When Money Dies – Adam Fergusson

The German Mark became so worthless it was used as kindling to light ovens.
The German Mark became so worthless it was used as kindling to light ovens. | Source

"If you wish to destroy a nation you must first corrupt its currency. Thus must sound money be the first bastion of a society's defence." – Adam Fergusson

When Money Dies: The Nightmare of Deficit Spending, Devaluation, and Hyperinflation in Weimar Germany is the sobering true story of hyperinflation in Weimar Germany. The book details the conditions and events leading to the devastating collapse of the German mark over the period 1914 to 1923. Devaluation of the German Mark started to gather pace during World War 1. At the height of the hyperinflation one US dollar bought 4.2 trillion (4,200,000,000,000) marks, in other words the currency become practically worthless.

When money Dies not only explores the events and decisions which fed the hyperinflation but also documents the human stories which recount just how devastating the hyperinflation was to the lives of the German people. This is told through letters and diary extracts which are particularly affecting as the slide into the hyperinflationary abyss led to increasingly desperate conditions for the German public.


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What caused the hyperinflation?

While hyperinflation did not start until 1919, the events which lead up to this point are important. It is widely assumed that the cause of Weimar Germany’s hyperinflation was the war reparations which it was ordered to pay in 1919, this however does not tell the full story. The conditions for the hyperinflation began much earlier than this and can be traced back to 1914 when the long standing German Bank Law of 1875 was suspended which required that at least 1/3rd of the marks deposits were backed by gold. This allowed the government to print unabated, in order to fund its war efforts. Fergusson spends the first three chapters of the book setting out the key conditions and events which fed the inflation and the eventual collapse of the mark. By the end of the book Fergusson surmises “What really broke Germany was the constant taking of the soft political option in respect of money”.


A German family divides up a single Bratwurst for dinner.
A German family divides up a single Bratwurst for dinner. | Source
The mark used as wallpaper as it was a cheaper alternative to actual wallpaper.
The mark used as wallpaper as it was a cheaper alternative to actual wallpaper. | Source

The body of When Money Dies focuses on the period 1919 to early 1924. Signed on June 29, 1919, the Treaty of Versailles is a milestone event. Since the beginning of the war in 1914 to 1919 the cost of living in Germany had risen by 12 times. Faced with a massive reparation bill and fearing that raising taxation by the amount required would cause riots, the German government took the easy option and put the printing presses into overdrive. The results were catastrophic and much of When Money Dies from this point onwards reads like a horror story.

“Financially, for nearly four years, the ultimate cataclysm was always just round the corner. It always arrived, and there was always an even worse one on its way — again, and again, and again...... It was unimaginable in 1921 that 1922 could hold any more terrors. They came, sure enough, and were in due course eclipsed, and more than eclipsed, with the turn of the following year”

When Money Dies provides a fascinating and sobering insight of what life was like during the hyperinflationary period. Fergusson meticulously pieces together diary entries, letters and newspaper articles from this period to tell of the human stories of the hyperinflation.

“In war, boots; in flight, a place in a boat or a seat on a lorry may be the most vital thing in the world, more desirable than untold millions. In hyperinflation, a kilo of potatoes was worth, to some, more than the family silver; a side of pork more than the grand piano. A prostitute in the family was better than an infant corpse; theft was preferable to starvation; warmth was finer than honour, clothing more essential than democracy, food more needed than freedom”

Throughout the book these human stories are recounted. What is made clear is that the hyperinflation affected everybody and affected nearly every part of daily life. Workers would be paid twice a day as the wages received in the morning would be practically worthless by the afternoon. Food shortages became commonplace from 1919, things became worse as farmers refused to harvest their crops in exchange for worthless paper marks. Crime was also rampant, fuelled by the race from worthless marks to hard assets.


The end of hyperinflation

The hyperinflation came to an end in 1924 almost as quickly as it arrived, quite remarkably when a new unit of currency the Rentenmark was introduced. By 1924 Germany had no gold left to back a currency so the new Rentenmark was backed instead by property and industrial goods. Fergusson concludes that the end of the hyperinflation came about due to a psychological change in the German populace, as the population began to believe that the printing presses had been turned off.


A notebook made from one million mark notes.
A notebook made from one million mark notes. | Source

The aftermath

When Money Dies covers the period up to 1924, however Fergusson does offer some insight into the events after 1924 and the rise of Hitler.

“Inflation did not conjure up Hitler, any more than he, as it happened, conjured it. But it made Hitler possible. It is daring to say that without it Hitler would have achieved nothing: but so is it daring to assert that, had enormous post-war unemployment not been held at bay for years by financing the government's deficits and by an ungoverned credit policy, bloody revolution would have occurred”


When Money Dies is not only a fascinating insight into a unique period history but is also a sobering warning of the dangers of excessive money printing and deficit spending. The relevance to the events unfolding both in Europe and the U.S. is disturbing. After reading this book it is hard not to question, do our own politicians and central planners know better, or are they just as much in denial as the Weimer republic?


References: When Money Dies - Adam Fergusson



Interview with Adam Fergusson

Watch an interview with Adam Fergusson author of When Money Dies. In this interview Fergusson discusses his the history of the Weimar hyperinflation, When Money Dies, and whether the Weimar hyperinflation has parallels with today's economy and the massive debts that many governments are currently facing. It is Fergusson's view that higher inflation is highly likely, however he is doubtful that another Weimar collapse could be replicated in a sophisticated modern economy. This interview was conducted by James Turk of Goldmoney Foundation 2011.

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