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Remembering Tales Hyperinflation in Germany After It's Defeat in World War I

A part-time college economics & finance instructor who began his career in banking, Chuck frequently writes on money & economics online.

Following Its Loss in World War I the German Government Tried to Fix Economy by Printing Money

I remember having lived through the 1965 to 1982 inflation spiral that occurred in the United States when I graduated from college and began my career.

Food prices could be counted on to increase regularly. In addition to increased prices some producers then, as some are now, tried to keep the price of their product from rising too fast by shrinking the size of the product. I remember stopping by a candy counter on the way back to my office after lunch each day and buying a Hershey Dark Chocolate Bar. I soon noticed that in addition to the price slowly inching up regularly the size candy bar was also shrinking.

The 1965 to 1982 inflation affected Canada and Europe as well. However, I remember reading an article in the Wall Street Journal describing Germany as being the lone exception to the inflation problem affecting the Western world at that time. Following their defeat in World War I their economy was in ruins and a socialist government had come into power following the abdication and exile of the Kaiser (King), The new government tried to solve the nation's economic problems by printing money which led to a massive inflation. There were still a large number of Germans who remembered that severe inflation and they immediately fought back at the ballot box.

Given the large number of Americans who lived through the much milder inflation of the 1960s and 1970s I am expecting the upcoming Fall 2022 and probably the 2024 Presidential election as well to see many of our current big spenders in Washington being voted out of office.

The Old Man's Story About Visiting Berlin in the 1920s

Following Germany's defeat in World War I, the government collapsed, the Kaiser (king) was forced to abdicate and a left of center, socialist style government was established.

The economy and the country were in shambles following the loss of the war and the new government of, what historians refer to as the Weimar Republic, attempted to work its way out of the mess by printing money.

When the initial injections of newly printed money failed to work, the government's response was more of the same. The result was an inflation that was so bad that prices were literally increasing by the minute.

In the case of the Austrian fellow I met, he was visiting Berlin and had converted his Austrian currency into German currency.

The inflation was such that the German mark, which could be exchanged for U.S. dollars in 1914 at the rate of approximately 4 marks to the dollar had, by 1923 reached the point where the exchange rate was approaching 1 trillion marks to the dollar.

As a result, when my acquaintance exchanged his Austrian money for German money during his 1923 visit he needed a bag to carry the money.

Having trouble finding his way around Berlin and sick of carrying his bag of money, this fellow decided to purchase a map. The price of the map was slightly less than the value of the money in his bag so he exchanged his bag of money for the map.

My Uncle's Father Trades his Silver War Medals for a Pair of Shoes

One of my uncles (by marriage as he had married my aunt) was born in Germany and came to the U.S. with his parents as a young child in the 1920s.

His father, Fritz, had been an infantry soldier in the German Army during the war and had been awarded a number of silver medals for bravery.

Following the war Fritz worked in a factory. It was during the political and economic chaos that accompanied the socialist run Weimar Republic that Fritz and his wife decided to leave Germany and immigrate to the U.S. In the U.S.

Fritz and his wife purchased some land along the St. Lawrence River in the Thousand Islands area near the city of Cape Vincent in New York State. The built a home there and some cabins that they rented to tourists during the summer. When I was a child we sometimes vacationed at their little resort during the summer.

I remember sitting on the lawn by the river one summer listening to my Grandmother (who vacationed with us that year) and my Uncle Herman's mother reminisce about the past.

Still vivid in my mind is the story my uncle's mother told about how, during the hyperinflation, the men would go to work in the morning and, after sending the children off to school, their wives would make their way to the factory, arriving about an hour after the men.

Each hour the men would be paid with a huge handful of high denomination marks for the previous hour's work. As soon as they were paid they would rush to the exits and give the money to their wives who would then make their way quickly to the store to try to purchase some food.

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The money was losing value so quickly that, if it wasn't spent immediately, it would be practically worthless within an hour or so.

This went on all day every day. At one point during this period my uncle's father's shoes became so worn that they were no longer wearable.

Rather than trying to find a shoe store that would take his armful of marks, Fritz simply melted down his medals from the war and used the silver to purchase a new pair of shoes.

Hyper Inflation Can Happen Here

While the hyperinflation of the Weimar Republic is an extreme case, other countries have experienced very severe inflation during the twentieth century as well. Argentina and Israel both experienced annual inflation rates of 1,000% or more during the middle of the century, and most developed nations, including the United States (during the Carter Administration the rate exceeded 20% in the U.S.) have experienced double digit inflation during the twentieth century. With this experience in mind, it is no wonder that calls for a return to a gold standard are being met with increasing interest.

This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.

© 2007 Chuck Nugent


Fisah Stikah on November 03, 2010:


Evan G Rogers from Dublin, Ohio on February 13, 2010:

Fantastic work, I love seeing more Austrian Economists on here writing. I'm a huge Ron Paul buff - I'm worried about this new Tea-Party monster.

I'm sure a lot of people follow Ron Paul but might not have the economic understanding to fully comprehend what exactly he's talking about... If anyone reading this wants to learn more about Austrian Economics, I'm writing about basic economic principles - "Evan's Easy Economics".

Great stuff, keep it up!

Chuck Nugent (author) from Tucson, Arizona on November 15, 2008:

Tapi, thanks for visiting my HubPages and for your comment.

As to your question, I think that you mean pre inflation problems rather than post inflation problems as "post" in this sense means after. However, as to other nations like Israel, Argentina, Zimbabawe and the United States during the administration of President Jimmy Carter who have experienced serious inflation the problem has been that the cost of the socialist policies persued by these governments has been such that they could not raise enough money to pay for them through taxation alone so they resorted to printing money to pay for the government programs.

In Weimer Germany and some of the other countries the process was simply a matter of the government printing money. However, in recent times in more advanced nations like the United States, the additional money has been created by a process in which the government run central bank (which is the Federal Reserve in the United States) creates additional reserves which are pumped into the banking system thereby expanding the money supply. Most modern governments (including the United States) no longer back their money with gold as, because the amount of gold is limited, the amount of money that can be printed or created in a system where money is backed by gold is limited by the amount of the gold held by either the central bank or the banking system as a whole. Click here to visit my economics blog where I have a very good video that compares a monetary system based upon a gold standard and one, like ours, based upon a fractional reserve banking system

Finally, the recent bailout (October 2008) of the world's financial system by the U.S. and other governments has been done mostly with newly created money by these governments. Unless these governments now reduce spending and encourage economic growth so that the supply of goods and services increases to offset the newly created money we can expect to see inflation return in the near future. Furthe, if President elect Obama gives in to demands to bail out the auto and other industries as well as go ahead with his other big spending programs the United States could see a return to the economically devastating double digit or worse inflation that we suffered under during the President Jimmy Carter years.

tapi on November 15, 2008:

So wht were the post inflation problems that were faced by these countries?

nancydodds1 from Houston, Texas on October 07, 2008:

Its very nice and interesting information you provided. Here is an interesting hub

Buddy Hincke on September 29, 2008:

Hi, I enjoyed the article by Chuck. Please check out my very simple 3 page web site as listed above. I wonder if anyone reading this can give me any information about a German inflation banknote printed on cloth? It is a 10,000 mark note with sillouette type drawings of industry, workers, and livestock. Printing is in black and purple. Back is blank and it has two machine stitched borders. It is dated either 1913 or 1918 but has references in the writing about the year 1922.

Thank you for your time.

WOTPN on July 31, 2008:

great article!

Chuck Nugent (author) from Tucson, Arizona on July 09, 2008:

Good point, Joe. Present day governments are just as irresponsible with the printing of money as was the old Weimer Republic in Germany. This is why Congressman Ron Paul ( ) and others urge that we take away from governments the power to control the money supply and return to a gold standard.

joe strummer from berlin-babylon on July 09, 2008:

good article. thank you!

actual example of such a situation is Zimbabwe hitting an annual rate of 100,000%

The central bank has introduced new banknotes to cope with the spiralling prices.

Last month it issued a 10 million Zimbabwe dollar note.

themagicfrog from Central Massachusetts on July 06, 2008:

I knew about the inflation of the period but not in this amount of detail. It continues to amaze me how Hitler, albeit by nefarious means, drove the German people out of the mess and into one slightly different and even bigger one.

Mortgage Calculators on June 19, 2008:

Excellent HUB! Five stars. Im very interested in German history.

terenceyap07 from Singapore on June 13, 2008:

I've learnt a lot from this article. Thank you.

guidebaba from India on June 13, 2008:

The Best writing I ever Read. Excellent.

Talleyrand on June 01, 2008:

Actually, the greatest inflation rate was in Hungary following World War 2... 1945-46.One point: It sounds like the Weimar Republic was chaotic in your account and that its leftist leanings made it an inflationer... After WW1, the Germans were saddled with an enormous war debt and the horrendous reparations that the country had no hope of paying back after over 4 years at war (mentioned above by The Indexer).

Here is another anectdote: A woman went by a shop with a basket full of cash. She went inside briefly to look at something, a thief came along, dumped her money and took the basket!

Another thing: There was not enough paper around to even print money. ...

jimcrowthers from Port Charlotte on May 27, 2008:

Are there any inflation insurance vehicles, like stocks, gold, or real-estate? In other words, if inflation were to reach double, triple, or quadrupel digits, would your stocks go up in value to compensate (as well as your salary)? If this is the case, and you have money laying around, it's best to either invest it, and possibly leverage your credit (go into debt) to counteract the effects? Your debt (and subsequent payments) would become insignificant compared to the asset that you now hold. No?

VinceSamios from Australia on May 26, 2008:

You've saved a couple of grades with this one!

6 pack abs on May 26, 2008:

Great Hub! Well written! Very interesting information.

Mike Geary on May 24, 2008:

Chuck, your hubs are amazing! But this one is one of the best. I always learn a lot surfing through your hubs. Thanks.

CherylTheWriter from Humble, Texas (the ultimate oxymoron) on May 19, 2008:

When Germany was unable to make its reparations payment to France in (I believe) 1923, the French government marched troops into the German industrial region known as the Ruhr, the logic being that, if they couldn't get their money one way, they'd get it by taking over Germany's manufacturing ability. Up until this point, the Weimar government had been reasonably prudent, but the loss of the Ruhr meant Germany was going to starve.

So they fired up the printing presses.

Angela Harris from Around the USA on April 24, 2008:

Very interesting. I remember the 70s inflation in the US. And Ron Paul is my man- too bad he's not getting the media attention that is needed.

Medical Alert Calling Systems on April 15, 2008:

Amazing article. Thanks for sharing this information with us!

solarshingles from london on April 13, 2008:

No control over national finances and basic monetary rules leads to credit crisis.

It is so very easy to borrow and to spend, but so very hard to earn and to pay back with added interests.

kari dean on April 09, 2008:

Excellent article on hyperinflation in Germany. Thank goodness we have a federal reserve chairman committed to protecting OUR currency.  Unfortunately he's retired and we have Ben Bernake instead.

TravelMonkey from United Kingdom on April 04, 2008:

Hans Fallada deals with this in his novel Wolf unter Woelfen. Excellent read for German speakers.

clearwaterhomes on March 25, 2008:

This economy makes me very nervous and bailing out BearStearns and the likes isn't going to help any - excellent hub!

Joanie Ruppel from Texas on March 12, 2008:

I never thought that ebay would have collectibles related to WWI German currency. I guess you can find about anything on ebay. Great hub, thx.

beachbum_gabby on March 10, 2008:

amazing hub with a very educational infos! I am very interested in world history ever since I was a child. Thanks for posting about this. Voted you up.

John Welford from UK on February 01, 2008:

The situation in Zimbabwe today is very similar, where the government has allowed the economic base of the country, namely agriculture, to wither away, and resorted to printing money to make up the shortfall. In Weimar Germany, there was some truth in the claim that the economic ills were the result of external conditions, namely the massive reparations claimed by the victors in World War I, but Mugabe in Zimbabwe has no such excuse, despite his attempts to blame the "imperialists" in the UK and elsewhere.

MortimerWorth from Germany on January 05, 2008:

I think there is a greater danger today. Do we really print more money to get more money into peoples hands? Theoretically everyone could withrdraw all their cash but we most likely will continue to get paid digitally and spend with debit/credit cards. Only about 1% of my salary is ever converted into actual cash. I don't think I am alone. Imagine how easy it would be to create hyper inflation by mass didtial distribution of money that doesn't actually exist....I never claimed to be an economist, but there should be some pause, I think.

thecounterpunch on November 17, 2007:

There is a good story in Kenneth Glabraith's book:

Money: Whence It Came, Where It Went

Late in July the Daily Mailman told of this problem:

It is difficult to get a cheque cashed. The 10,000-mark note is the highest denomination printed and the banks are denuded of them. This morning motor-lorries loaded with paper money kept on arriving at the Reichsbank but messengers with handcarts were also there to take away the bundles of notes passed out by the Bank . . The cashier of my bank handed me 4,000,000 marks in 1000-mark notes, each worth less than half a farthing . . He obligingly did them up for me in a neat paper parcel which I afterwards put on the table of the restaurant where I lunched and unpacked when the waiter brought the bill. But this difficulty will soon disapper for we expect to have 4,000,000-mark notes by the end of next week.

In the next weeks there were many such tales. At the end of October the New York Times told of a stranger in one of 'the lesser restaurants' in Berlin who flourished a dollar bill and asked for all the dinner it would buy. He was amply provided, and, as he was about to leave, the waiter arrived with another plate of soup and another entrée and bowed politely: 'The dollar has gone up again'.

Elisabeth Sowerbutts from New Zealand on October 14, 2007:

I travelled in Brazil in the early 90's where they had high inflation. The main problem was the biggest note was the equivalent of 10c - so if you changed $50 the resulting currency (pesos? I dont recall) filled your bag, pockets etc. I also noted in shops selling more expensive items like clothing instead of a price tag they would put a label a, b etc - and then display a list telling you what "A" cost this week !

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