The most popular image of the German Inflation is the flood of paper money which issued from the printing presses and engulfed the nation. The struggle against it was hard, tragic and often ridiculous, and innumerable stories are still told about it. A German girl neatly sum it up: "You could see mail carriers on the streets with sacks on their backs, or pushing baby carriages loaded with paper money which would be devalued the next day. Life was madness, nightmare, desperation, chaos."

The chief cause was the Reichsbank’s policy of simply printing more money to counter the country’s debt in view of the cost the First World War and the reparations owing. The mark plummeted on the international money markets and inflation soared.

The inflation peaked in 1923 where for the last 5 months it was a staggering 300 million percent. When the inflation was finally stopped by the introduction of the Rentenmark on 16th November 1923, the exchange rate was 4.2 trillion marks to the US dollar - ie 4,200,000,000,000 marks.

Effects of the Inflation

Prices and incomes changed daily. A former student recalls: "One fine day, I dropped into a café to have a cup of coffee. As I went in I noted that the price was say 5,000 marks - just about what I had in my pocket. I sat down, read my paper, drank my coffee and spent altogether one hour on the café, and then asked for the bill. The waiter duly presented me with the bill for 8,000 marks. 'Why 8,000 marks?' I asked? The mark had dropped in the meantime I was told. The 'index' based on the dollar exchange rate had altered so much that the price had gone up by 60% while I was sitting at the table. So I gave the waiter all the money I had - and he was generous enough to leave it at that."

People who did not convert their savings into tangible assets (or Sachwerte) lost them. Pensions became worthless, the middle class was by and large reduced to poverty. Many starved to death. Conditions were so harsh that people even ate dog meat: around 20,000 dogs were slaughtered for human consumption in 1923 alone.

Typical is the case of a bank which, unwilling to keep open an account with 68,000 Marks, informed the customer that it was to be closed. "Since we have no banknotes in small enough denominations at our disposal, we have rounded up the sum to 1 million marks. Enclosed: one 1 million mark note."

Emergency Money

On the 17th July 1922, a law was passed to permit the printing of emergency money with certain safeguards. After that municipal banks, the railways, local authorities and also private firms used this law to start printing their own money. In the end it was estimated that more than 2,000 kinds of emergency money were circulating, and many of them were not authorised.

Many municipalities, reacting to the Reichsbank notes which became more drab and dull, took pride by giving their money and attractive look by good design and witty texts - often in verse or the local dialect. Some advertised their local industries by using leather, linen or silk to print on. One town issued money consisting of leather suitable for soling shoes as a truly inflation-proof form of currency, while one private firm promised the bearer "one pound of rye."

Before World War I, the highest denomination note had been the 1,000 mark note, affectionately known as the "brown rag". Being the equivalent of some 250 US dollars, it was rarely seen by most people before the inflation. Today, a note in perfect condition fetches no more than a couple of dollars or so.

Overprinting

At some stages during the inflation the inflation rate had jumped ahead so far that large amounts of money still sitting in the Reichsbank vaults were already worthless. For instance, in 1923 the worthless 1,000 mark note of 1922 was overprinted and re-issued at one million times its previous value: "eine Milliarde mark" - a billion marks.

Many Notgeld notes were also overprinted as the 500 Milliarden Mark note from Konstanz illustrates.

Source: William Guttman's "The Great Inflation" - a very worthwhile read.

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This page was updated by Richard Holmes on Friday, 27 July 2001

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