How Germany came into the trap of hyper inflation situation after world war I ?
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Answer:
In Germany had fought the war largely on loans and had to pay war reparation in gold.
This depleted gold reserves at a time when resources were scarce.
In 1932, Germany refused to pay, and the French occupied its leading industrial area ‘Ruhr’, to claim their coal.
Germany retaliated with passive resistance and printed paper currency wrecklessly.
With too much printed money in circulation, the value of the German mark fell.
As the value of the mark collapsed, prices of goods soared.
The image of the Germany carrying cartloads of currency notes to buy a loaf of bread was widely publicised.
This crisis came to be known as ‘hyper-inflation’, a situation when prices rise phenomenally high.
Eventually, the Americans intervened and bailed Germany out of the crisis by introducing ‘The Dawes Plan’ which reworked the terms of separation to ease the financial burden on Germany.
Explanation:
Answer:
In Germany had fought the war largely on loans and had to pay war reparation in gold. This depleted gold reserves at a time when resources were scarce. ... With too much printed money in circulation, the value of the German mark fell. As the value of the mark collapsed, prices of goods soared.