Germany’s Great Inflation


Between December 1920 and December 1921 the value of the German currency dropped from 258 marks to 771 marks to the pound.                 p.108


By December it had plummeted to 34,125 marks to the pound. p.108

Keynes … continued, ‘One must not lose sight of the other side of the balance sheet … The burden of internal debt is wiped off.  p.98

According to T. Walter Williams, a German banker said that his country would continue to haggle until the Allies agreed to a reasonable payment for the reparations.  If France still refused to listen to reason, the mark would go lower and lower until it became worthless.  Finally the currency would be ‘washed out’ and the country would be technically bankrupt, although not industrially or commercially.

There were two attractions in reducing the mark to waste paper.   The first was that if it was stabilised before it became worthless, middle class savers who had not put money abroad would be practically destitute, while shop floor workers,  by dint of strike action, would maintain the value of their earnings and the power that money brings to defy authority. The second reason was that Germany’s industrialists wanted their country to be a great power again.  If German industrial workers reverted to a ten-hour day while Britain retained an eight-hour day, after the mark was pegged at a more or less fixed rate to the £ and dollar, Germany could keep its dominant position in export markets and become once more leading player on the world stage. p.93

The advent of the American Fordney-McCumber tariff caused German heavy industry and friends to crystallise their strategy.  Although the American observer, Alanson Houghton, had felt that persuading workers to work two hours longer each day was an impossible task which could only be achieved ‘through the bitter Must of hunger’ the industrialist Hugo Stinnes had made up his mind to achieve his goal.  He realised that he needed a scapegoat to implement this punitive strategy – and there was one close to hand – France!  Indeed one week before he was murdered, Rathenau had accused Stinnes of wanting to put Germany ‘on a collision course with France’.      p.97


(The French and Belgians entered Germany to collect the reparations coal and timber owed to them.  Meanwhile the value of the German currency plummeted)

Unsurprisingly, the French soon had to increase the small military force they had sent into the Rhine … to collect coal from the recalcitrant local population.  …  Thirteen men were killed and thirty wounded.   .. .  The German people became disgusted at the butchery and rapaciousness of France.      p.103

the mark’s headlong descent in value accelerated until, by August 1923, £1 was worth 19,800,000 German paper marks.     p.108

The New York Times reported on the food riots on 5 and 6 November, describing how angry mobs attacked the Jews plundering and wrecking their shops in Berlin, Coburg, Bremen, Erfurt, Nürnberg and Oldenburg …

The industrialists’ message to the starving workers was stark.  The New York Times explained, on 8 November that the workers were told that they must work ten hours above ground or eight and a half hours below in order to make reparations deliveries to the French. …

Beaten, the German workers finally agreed to the industrialists’ conditions.  Not only did they have to work for longer hours but their wages were nearly 20% lower than they had been in 1913.   p.117


See Cobden Institute Comment

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  • How Hitler Came To Power Press Release

              How Hitler Came To Power describes how what amounted to a conspiracy of the German military and industrial cliques, manipulated Allied leaders and misrepresented the Treaty of Versailles to further their ambitions, with zero regard for the human cost.
             Germany was far stronger economically by 1929 than she had been before the First World War. How Hitler Came To Power makes the case that she was primarily responsible for the Wall Street crash. By 1931 she was the greatest exporter in the world, with a mountain of cash in the bank. Yet the German people were subjected to high taxation, mass unemployment and misinformation in the cause of ridding Germany of the shackles of Versailles and returning the country to dictatorship