In 1923, Germany experienced one of the worst cases of hyperinflation in modern history. By the end of the year, the German mark was worth practically nothing as the currency spiraled out of control.
Between 1921-1923 the value of the German mark plummeted, leading to catastrophic consequences for the country’s economy and society. In a matter of months prices rose to unimaginable levels, with people carrying wheelbarrows full of money just to buy basic necessities.
The hyperinflationary spiral was fueled by a combination of factors including war reparations, government policies, and a lack of confidence in the currency.1
This article delves into the causes and consequences of Germany’s hyperinflation crisis and its impact on the country’s political and economic future. Read on to explore one of the most dramatic collapses of a currency in modern history.
How Much was a German Mark Worth in 1923?
At the apex of the hyperinflationary cycle in November 1923, 4.2 trillion (4,200,000,000,000) German marks were worth the same as one American dollar. The rapid decline of the currency stunned the nation and left deep scars its the wake.2
Germany faced staggering reparations in the aftermath of World War I. The Treaty of Versailles required them to make payments to the allies in gold or foreign currency in specified amounts. Germany’s gold reserves were depleted from financing WWI and thus had to make payments via foreign currencies.
Prior to this the German Mark had already seen significant devaluation. In 1914 (prior to the war) one US dollar was worth ~4 marks. By June 1921 this had risen to ~63 marks per dollar. June 1921 was when the first reparation payment was due. From this moment on, the currency spiraled out of control.
Just 4 months later the marks value had been cut in half to ~124 marks per dollar. A little over a year later in January 1923, 6,890 marks were worth one dollar. By the end of 1923, 4.2 trillion marks equaled one dollar. The mark became so volatile that prices on restaurants menus would change mid meal. In some cases, Germans used the marks as kindling for their fires, as this was cheaper than using the mark to buy wood.
Eventually, a new currency was introduced in 1924 to help stabilize prices and the German economy. Though the hyper-inflationary period was over, the trauma experienced by German citizens would have lasting effects.
The political ramifications of the event were tremendous as the episode helped lead to the collapse of the Weimar Republic and the rise of the Nazi party less than a decade later.
The rapid devaluation of the German mark also significantly impacted the economy in a negative way. Unemployment skyrocketed as business closed their doors in the uncertain times. Times were so bad that many Germans conflated this event with the Great Depression, even though they were two separate events.
The economic and political turmoil helped lead directly to the breakout of World War II.
1) Hill, Lewis E., et al. “Inflation and the Destruction of Democracy: The Case of the Weimar Republic.” Journal of Economic Issues, vol. 11, no. 2, 1977, pp. 299–313. JSTOR, http://www.jstor.org/stable/4224593.
2) Weidenhammer, Robert. The American Economic Review, vol. 22, no. 1, 1932, pp. 146–49. JSTOR, http://www.jstor.org/stable/1807287.