Hyperinflation in Germany, 1923 (Edexcel GCSE History)

The Impact of Hyperinflation on the Weimar Government - Summary

Germany began the process of paying off the 132 billion gold mark reparations bill set by the Allies in 1919. It soon became clear that Germany could not meet their monthly repayments. The Treaty of Versailles had taken away all of Germany’s overseas colonies as well as 50% of its iron production. The treaty also stated Germany had to send coal to France to help increase its industrial output. European countries did not want to buy the goods that Germany produced. Citizens of Britain and France bought their own country’s products. This was an attempt to boost their economies back to pre-war levels. 

Many European countries had taken out loans in 1914-18 to fund their war efforts. The USA received a large proportion of Germany’s monthly reparations bill indirectly from Britain and France. This was because the USA requested that Britain and France pay back the money lent them for the First World War. If Germany could not pay their reparations, countries like Britain and France would default on their loans to the USA. As a result, in January 1922, Britain and France rejected Germany’s request to reduce their monthly payments. 

By 1922, Germany could not fulfil its coal obligations to France. This forced France, supported by Belgium, to invade the Ruhr coalfields in January 1923. The resulting events triggered a hyperinflation crisis in Germany. A loaf of bread cost 200,000 billion marks in 1923 compared to 1 mark in 1919. 

The crisis of 1923 permanently damaged the Weimar government's reputation. Many blamed the government's handling of the French invasion of the Ruhr as the cause of the depression. Hyperinflation destroyed the life savings of the middle classes. As a result, the government lost the support and trust of a key electorate group. The legacy of hyperinflation would push many to support extremist political groups such as the Nazi Party.

Occupation of the Ruhr

• In December 1922, France accused Germany of not sending the amount of coal required by the Treaty of Versailles

• France was already suspicious of Germany because: 

  • In November 1922, Germany had requested to stop reparation payments to Britain and France for the next four years

  • In April, Germany had signed the Treaty of Rapallo with Russia. They had agreed that Russia would supply Germany with economic support

• French and Belgium troops entered the Ruhr in January 1923

  • The Ruhr was Germany’s most valuable industrial area

  • The soldiers seized coal, manufactured products and machinery

• Chancellor Cuno urged the coal workers to use passive resistance against the French and Belgian soldiers. Passive resistance is protesting in a non-violent way.

• The workers:

  • Went on strike

  • Sabotaged machinery

• The French responded by bringing their own workers into the Ruhr

• The Weimar government could not force the soldiers out of the Ruhr because:

  • The Treaty of Versailles restricted Germany’s army to 100,000 men whereas the French had 750,000 soldiers

• The public had a poor opinion of the Weimar government. They believed that the government could do more to force the French out of the Ruhr

• The French occupation of the Ruhr damaged Germany’s economy because:

  • The Weimar government insisted on paying wages to the striking workers 

  • Germany was not producing enough coal to meet demand. The government began importing coal from other countries. This additional cost was more than they could afford

  • The government could not make essential goods because coal fuelled many factories. This caused shortages in other products

  • As Germany had fewer products to trade internationally, countries lost confidence in the mark as a currency

  • Germans experienced shortages in everyday items. This increased the prices of these products

What is Hyperinflation?

• The term inflation means the increase in prices 

  • Inflation happens in an economy over time. For example, a loaf of bread in January 1971 cost 10p. The average price of bread in January 2023 was £1.06

  • Inflation is measured as a percentage

• Hyperinflation is when prices rise rapidly and become out of control

  • In hyperinflation, wages struggle to match the cost of living

  • Hyperinflation can become so bad that currency loses its monetary value. Governments can print more money to counteract the effects of hyperinflation

• In early 1923, the invasion of the Ruhr caused inflation

  • Prices rose because there was a shortage of essential goods

• The government had a reduced amount of money because:

  • The Weimar government continued to pay the wages of the striking Ruhr workers. Technically the government was paying for coal they were not receiving

  • The government purchased coal from other countries to meet Germany’s demand for coal

  • Some businesses closed down because of the drop in demand for their products or services. This increased levels of unemployment and reduced the amount of money the government earned in taxes

• The Weimar government decided to print more money

  • In 1923, there were 300 paper mills and 2,000 printers whose sole purpose was to print currency

  • The decision to print an excessive amount of money caused the hyperinflation crisis

• By November 1923, the German currency (mark) had become worthless

  • Some workers received pay twice a day so they could purchase essential goods before their wages became worthless

  • People filled wheelbarrows full of money to buy a loaf of bread

The Impact of Hyperinflation on the Weimar Republic

The impacts of hyperinflation in 1923

Short & long-term impacts of hyperinflation on the Weimar government

Causes & consequences of hyperinflation