Hyperinflation in the Weimar Republic

In 1922 and 1923 the German paper mark lost almost all of its value, in one of the most famous currency collapses in history. Prices rose so fast that by November 1923 a single US dollar cost more than four trillion marks. The crisis ruined creditors, shook the young Weimar Republic and left a lasting German fear of inflation.

The roots lay in the First World War. When fighting began in 1914, Germany left the gold standard and, instead of raising new taxes, chose to pay for the war almost entirely by borrowing, expecting that defeated enemies would cover the bill. Germany lost. By 1918 the national debt had reached 156 billion marks, and the mark had already slipped from 4.2 to 7.9 to the dollar.

The Treaty of Versailles added reparations. Under the London Schedule of Payments of May 1921, Germany owed 50 billion gold marks in bonds with fixed deadlines, payable partly in goods such as coal and timber, with a further 82 billion or so in bonds that were not expected to be paid. Germany paid an initial one billion gold marks in June 1921, but only small cash sums for the next two years.

From August 1921 the central bank, the Reichsbank, began selling marks for foreign currency whatever the rate, which German officials said was needed to pay reparations. British and French experts argued that Germany was deliberately ruining its currency to escape both reparations and budget reform. The mark held at about 320 to the dollar in the first half of 1922, but after the assassination of the foreign minister Walther Rathenau in June it collapsed, reaching 7,400 to the dollar by December.

In January 1923, after repeated German failures to deliver coal, France and Belgium sent troops into the Ruhr, Germany's industrial heartland. Berlin called for passive resistance, in effect a general strike, and paid the idle workers by printing ever more banknotes. The result was chaos. In Berlin, bread that had sold for about 160 marks a loaf in late 1922 was priced at around 200 billion marks a year later. Towns issued their own emergency notes in denominations of millions and billions, and people turned to barter and hard goods.

The disorder fed political extremism. In November 1923, at the height of the crisis, Adolf Hitler attempted to seize power in Munich in the Beer Hall Putsch.

The cure came that autumn. Monetary reform decrees of 13–15 October 1923 created the Rentenmark, a new currency tied to bonds indexed to gold. It was introduced on 16 November, replacing the old notes at a rate that cut twelve zeros from prices, and the Reichsbank under Hjalmar Schacht was barred from printing money to finance government debts. Prices held. A law of 30 August 1924 exchanged one trillion paper marks for one new Reichsmark, and the same year the Dawes Plan put reparations on a new footing.

Inflation erased the government's domestic war debts, but it also ruined lenders, whose claims in paper marks became almost worthless. From 1925 some mortgages were revalued at a quarter of their face value and some government bonds at 2.5 per cent, and the return of debts and taxes pushed many firms into bankruptcy. Historians and economists still disagree about how far reparations caused the collapse, though most agree that printing money to support the Ruhr strikers made it far worse. The episode left a deep imprint on German economic policy, and many Germans later came to remember it and the Great Depression as a single catastrophe.

Our 1920 and 1930 maps show the borders of the Weimar Republic, the period covered on our Germany page.