The most famous of modern monetary disasters occurred in Germany in 1923. The indirect cause of the German hyperinflation was the Treaty of Versailles, which brought to a close the First World War. More directly it was the level of reparations which the German people were required to pay to the victors. More directly still it was the occupation by France and Belgium of Germany's industrial heartland in the Ruhr valley, as an attempt to force the payment of those reparations, which were outstanding.
Germany was already proving ungovernable as democrats, republicans, communists and the extreme right vied for power. Assassinations were rife.
In reaction to the Ruhr occupation the government, such as it was, encouraged the closure of factories to prevent the achievement of the foreign occupiers' aims, and it offered payment in newly printed money to Germans thrown out of work.
The results are well documented. Restaurant prices rose during the meal; workers had to be paid twice a day; the money presses consumed a vast tonnage of paper; the population took to shares as a possible money store and financial speculation ran amok. It was fine to enter into this era with nothing to lose, but a disaster for anyone who had built themselves even a small fortune on the old rules of the world. German savers were wiped out.
The inflation was a revolution of wealth - transferring it from those who had saved to those who had the foresight to act. It drove large numbers of the impoverished middle classes to despair and even suicide.
"The young, and quick-witted did well. Overnight they became free, rich and independent. It was a situation in which mental inertia and reliance on past experience was punished by starvation and death." Sebastian Haffner - 1939
Paul Sustain
Director and Founder
Bullionvault.com
Also by Paul Tustain
Paul Tustain is director and founder of BullionVault - the world's fastest-growing gold ownership service, where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
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