Transcript The German Hyperinflation of 1923

The Invasion of the Ruhr
1922
Problems of Versailles
•Weimar Germany was horrified with the financial
punishment of Versailles.
•If Germany had paid off the sum of £6,600,000,000, she
would have remained in debt to the Allies until 1987 !
•By signing the Treaty of Versailles, Germany had agreed
to pay the reparations.
•In 1921, Germany just managed to pay its first
installment of 2 billion gold marks.
•Weimar Germany was allowed to pay in kind (actual
materials) as opposed to just cash. Most of this 2 billion
was paid in coal, iron and wood.
Problems with Payments
•In 1922, Weimar Germany could not manage to pay
another installment.
•The Allies did not believe this - especially France
where anger towards Germany still ran deep.
•The German government was accused of trying to
get out of paying the reparations.
•This was only four years after the end of the war,
and Britain and France still did not trust Germany.
Invasion
•In 1922, French and Belgium troops invaded the Ruhr;
Germany’s most valuable industrial area.
•The French and Belgium troops took over the iron and steel
factories, coal mines and railways.
Invasion
•Those Germans who lived in the Ruhr and did not do as the
French told them to were imprisoned. Food was taken.
•This action by the French and Belgium broke the rules of
the League of Nations - both nations were members but the
League was ignored by both countries.
•France was considered one of the League's most powerful
members and here she was breaking its own code of
conduct.
Response from the German Government
•The Weimar government ordered the workers in the Ruhr
to go on strike and it ordered all people in the Ruhr to
passively resist the French and Belgium soldiers.
•They were not to openly confront the French and Belgium
soldiers, but they were not to help them in any way
whatsoever.
•This led to violence and over the next 8 months of the
occupation, 132 people were killed and over 150,000 Ruhr
Germans expelled from their homes.
German economy suffers
•The order for workers to go on a general strike may have
been patriotic but it had disastrous consequences for
Germany as a whole.
•The Ruhr was Germany’s richest economic area and
produced a great deal of wealth for the country as a whole.
The huge Krupps steelworks was there.
•By not producing any goods whatsoever,
Germany’s economy started to suffer.
•The striking workers had to be paid and the
people expelled from their homes had to be
looked after.
German economy suffers
•To pay the striking workers and look after the homeless the
government did the worst thing possible - it printed money to
cover the cost.
•This showed other countries that Germany did not have
enough money to pay for her day-to-day needs.
•Whatever money which had been invested in Germany was
removed by the foreign investors.
Hyperinflation
•This drop in confidence also caused a crisis in Weimar
Germany when prices started to rise to match inflation.
•Very quickly, things got out of control and what is known as
hyperinflation set in.
•Prices went up quicker than people could spend their money.
In 1922, a loaf of bread cost
By September 1923, this figure had reached
At the peak of hyperinflation, November 1923,
a loaf of bread cost
163 marks.
1,500,000 marks.
200,000,000,000 marks.
•Hyperinflation proved to many that the old mark was of no
use. Germany needed a new currency.
•In September 1923, Germany had a new chancellor, Gustav
Stresemann.
•He immediately called off passive resistance and ordered
the workers in the Ruhr to go back to work. He knew that this
was the only common sense approach to a crisis.
•The mark was replaced with the new Rentenmark which was
backed with American gold.
•In 1924, the Dawes Plan was announced. This plan, created
by Charles Dawes, an American, set new lower targets for
German reparation payments. For example, in 1924, the
figure was set at £50 million as opposed to the £2 billion of
1922. The American government also loaned Germany $200
million.
•This one action stabilised Weimar Germany and over the
next five years, 25 million gold marks was invested in
Germany by other countries.
•The economy quickly got back to strength, new factories
were built, employment returned and things appeared to
be returning to normal.
•Stresemann gave Germany a sense of purpose and the
problems associated with hyperinflation seemed to
disappear.
•1924 to 1929 is known as the Golden Age of Weimar.
Berlin became the city to go to if you had money.
The Nazis were a small, noisy but unimportant party.
•Above all, Stresemann gave Germany strong leadership.