Weimar Hyperinflation (1923): When German Money Became Worthless

The Weimar hyperinflation was the collapse of the German currency that peaked in 1923, when the value of the paper mark fell from about 18,000 to the US dollar in January to 4.2 trillion in November. Prices rose by the hour, savings were wiped out and money became so worthless that people carried it in baskets. It remains the most famous case of hyperinflation in an advanced economy and left a lasting mark on German attitudes to money.

Causes

The roots lay in the First World War. Imperial Germany paid for the war mainly by borrowing and expanding the money supply, expecting to repay its debts from the spoils of victory. Defeat in 1918 left the new Weimar Republic with huge debts, a weakened economy and a mark already worth roughly half its pre-war value.

The Treaty of Versailles required Germany to pay reparations, fixed in the London Schedule of Payments of May 1921 at 132 billion gold marks, of which a smaller portion was expected to be paid in practice. Governments of the early 1920s, facing political instability and reluctant to raise taxes or cut spending sharply, continued to run deficits covered by the Reichsbank’s printing presses. Historians still debate how far reparations themselves caused the inflation and how far it reflected domestic political choices; most agree both played a part.

Confidence broke in the second half of 1922. After the assassination of the foreign minister Walther Rathenau in June 1922, the mark began to fall rapidly. Prices rose so quickly that the tax system stopped working: by the time taxes were collected, they were worth almost nothing.

The Ruhr crisis and the collapse of 1923

In January 1923, after Germany fell behind on deliveries of coal and timber, French and Belgian troops occupied the Ruhr, Germany’s industrial heartland. The government of Chancellor Wilhelm Cuno called for passive resistance: workers and officials refused to cooperate with the occupiers, and the state paid their wages and supported the region’s population.

With industrial output collapsing and no way to fund these costs, the government relied almost entirely on printing money. Under its president Rudolf Havenstein, the Reichsbank used private printing firms and paper mills across the country to keep up with demand, while cities and companies issued their own emergency money, known as Notgeld. Banknotes with ever larger denominations appeared, eventually reaching 100 trillion marks.

Life with worthless money

By the autumn of 1923 prices were doubling within days. Workers were paid daily, sometimes twice a day, and family members waited at factory gates to rush the money to shops before prices rose again. Restaurant meals could cost more at the end than at the start. Banknotes were weighed rather than counted, children played with bundles of notes, and some people burned money as fuel because it was cheaper than coal or wood.

Many people turned to barter, foreign currency and goods such as cigarettes. Farmers were reluctant to sell food for paper money, leading to shortages and food riots in cities. Those with access to dollars or other hard currencies, including foreign visitors, could live remarkably cheaply.

The effects were very unequal. Savers, pensioners, holders of war bonds and people living on fixed incomes, many of them from the middle classes, lost almost everything. Debtors gained: mortgages, business loans and the state’s own internal war debt were wiped out in real terms. Some industrialists, most notably Hugo Stinnes, used cheap credit to build large business empires.

Stabilisation

In August 1923 Gustav Stresemann became chancellor of a broad coalition. On 26 September his government ended passive resistance in the Ruhr, a politically painful but necessary step. The same autumn brought a communist uprising in Hamburg and Hitler’s failed Beer Hall Putsch in Munich, both partly fed by the economic chaos.

On 15 November 1923 a new currency, the Rentenmark, was introduced. It was issued in strictly limited amounts and notionally backed by a mortgage on German agricultural and industrial land. One Rentenmark was set equal to one trillion paper marks, giving a rate of 4.2 Rentenmarks to the dollar, the old pre-war parity. The finance minister Hans Luther cut public spending and dismissed many civil servants, while Hjalmar Schacht, appointed currency commissioner and later head of the Reichsbank, refused to let the Rentenmark be printed to cover deficits.

The stabilisation held. In 1924 the Dawes Plan rescheduled reparations and brought in foreign, mostly American, loans, and the Reichsmark was introduced as Germany’s permanent currency, backed by gold and foreign exchange.

Contemporaries called the sudden return of stable prices the “miracle of the Rentenmark”. The cost was high: unemployment rose sharply over the winter of 1923-1924 as firms that had survived on cheap credit collapsed, and the savings destroyed by the inflation were never restored. A revaluation law of 1925 compensated holders of some old debts for only a small fraction of their value.

Key people

• Rudolf Havenstein (1857-1923): president of the Reichsbank from 1908, who kept the presses running in the belief that the money supply had to follow rising prices. He died on 20 November 1923, the day the mark was stabilised.
• Wilhelm Cuno (1876-1933): a shipping executive who became chancellor in November 1922 and led the policy of passive resistance in the Ruhr.
• Gustav Stresemann (1878-1929): chancellor for about a hundred days in 1923 and then foreign minister until his death, who ended passive resistance and oversaw the currency reform.
• Hjalmar Schacht (1877-1970): the banker appointed currency commissioner in November 1923 and Reichsbank president soon afterwards, credited with defending the new currency.
• Hans Luther (1879-1962): finance minister during the stabilisation, who imposed the spending cuts that made it last.

By the numbers

Myths and facts

Myth: hyperinflation brought Hitler to power. Hitler’s 1923 coup failed, and the Nazis won only 2.6 per cent of the vote in 1928 after years of stability. Their mass support came during the deflation and unemployment of the Great Depression after 1929, though the trauma of 1923 had weakened faith in the Republic among many middle-class Germans.

Myth: reparations alone caused the crisis. Reparations were an important strain, but the inflation began with wartime finance and continued because post-war governments relied on the printing press. Historians weigh these factors differently.

Fact: some famous images are real. Photographs of children building towers from banknotes and notes used as wallpaper or fuel are genuine records of 1923.

Timeline

• 1914-1918: Germany finances the First World War largely through borrowing and money creation.
• 1921, May: The London Schedule of Payments sets reparations at 132 billion gold marks.
• 1922, 24 June: Foreign minister Walther Rathenau is assassinated; the mark’s fall accelerates.
• 1923, 11 January: French and Belgian troops occupy the Ruhr; passive resistance begins.
• 1923, 13 August: Gustav Stresemann becomes chancellor.
• 1923, 26 September: Passive resistance in the Ruhr is called off.
• 1923, 15 November: The Rentenmark is introduced.
• 1923, 20 November: The mark is fixed at 4.2 trillion to the dollar.
• 1924, August: The Dawes Plan is adopted and the Reichsmark is introduced.

Why it matters

The hyperinflation of 1923 destroyed the savings of millions and undermined trust in Germany’s first democracy. Its memory helped shape Germany’s strong commitment to price stability, from the independent Bundesbank after the Second World War to its influence on the European Central Bank.