first introduced in October 1923, one bill was worth an astonishing one trillion Reichsmarks! <ref> Widdig, p. 11</ref> Although the Weimar government was able to effectively end the hyperinflation by the end of the year, the damage had already been done to the German economy, political system, and greater society.

Among the many different groups who suffered due to the hyperinflation and never were really able to get back on their feet, were members of the German middle class. Middle class workers and small business owners were especially hit hard when they saw their savings evaporate overnight. <ref> Widdig, p. 12</ref> Many middle class retirees found themselves back at work and many others had to rely on the goodwill of friends and family just to make ends meet. All of this resulted in a loss of confidence in the Weimar government, which was further exposed as being weak and ineffective when Germany had a brief economic Depression in 1925-26. Despite the hardships that hyperinflation caused in Germany, there were some who were able to profit from it.

There are always people who prosper during times of economic distress, even during a near collapse. In the case of Germany’s hyperinflation, people who were in debt came out ahead since the amount owed on any debt only increases due to interest rates; debtors were able to use inflated currency to quickly pay off their debts. Those with a keen sense of business acumen quickly picked up on this and took out loans to buy items of real value – real estate, gold, and artworks for instance – which they were then able to quickly turn into profit. Stock market speculators and exporters of German goods also came out ahead financially once the smoke of the hyperinflation cleared in 1923. <ref> Widdig, p. 12</ref>

Perhaps the biggest beneficiaries of Germany’s hyperinflation, though, were the far rightwing and leftwing political parties and paramilitary organizations. As the Weimar government appeared to be unable to deal with the economic problems of the 1920s, more and more Germans began turning to extreme organizations for answers. Rightwing paramilitary groups such as the <i>Freikorps</i> engaged in armed battles with communist organizations like the Spartacus League on the streets of nearly every major German city during the 1920s, which left hundreds dead by the end of the decade. <ref> Rickards, p. 76</ref> Eventually, the National Socialist German Worker’s Party presented itself as a viable alternative to what it described as a weak and degenerate Weimar government.

~~===Conclusion===~~

The period after World War I was an extremely critical juncture in world history where the stage was set for World War II. Among the most important factors that led to World War II, albeit indirectly, was the hyperinflationary cycle Germany experienced from 1921 through 1923. During that period, the Weimar government watched as prices soared over 1000% and sat helplessly as its currency essentially lost all of its value. The factors that contributed to that short but devastating cycle can be attributed to excessive printing of currency, the inability to pay off wartime debts and reparations, and a couple of major political events. Although the Weimar government was eventually able to quell the hyperinflationary cycle, the German people lost confidence in the government and so began looking elsewhere for political answers.

====References====

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