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Hyperinflation in Post World War I Germany
Pay Day was Every Hour
In responding to one of the comments about my recent Hub about Congressman Ron Paul's Presidential campaign I recounted a story told to me a number of years ago by an old Austrian fellow describing his experience visiting Berlin during the 1923 - 24 hyperinflation in Germany.
Following Germany's defeat in World War I, the government collapsed, the Kaiser (king) was forced to abdicate and a left of center, socialist style government was established.
The economy and the country were in shambles following the loss of the war and the new government of, what historians refer to as the Weimar Republic, attempted to work its way out of the mess by printing money.
The Story of a Young Man Visiting Berlin in the 1920s
When the initial injections of newly printed money failed to work, the government's response was more of the same. The result was an inflation that was so bad that prices were literally increasing by the minute.
In the case of the Austrian fellow I met, he was visiting Berlin and had converted his Austrian currency into German currency.
The inflation was such that the German mark, which could be exchanged for U.S. dollars in 1914 at the rate of approximately 4 marks to the dollar had, by 1923 reached the point where the exchange rate was approaching 1 trillion marks to the dollar.
As a result, when my acquaintance exchanged his Austrian money for German money during his 1923 visit he needed a bag to carry the money.
Having trouble finding his way around Berlin and sick of carrying his bag of money, this fellow decided to purchase a map which not only made finding his way around easier, but was also much easier to carry.
My Uncle's Father Trades his Silver War Medals for a Pair of Shoes
One of my uncles (by marriage as he had married my aunt) was born in Germany and came to the U.S. with his parents as a young child in the 1920s.
His father, Fritz, had been an infantry soldier in the German Army during the war and had been awarded a number of silver medals for bravery.
Following the war Fritz worked in a factory. It was during the political and economic chaos that accompanied the Weimar Republic that Fritz and his wife decided to leave Germany and immigrate to the U.S. In the U.S.
Fritz and his wife purchased some land along the St. Lawrence River in the Thousand Islands area near the city of Cape Vincent in New York State. The built a home there and some cabins that they rented to tourists during the summer. When I was a child we sometimes vacationed at their little resort during the summer.
I remember sitting on the lawn by the river one summer listening to my Grandmother (who vacationed with us that year) and my Uncle Herman's mother reminisce about the past.
Still vivid in my mind is the story my uncle's mother told about how, during the hyperinflation, the men would go to work in the morning and, after sending the children off to school, their wives would make their way to the factory, arriving about an hour after the men.
Each hour the men would be paid with a huge handful of high denomination marks for the previous hour's work. As soon as they were paid they would rush to the exits and give the money to their wives who would then make their way quickly to the store to try to purchase some food.
The money was losing value so quickly that, if it wasn't spent immediately, it would be practically worthless within an hour or so.
This went on all day every day. At one point during this period my uncle's father's shoes became so worn that they were no longer wearable.
Rather than trying to find a shoe store that would take his armful of marks, Fritz simply melted down his medals from the war and used the silver to purchase a new pair of shoes.
Hyper Inflation Can Happen Here
While the hyperinflation of the Weimar Republic is an extreme case, other countries have experienced very severe inflation during the twentieth century as well. Argentina and Israel both experienced annual inflation rates of 1,000% or more during the middle of the century, and most developed nations, including the United States (during the Carter Administration the rate exceeded 20% in the U.S.) have experienced double digit inflation during the twentieth century. With this experience in mind, it is no wonder that calls for a return to a gold standard are being met with increasing interest.