Question

What were the causes and effects of HYPERINFLATION in GERMANY 1923

Answer 1

CAUSES:

Depleting gold reserves and particularly, REFUSING to pay.

Printing paper currency recklessly- leading to the value of the German currency to fall.

EFFECTS:

Prices of goods increased.

There was a burden on the people to carry a load of money to buy even less valuable things.

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Answer 2

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Effects of Hyperinflation in Germany :-

1. Falling Value of the the Reichsmark

The more money that the government printed, the more the money became worthless. This meant that, when other countries exchanged their money to Reichsmarks, it wasn’t worth anything. As a result, imports to Germany fell and the shortages became worse. Germany could not import the goods it needed for survival.

2. Daily Hardship

Daily life became difficult for many. Hyperinflation created a situation whereby prices rose almost hour by hour. People were paid twice in a day and often had to take piles of money to the shops in wheelbarrows. Shopping stopped becoming about paying for goods with money but developed into an exchange economy whereby goods were swapped for each other, e.g. food for toiletries. Famous examples included people using bank notes as wallpaper, as this was cheaper than purchasing wallpaper. Children too were also given large piles of money to play with, some created kites or built towers out of the money.

3. Savings

As money became worthless so too did people’s savings. For example, if you had saved 500 marks prior to hyperinflation, this amount did not increase as prices did. The value of these savings stayed at 500 marks. The destruction in the value of savings particularly hit the middle classes in Germany.

4. Debts and Loans

Here is where there were some winners from hyperinflation. Particularly anyone with debts who found that they were easily repayable as the value of these debts did not increase either.

Causes of Hyperinflation in Germany:-

The hyperinflation in Germany of 1923 could be divided in two causes, the internal and external.

Both of these causes each had their own definitive effect on Germany and its economy but the external causes such as the Treaty of Versailles proved to cause a greater effect on Germany’s industry, carving industrial territory out of the Fatherland. The external causes had a greater effect on Germany’s economy than the inside policies did, proving that hyperinflation was largely due to the outside causes of Germany, with the internal causes having a mild effect on inflation.