Saturday Snippet: Hyperinflation in Weimar Germany


In his excellent study “When Money Dies:  The Nightmare of Deficit Spending, Devaluation, and Hyperinflation in Weimar Germany“, Adam Ferguson lays out in graphic detail what it was like for ordinary citizens to have to live with a worthless currency that decayed further in value every second they held on to it.

In the light of our discussion about the current threat of hyperinflation earlier this week, I thought it might be worthwhile to illustrate at least some of its effect on society.  I’ve chosen a chapter from relatively early in the book, when the effects of hyperinflation were beginning to be felt, but weren’t nearly so chaotic as they later became.  Note, however, that as conditions worsened, more and more Germans looked for someone to blame – and Hitler was ready, willing and able to blame the Jews.  He was fanning an existing, long-standing spark.  German anti-semitism had always been a potent social factor.  Now, amid the misery of hyperinflation, it grew worse.  In one sense, it’s true to say that the Holocaust grew out of Weimar Germany’s economic woes.

Only the country people were surviving in Germany in any comfort: anyone who lived off the land had the readiest access to real values. It was not surprising that even when they ensured that the money receipts for their goods were no more than equivalent in purchasing power to what they were used to, they were accused of extortion – the more so if they delayed the sales of produce in the full knowledge that prices would be higher the longer they waited.

Erna von Pustau went to stay in the country and asked her hosts bluntly what they were doing with all the money they were squeezing out of the townspeople. They replied candidly that they were paying off their mortgages. The principle of Mark gleich Mark [“the Mark will always be the Mark”] had helped agriculture enormously: for the country people, landowners, farmers or peasants, life had started again. At the end of August 1922 when the mark passed 2,000 to the dollar – 9,000 to the pound – a mortgage of seven or eight years’ standing had been 399/400ths paid off. When Frau von Pustau returned home,

“the talk in the family was about prices going up, about the credits which had to be reduced, about the middle-class party, about big business and the workers who always asked for more … The contrast between country and city was so enormous that it cannot be understood by people who have not lived through it.”

Herr Hans-Georg von der Osten, who had formerly flown with Baron von Richthofen’s Flying Circus and was later for a short time Goering’s Aide-de-Camp (ADC) until he shot the Reichsmarschall’s favourite stag, recollects that in February 1922, with a loan from a friendly banker, he bought an estate neighbouring his own property in Pomerania for 4 million marks (then equivalent to about £4,500). He paid the debt in the autumn with the sale of less than half the crop of one of his potato fields. In June of the same year, when prices were shooting up ahead of the mark, he bought 100 tons of maize from a dealer for 8 million marks (then about £5,000). A week later, before it was even delivered, he sold the whole load back to the same dealer for double the amount, making 8 million marks without raising a finger. ‘With this sum,’ he said, ‘I furnished the mansion house of my new estate with antique furniture, bought three guns, six suits, and three of the most expensive pairs of shoes in Berlin – and then spent eight days there on the town.’

This was simple commerce: the only thing to do with cash by that time was to turn it into something else as quickly as possible. To save was folly. Undoubtedly, however, as in Austria, there were many farmers who behaved outrageously. Dr Schacht’s account of the inflationary years recalled that farmers ‘used their paper marks to purchase as quickly as possible all kinds of useful machinery and furniture – and many useless things as well. That was the period in which grand and upright pianos were to be found in the most unmusical households.’ Anyone who was alive to the realities of inflation, he said, could safeguard himself against losses in paper currency by buying assets which would maintain their value: houses, real estate, manufactured goods, raw materials and so forth.

“Wholesale recourse to real values enabled not only the well-to-do but also, and especially, the unscrupulous to preserve and even possibly to increase their assets … As a result of this struggle for self-enrichment and financial self-preservation, based on exploitation of the ignorance of the masses, every aspect of business life was vitiated.”

To condemn the individual’s struggle for survival in such chaotic circumstances as either selfish, or unnatural, or wrong, was in many ways unjust. When people do not understand what is happening, or why it is happening, and have no idea about what to do about it, and are not told, panic must follow. Even so, that the country people were behaving naturally brought no comfort to townspeople who had no goods to barter, and whose incomes remained static.

A Hesse professor lamented as September came that professors, teachers and men of science were no longer given the right to live, and many would probably die in the coming winter for lack of food and warmth. He feared that their sons, instead of following their fathers’ careers, as they had done for generations past, would by force of circumstances turn to manual labour to earn their bread.

It was obviously possible to be over-pessimistic: earning bread by manual labour over a critical period need not bind one permanently to that activity. Yet the professor’s complaints showed the despondency to which the academic world had been reduced:

“Labour, wholly or partially educated labour, has already begun to rule in Germany, and there is no demand for brains: that is to say, brains have no longer a marketable value. The result can only be a catastrophe for Germany and the downfall of civilisation in central Europe if not, indeed, the whole world.”

Already, however, a new element had joined the economic crisis. For the first time the wages paid for labour began to lag behind the rise in prices, noticeably and seriously, in spite of everything the monopoly of the unions could do about it. President Ebert, pleading with Curzon to engineer a further moratorium on reparations, pointed out that the conditions of existence for the working population had become ‘completely impossible’, and that the downfall of Germany’s economic life was imminent.

A litre of milk, which had cost 7 marks in April 1922 and 16 in August, by mid-September cost 26 marks. Beer had climbed from 5.60 marks a litre to 18, to 30. A single egg, 3.60 in April, now cost 9 marks. In only nine months, Mr Seeds’s chauffeur’s weekly bill for an identical food basket had risen from 370 marks to 2,615.

“The rise of nearly 100 per cent within the last four weeks [reported the consul] has proceeded by such sudden leaps and bounds that no scheme for a simultaneous increase in wages can well be devised to cope with it: an increase of wages granted at the end of one week would not meet the rise in prices by the following Tuesday, for instance, and the working and salaried classes have suffered severely despite their continually increasing remuneration … The wage situation is hopelessly dislocated at present.”

On September 9 the financial authorities announced that in the previous ten days 23 milliard marks had been printed and distributed, representing 10 per cent of the total circulation of paper in the country. ‘The daily production of the Federal printing press,’ the newspapers dutifully recorded, ‘has now risen to 2.6 milliards of paper marks. In the course of this month it will be increased to almost 4 milliards of paper marks, at which figure it is hoped the shortage of money will be definitely overcome.’

Shortage of liquid cash, indeed, was acute, and the July emergency money law was coming into its own. Large industrial concerns began to pay their workmen partly in notes and partly in coupons of their own, which were accepted by local tradesmen on the understanding that they would be redeemed within a very short time. Municipalities, too, started to issue their own currencies, aware that any delay in receiving their pay packets would dangerously aggravate workers whose main concern was to spend them before they depreciated. The cities and towns developed a parallel fear of unemployment which on a large scale might lead to outbreaks of Communist-inspired disorder, and so began artificially to create employment for their staff. The citizens of Frankfort noted with alarm that large tracts of quite serviceable road were being repaired outside the town and that the overhead system of telephone wires was being converted into an underground one.

. . .

In Britain that October Lloyd George’s coalition government was displaced by a Conservative administration under Bonar Law. In Italy, Mussolini staged his coup.

At home in Germany, where people were resorting to trade by barter and progressively turning to foreign currencies as the only reliable medium of exchange, new Orders were brought in relating to the purchase of foreign bills and the use of foreign exchange to settle inland payments. In addition to imprisonment, fines could now be imposed of up to ten times the amount of an illegal deal. Further to prevent the flight of capital, its transfer from then on had to be authorised – not just notified – and the transactions of importers were to be closely regulated. These moves, unfortunately, apart from making legitimate trade more difficult, took no account of the fact that speculation could still be pursued in foreign stock exchanges, and were thus unlikely to prevent the mark’s downward course.

In Oldenburg in an attempt to offer a safe investment to the public as an alternative to foreign currency ‘rye bills’ (Roggenmarks) were issued by the state bank, due for repayment in 1927. The issue price was the current value of 125 kilograms of rye, and repayment was to be in line with the average price of 150 kilograms of rye in the first quarter of the later year, the extra 25 kilograms representing four years’ interest. The bills were bearer bonds, complete with stock exchange quotations and secured by the bank’s total funds.

In the meantime, September’s 26-mark litre of milk became October’s 50-mark litre. Butter at 50 marks a pound in April could be had for 480. In two months the price of an egg had doubled to 14 marks. A pocket comb cost 2,000 marks; a pot of honey 8,000; a pair of child’s trousers 5,000; a dozen kitchen plates 7,500; a pair of silk stockings 16,500; a roll of lavatory paper 2,000; a pair of children’s shoes 2,800. Three masses for a relation, however, were still available at the old price of 150.

The deputies in the Bavarian Landtag vied with one another, irrespective of their political colour, in urging the central government to send relief for the state’s poor, hundreds of thousands of whom, it seemed, were threatened with starvation. Their plight was made the more poignant with the arrival of the Oktoberfest, Munich’s great annual three-week fair at which gargantuan quantities of beer and pork are consumed – and are sold at very high prices at the best of times. As the mark dropped away from 9,000 to 12,000 to 18,000 to the pound, as beer rose from 30 marks a litre to 78, merrymakers from the countryside, celebrating their harvest, became the objects of political denunciation in place of the tourists who had mostly gone home. Mr Seeds commented in the Munich consulate:

“The deputies are thoroughly justified in speaking of the excesses of the fair with bitter condemnation, but a foreign observer who noticed that the thousands and thousands of revellers were composed solely of the working and lower middle classes, would be justified in doubting the existence of the much advertised starving population. Except where certain sections of the middle classes are concerned, it is difficult to resist the feeling that the food subsidies are merely a means of passing on to the taxpayer a portion of the wages which should be paid by the industrialists.”

Stinnes himself, that eponym of capitalist ruthlessness, at a meeting with British businessmen in Cologne in November 1922 was asked how long Germany’s industrialists were prepared to see this state of affairs go on. He replied that they would try to carry on as long as they could – ‘if necessary until the day after the French government makes up its mind to pursue a policy of understanding’. Stinnes was apt to seize any opportunity to drive a wedge between France and Britain, but probably genuinely regarded as secondary importance to the risk of unemployment the actual point to which the mark might sink. ‘With a central government without power or authority, with acute economic distress, and with revengeful neighbours ready to fish in troubled waters,’ he asserted, ‘we will do everything in our power to keep our workmen employed.’

Sure enough, in the Ruhr, numerous factories were using various devices to avoid having to put men out on the streets. Bochumer Verein, in Essen, for example, engaged 1,500 men making stock articles for railways although there was no immediate requirement for them. Such measures, however, were only possible for firms with big financial reserves, and small firms were already dismissing workers in small numbers. With the November price increases – butter at 800 marks a lb., eggs at 22 marks each – shops were also cutting down on assistants because sales were dropping off.

The disparity between the rise in the cost of living and the rise in wages had now become very marked. Whereas since the war the former had gone up by about 1,500 times, the wages of the miner – in November 1922 the best paid worker – had gone up by barely 200 times. With the mark in mid-November at 27,000 to the pound and 6,400 to the dollar, and with prices following the course of both with unfailing regularity, not only were wages in general failing to keep pace but the workers were not even being paid what was their due. Owing to the shortage of paper money of all kinds … they were finding that by the time the balance was paid it had lost 50 per cent of its value. The best-paid workers were unable to purchase the barest necessities of life. The others and – as ever – those on fixed incomes or dependent on savings suffered accordingly.

That suffering was acute and, although worse was to come, was only the culmination of many months of increasing misery. Conditions in Berlin may not have been typical of every urban community in the country, but were at least indicative of the general distress. The figures issued by the chief burgomaster of Pankow for 1922 showed that nearly 25 per cent of the children leaving school were below the normal spread of weights and heights, and 30 per cent were unfit to work for reasons of health. In Schöneberg, where in 1913 8 per cent of school leavers had been tubercular, the figure was 15 per cent. ‘Want,’ said the burgomaster’s report, ‘is gradually strangling every feeling for neatness, cleanness, and decency, leaving room only for thoughts of the fight with hunger and cold.’

The failure of wages to keep pace with prices, and the consequent impoverishment of even the most fortunate workers, had a direct effect upon the trade unions. Owing to the tumbling value of union funds and the impossibility in such hard times of raising subscription, ordinary strikes became less and less practicable. Union leaders, by the same token, became less able to extract and deliver the higher wages which the workers and their situation demanded, and so lost first their influence and then – although they would not admit it – their control. In an increasingly nervous state, they were finding it necessary to make repeated appeals to their members to maintain discipline and abide by union decisions.

The workers, on the other hand, became easily roused by extremist factions, and were liable to get out of hand and start rioting, especially when they believed that the greatest achievement of the Revolution, the eight-hour day, was under attack from the big industrials. Since there were many local authorities who would not have hesitated to fire on a rioting mob, the mixture was unusually volatile. In the third week of November, there were serious collisions between the police and a crowd of angry workers after the employees at the Mannesmann works demanded a 100 per cent wage increase and tried unsuccessfully – though with Communist encouragement – to declare a general strike in the city. A similar manifestation occurred in Cologne. In Dresden there was a fierce outbreak against the cost of living, with provision shops looted and damage estimated at 100 million marks; and a noisy display of xenophobia before the principal hotels which habitually housed the foreigners whose presence in the country was popularly supposed to be the cause of the rise in prices. In Braunschweig there were food riots and shop-plundering, and more food riots in Berlin. Most of these were controllable, but all were symptomatic of general distress and unrest.

The gold value of the money in circulation, equivalent to nearly £300 million before the war, and to £83 million in July 1922, had by November fallen to £20 million. The more notes were printed, the lower the value fell – illustrating the Copernican thesis expounded by King Sigismund of Poland in 1526 that ‘money loses its value when it has become too much multiplied’. How the business of the country could be carried on with so small an amount of real currency mystified many observers, and accounted for the ever-mounting pressures on the bank to go on printing. That trade continued notwithstanding was usually explained by reference to the accelerating velocity with which money circulated. Notes were held for as short a time as possible. Private-account cheques were hardly accepted. Anyone receiving money for goods quickly converted it back into other goods, and the money never stopped moving, doing the work of ten times the amount moving a tenth as fast.

Chancellor Wirth’s government broke down under the strain in mid-November, and as that month passed away the mark fell to 30,000, 32,000, 34,000 to the pound – 8,000 to the dollar. The Reichsbank had proclaimed, and was now carrying out, a programme of unlimited printing of notes. More and more printing presses were employed for the work, and by December the amount issued was limited only by the capacity of the presses and the physical fatigue of the printers. Lord D’Abernon reported to London: ‘The exchange market and the Reichsbank are like a runaway horse with an incompetent rider – each aggravates the folly of the other’; or, as he described it in another happy burst of metaphor: ‘In the whole course of history, no dog has ever run after its own tail with the speed of the Reichsbank. The discredit the Germans throw on their own notes increases even faster than the volume of notes in circulation. The effect is greater than the cause. The tail goes faster than the dog.’

. . .

“By the end of the year,” said Erna von Pustau,

“my allowance and all the money I earned were not worth one cup of coffee. You could go to the baker in the morning and buy two rolls for 20 marks; but go there in the afternoon and the same two rolls were 25 marks. The baker didn’t know how it happened … His customers didn’t know … It had somehow to do with the dollar, somehow to do with the stock exchange – and somehow, maybe, to do with the Jews.”

Mr Seeds’s chauffeur can have been no less confused. He and millions like him still instinctively regarded the mark as being as good as gold, failing to realise how desperately sick it had become. Milk which had cost him an unbelievable 78 marks a litre in the first week of November cost him 202 marks a month later. Butter had risen from 800 to 2,000 marks a lb.; sugar from 90 a lb. to 220; eggs from 22 each to 30. Although potatoes were still available for 8 marks a lb., an increase of only 1 mark, he had to pay 1,400 marks for 1 lb. of eatable sausages to go with them.

. . .

Conditions in the motor trade reflected the difficulties of a manufacturing industry generally under the uncertainties of inflationary finance. The number of cars in the country in 1922, at one for every 360 people, was not great compared, say, to France (one for every 176), Britain (one for every 91), or the United States (one for every 10). But the scope for sales was correspondingly greater, and demand was very high. Foreigners, nouveau riche businessmen and, because it was found that cars were cheaper to maintain than horses, landed proprietors were usually the buyers: since the war, the gentleman owner who kept a car for the fun of it had practically disappeared. The cost of petrol, at 17 marks a litre (½d) in January 1922 was at 686 at the end of the year.

High demand availed the dealer little. The ten-horse-power car, for example, which (with lighting and starting sets, but no tyres, because they were generally purveyed separately) in January 1922 cost 220,000 marks (about £270), and in August cost 1.25 million, by January 1923 cost 11.4 million marks, or half, or twice as much depending upon which end of that frenzied month one bought it, the sterling price remaining much the same. Similarly, a four-ton motor lorry (without tyres, but with body, and with acetylene lighting) had risen in price between January 1922 and January 1923 from 265,000 marks (£320) to 12.9 million. Pneumatic tyres (one non-skid cover and one inner tube) had risen from 4,920 (£6) to 161,000 marks, and solid tyres even more, from 3,691 (£4 10s) to 202,095 marks apiece.

It was quite impossible to quote prices in advance, and customers themselves would not take the risk of committing themselves to the so-called ‘gliding clause’ in a contract: for otherwise, after payment of a non-returnable deposit, the final bill could be almost limitless, depending on the delivery date. As a result, dealers whose financial resources were already under enormous strain were constantly engaged in unpleasant correspondence with both clients and suppliers. Moreover, it took a long time for the trade to iron out the quarrel between dealer and manufacturer over the deposit paid by the one when ordering from the other: normally a third of the current price would have to be put down, but by the time of delivery, which was very slow, that deposit had become a minute proportion of the final price – and the manufacturers unfairly insisted that the full nominal balance should be met. In any case, throughout the trade it was being found that the sums realised from sales would not replace stocks.

Far too many people for my peace of mind seem to think that hyperinflation can never happen here.  All I can say is, look at how many dollars are being printed or electronically generated out of thin air.  More than 40% of all the dollars that have ever existed were produced in the last year alone.  We’re also using deficit spending, to the tune of well over a trillion dollars every year, to balance our national budget.  How can those factors not lead to serious problems with inflation?



  1. Deficit spending of a trillion a year? If only. Last year, the national debt increased by over $4.5 trillion. This year, the deficit is already projected to be $2 trillion, and that is before Biden gets his $2.3 trillion COVID deal passed, plus whatever else he has planned.

    A trillion dollars ago was September 29. 2 trillion dollars ago was June second. Five trillion dollars ago was October 11, 2019.

  2. "look at how many dollars are being printed or electronically generated out of thin air."

    You fail to mention who is creating these dollars "out of thin air".

    The Federal Reserve Bank, a privately owned for-profit corporation. And who the members of the board? Who are the major stockholders? Just who are these money handlers that – along with their allies in our government – are rapidly bringing us to collapse?

    You should tell the entire story, not just the disastrous results of their criminal activities, activities that have been repeated in many nations throughout history.

    Tell us how it all started and by who. How they wormed their way into the governments and financial institutions of many nations and them destroyed them from the inside, just as we are being destroyed today.

    Telling half the story is no better than telling nothing.

    1. Yeah, Ivy League-educated WASPs are kind of obnoxious, all things considered, especially when one considers the shenanigans of people like Woodrow Wilson and the Dulles brothers.

      If that's not what you meant, I have no idea what alternate timeline you're typing from.

  3. This. THIS, more than anything else is what eventually brought the National Socialists to power.

    Think it can't happen here? Think again, only this time we start out with nuclear weapons.

  4. @Roy: and an ability to surveil its own citizens that the National Socialists and Bolsheviks could have only dreamed of. Look at the methods being used to find those who were at the Capitol on Jan 6- they are using cell phone location data and facial recognition to figure out who was there.

  5. Get thee unto the countryside and abide there. And lo thou shalt eat the plants of the field and the beasts of the forest. And thou shalt gird up thyself for war and defend thy way of life until the death from the encroachments of the tyrant.

  6. Sara Palin wisely said "Please don't tell Obama what comes after a Trillion" Now we update that to say Xiden and our One-party federal government…

  7. The deficit from the last year doesn't bother me as much as the deficit the year before. The government should deficit spend when a crisis demands it. And we did have one.

    The problem is that the government has decided that deficit spending of a quarter to half(!) the budget is NORMAL.

    In 2019 revenue was $3.5 Trillion and outlays were $4.4 Trillion. We will never inflate out of the debt if we keep increasing it like that. 🙁

  8. Hyperinflation isn't a threat, it's a certainty. The only question is "when?".

    For but one example of how bad it already is, in 1932, and ounce of gold cost $20.67, as it had al the way back to 1837; prior to that, it had been $19.39 since 1792.
    A dollar, IOW, was a dollar.
    That same dollar now, in gold terms, is worth 1.5¢ today, less than the cost for the paper, ink, manhours, and energy to print it.
    It is, to put a sharp point on it, just finely-engraved toilet paper.
    And that's when people assign any value to it at all.

    When that confidence has the rug pulled out from under it, as it inevitably will, from so much as a sharp hiccup, the hole in the floor is an abyss leading to a depth of negative infinity.

    One's nest egg is the only place where diversity is truly a virtue; everything has it's pros and cons.
    The dollar, over the long run, is a con.

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