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A 50,000,000 (50-million) mark banknote from 1923
A 1000 Mark banknote, over-stamped in red with "Eine Milliarde Mark" long scale (1,000,000,000 mark), issued in Germany during the hyperinflation of 1923
Weimar Republic hyperinflation from one to one trillion paper Marks per gold Mark
Postage stamps of Weimar Germany during the hyperinflation period of early 1920s
A medal commemorating Germany's 1923 hyperinflation. The engraving reads: "On 1st November 1923 1 pound of bread cost 3 billion, 1 pound of meat: 36 billion, 1 glass of beer: 4 billion."

The inflation in the Weimar Republic was a period of hyperinflation in Germany (the Weimar Republic) during 1921-1923.



The hyperinflation episode in the Weimar Republic in the 1920s was not the first hyperinflation, nor was it the only one in early 1920s Europe or even the most extreme inflation in history (the Hungarian pengő and Zimbabwean dollar have both been more inflated). However, as the most prominent case following the emergence of economics as a science, it drew interest in a way that previous instances had not. Many of the dramatic and unusual economic behaviors now associated with hyperinflation were first documented systematically in Germany: order-of-magnitude increases in prices and interest rates, redenomination of the currency, consumer flight from cash to hard assets, and the rapid expansion of industries that produced those assets. John Maynard Keynes described the situation in The Economic Consequences of the Peace: "The inflationism of the currency systems of Europe has proceeded to extraordinary lengths. The various belligerent Governments, unable, or too timid or too short-sighted to secure from loans or taxes the resources they required, have printed notes for the balance."


It is sometimes argued that Germany had to inflate its currency to pay the war reparations required under the Treaty of Versailles, but this is misleading, because the treaty did not allow payment in German currency. The German currency was relatively stable at about 60 Marks per US Dollar during the first half of 1921.[1] But the "London ultimatum" in May 1921 demanded reparations in gold or foreign currency to be paid in annual installments of 2,000,000,000 (2 billion) goldmarks plus 26 percent of the value of Germany's exports. The first payment was paid when due in August 1921.[2] That was the beginning of an increasingly rapid devaluation of the Mark which fell to less than one third of a cent by November 1921 (approx. 330 Marks per US Dollar). The total reparations demanded was 132,000,000,000 (132 billion) goldmarks which was far more than the total German gold or foreign exchange. An attempt was made by Germany to buy foreign exchange with Marks backed by treasury bills and commercial debts, but that only increased the speed of devaluation.

During the first half of 1922 the Mark stabilized at about 320 Marks per Dollar accompanied by international reparations conferences including one in June 1922 organized by U.S. investment banker J. P. Morgan, Jr.[3] When these meetings produced no workable solution, the inflation changed to hyperinflation and the Mark fell to 8000 Marks per Dollar by December 1922. The cost of living index was 41 in June 1922 and 685 in December, an increase of more than 16 times. In January 1923 French and Belgian troops occupied the industrial region of Germany in the Ruhr valley to ensure that the reparations were paid in goods, such as coal from the Ruhr and other industrial zones of Germany, because the Mark was practically worthless. Although reparations accounted for about one third of the German deficit from 1920 to 1923,[4] the government found reparations a convenient scapegoat. Other scapegoats included bankers and speculators (particularly foreign). The inflation reached its peak by November 1923, but ended when a new currency (the Rentenmark) was introduced.


When the new currency, the Rentenmark, replaced the worthless Reichsbank marks on November 16, 1923 and 12 zeros were cut from prices, prices in the new currency remained stable. The German people regarded this stable currency as a miracle because they had heard such claims of stability before with the Notgeld (emergency money) that rapidly became worthless. The usual explanation was that the Rentenmarks were issued in a fixed amount and were backed by hard assets such as agricultural land and industrial assets, but what happened was more complex than that.

In August 1923, Karl Helfferich proposed a plan to issue a new currency (roggenmark) backed by mortgage bonds indexed to market prices (in paper Marks) of rye grain. His plan was rejected because of the greatly fluctuating price of rye in marks. The Agriculture Minister Hans Luther proposed a different plan which substituted gold for rye and a new currency, the Rentenmark, backed by bonds indexed to market prices (in paper Marks) of gold.[5]

The gold bonds were defined at the rate of 2,790 gold Marks per kilogram of gold, which was the same definition as the pre-war goldmarks. The rentenmarks were not redeemable in gold, but were only indexed to the gold bonds. This rentenmark plan was adopted in monetary reform decrees on October 13-15, 1923 that set up a new bank, the Rentenbank controlled by Hans Luther who had become the new Finance Minister.

After November 12, 1923, when Hjalmar Schacht became currency commissioner, the Reichsbank, the old central bank, was not allowed to discount any further government Treasury bills, which meant the corresponding issue of paper marks also ceased.[6]. Discounting of commercial trade bills was allowed and the amount of Rentenmarks expanded, but the issue was strictly controlled to conform to current commercial and government transactions. The new Rentenbank refused credit to the government and to speculators who were not able to borrow Rentenmarks, because Rentenmarks were not legal tender.[7] When Reichsbank president Rudolf Havenstein died on November 20, 1923, Schacht was appointed president of the Reichsbank.

By November 30, 1923, there were 500 million Rentenmarks in circulation, which increased to 1000 million by January 1, 1924, and again to 1,800 million Rentenmarks by July 1924. Meanwhile, the old paper marks continued in circulation. The total paper marks increased to 1,211 quintillion in July 1924 and continued to fall in value to one third of their conversion value in Rentenmarks.[8]

The monetary law of August 30, 1924 permitted exchange of each old paper 1,000,000,000,000 mark note for one new Reichsmark, equivalent in value to one Rentenmark.


Germany, 1923: banknotes had lost so much value that they were used as wallpaper

Although the inflation ended with the introduction of the Rentenmark and the Weimar Republic continued for a decade afterwards, hyperinflation is widely believed to have contributed to the Nazi takeover of Germany and Adolf Hitler's rise to power. Adolf Hitler himself in his book, Mein Kampf, makes many references to the German debt and the negative consequences that brought about the inevitability of National Socialism. The inflation also raised doubts about the competence of liberal institutions, especially amongst a middle class who had held cash savings and bonds. It also produced resentment of Germany's bankers and speculators, many of them Jewish, whom the government and press blamed for the inflation.[9]

See also


  1. ^ Laursen and Pedersen, page 134
  2. ^ The Great Inflation, William Guttmann, Gordon & Cremonesi, London, 1975, pages 21-26.
  3. ^ Balderston, page 21
  4. ^ Costantino Bresciani-Turroni, page 93
  5. ^ The Rentenmark Miracle, Gustavo H.B. Franco, page 16
  6. ^ Guttmann, pages 208-211
  7. ^ When Money Dies: The Nightmare of the Weimar Collapse, by Adam Fergusson, Chapter 13
  8. ^ Fergusson, Chapter 13
  9. ^ Mein Kampf ("My Struggle"), Adolf Hitler (originally 1925-1926), Reissue edition (September 15, 1998), Publisher: Mariner Books, Language: English, paperback, 720 pages, ISBN 0-395-92503-7


  • Bernd Widdig, Culture and Inflation in Weimar Germany, University of California Press, 2001, ISBN 0520222903
  • Gerald D. Feldman, The Great Disorder, Oxford University Press, 1997, ISBN 0195101146
  • Theo Balderston, Economics and Politics in the Weimar Republic, (chapter 3 covers 1918-1923), Cambridge University Press, 2002, ISBN 0521777607
  • Costantino Bresciani-Turroni, The Economics of Inflation (English transl.), Northampton, England: Augustus Kelly Publishers, 1937, on the German 1919-1923 inflation.
  • Karsten Laursen and Jorgen Pedersen, The German Inflation, North-Holland Publishing Co., Amsterdam, 1964.
  • Max Shapiro, The Penniless Billionaires, pages 170-224, New York Times Books, 1980, ISBN 0-8129-0923-2
  • Adam Fergusson, When Money Dies: The Nightmare of the Weimar Collapse
  • When Money Buys Little - Jerry Jensen Study of the 1923 German postage stamps


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