Imagine that after a lifelong of hard work and saving, you find that your lifesavings will not buy more than one cup of coffee. For a majority of the middle class living in Germany during the early 1920’s this was precisely their experience. Of course, not all suffered during this period of hyperinflation. Those who owed money encouraged their government’s expansionary monetary policies, knowing the resulting inflation would effectively cancel their debt. In fact, it was the Reich itself who had the most to gain from inflation, for it was the biggest debtor of them all.
In this paper I will show that the German Government did have other options to finance its expenditures aside from simply printing money, but instead decided to implement inflation-causing policies to finance its own debt. I am not saying that the German Government is entirely responsible for the large extent of the inflation, but it certainly did start the ball rolling. Generally, once inflation starts, it is very hard to stop. It is like a domino effect that continues at faster and faster rates. The German Government should have thought of the future consequences and reversed its inflationary policies immediately after the war ended, as the other belligerent countries did. It is true that none of the other countries fared well during this interwar period, but at least citizens of other countries didn’t find their lifesavings to be utterly worthless.
The inflation problem actually began at the beginning of World War I. It was then that the German Government started to accumulate debt and to increase the money supply. Because they thought they would win the war and intended to force the...
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...e birth of the Euro), a main priority for the German Central Bank had been to keep inflation to a minimum.
1) Bartlet, Bruce. “The Great German Inflation.” Liberty Haven. 1975. http://www.libertyhaven.com/countriesandregions/germany/greatgermaninf.html (3 Dec 2002).
2) Goodman, George. “The German Hyperinflation, 1923.” Commanding Heights. 1981. http://www.newshour.org/wgbh/commandingheights/shared/minitext/ess_germanhyp erinflation.html (3 Dec 2002).
3) Hardach, Karl. The Political Economy of Germany in the Twentieth Century. Los Angeles: University of California Press, 1980. (16-29)
4) Sommariva, Andrea. German Macroeconomic History, 1880-1979. New York: St. Martin’s Press, 1987. (121-135)
5) Stolper, Gustav. The German Economy: 1870 to the Present. New York: Harcourt, Brace & World Inc., 1967. (74-93)
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