"Conditions have taken a catastrophic turn here,” wrote Berlin resident Betty Scholem to her son in October 15, 1923. “This letter cost 15 million” marks to send, she said, and “it will be 30 million beginning the day after tomorrow.” She estimated her expenses in the billions as the monthly rate of inflation approached 30,000 percent.
a party dress of banknotes
I thought an episode about Hyperinflation would be simple. A Wikipedia cut and paste about numbers and percentages and bad economic management. But it turns out money is so much more complicated, and looking after currency is not about simple economic management but is more like the greatest soap opera ever, filled with drama, scandal, murder, politics, greed, fear, defiance, war and desire. And the repercussions are enormous: the collapse of money in 1923 fuels the vibrant intensity of the Weimar Republic, a revolutionary society, but born not from a successful revolution but out of utter defeat, and where everything has collapsed, everything has been defeated – authority, morality, society and now money. And Hyperinflation propels the terrible rise of extremist groups and ultimately the Nazi party. So, I started in Wikipedia, and ended with a pile of books trying to get my head around the wild drama of economics.
Welcome to The Weimar Spectacle, where I explore the brief and extraordinary life of the Weimar Republic. I’m Bremner Fletcher Duthie, singer, actor and theatre maker. I’ve spent years performing songs and theatre and cabaret from the Weimar period, and I’m inspired and maybe more than a little obsessed by that moment in time.
Listen to Bremner's two albums of Weimar Cabaret songs
https://songwhip.com/bremnerduthie/bremner-sings-weill
https://songwhip.com/bremnerduthie/bremner-sings-kurt-weill-vol-2-moon-faced-starry-eyed
In 1913, one US dollar was worth roughly 4 German marks. By November, 1923 in Germany, ten yeas later, hyper-inflation had pushed one US dollar to be worth 4,210,500,000,000 German marks. And by then it was quite common to be carrying around a one trillion mark banknote. The journey through this hyperinflation changes everything in Germany. It makes beggars and it makes billionaires. It destroys an entire class of people. It changes morals and ambitions and sexual morality. It fuels the rise of right wing and left wing revolutionary dreams. It stokes the fears and hatreds and racism that lead to the 2nd World War, and it still effects today’s Europe.
And okay, full disclosure, I am the worst, or maybe the best, person to be telling this story. I’m terrible with money. It flows into my life, and I hold onto it briefly, and then it somehow disappears and I have to search around for more of it. I’m terrible at budgets, when I had a check book, I couldn’t balance it, and for larger national discussions, when someone on the news is talking about GDP and Balance of Payments and Basis Points, well, I just get this ringing noise in my ears, and I nod my head wildly and try and look as if I have the faintest idea about what they are talking about.
Now, I have a sneaking suspicion that I’m not that only one in this situation, so, I’m hoping that my vast initial ignorance, and my sweat in trying to understand what the hell happened in Germany between 1913 and 1923, will mean perhaps this episode will move at a pace that will allow others who are similarly afflicted to understand the incredible drama of money in that period, and also maybe understand how there are shades of that drama still going on. Certainly, I started this research with great confidence in the cash we all have in our pockets, in our cards and in our bank accounts, and also the cash we store in things like houses and cars and all our worldly goods. And I have finished this research wondering if maybe the most wise, practical, clearcut, logical, long-term monetary decision I can make is to fill up an old bottle with gold coins, wrap it in brown paper and bury it in the back yard.
So, my big, big idea for these podcasts, is that the Weimar Republic invented everything about the modern world, and we are all still dealing with the possibilities and problems it gave to us. To prove this possibly unprovable idea, I’ll be exploring the arts, politics, science, architecture, social innovations of the Weimar period, and of course, the terrible and irresistible rise of the Nazi Party. So, if you’re a young vegan furious at how every economic analysis today uses the price of a carton of eggs as an international currency standard, or an old carnivore outraged at the cost this morning of a ham and cheese omelet at The Waffle House, then this is the podcast for you.
before lego there were bundles of banknotes
So, Hyperinflation in Germany. Here we go, and as much as it makes my head hurt and I dread it, I’m going to do some of the theory first, because as Mark Twain said, if you have to eat a frog, best to eat it first thing in the morning. But I’ll include the cultural issues, since the history caused the terrible economics, and then the horrible economics brought on the terrifying history, and back and forth. Living in November 2024, when the word Inflation was being thrown around like some kind of battle axe by both sides during the American election, and may have just swung the whole election, well the toxic mixture of rising prices and rising extremism feels very current.
So, as we all know, money is magic. Magical thinking, that is. We assign value to something that has no value and then use it create order, and some disorder in our lives. I still remember being a child, visiting my relatives in England and the banknotes were printed with the words ‘Promise to Pay the Bearer on Demand’ and then the amount of the note. Which, as a child (and to be honest, still the present day), confused the hell out of me. Why is a bear involved? And If you have a 10 pound note, surely you have 10 pounds, and then what are you going to exchange it for at the bank? Another, shinier 10 pound note?
Of course, that phrase meant that in theory the bill you were holding was simply an indicator that the Bank of England, or indeed England itself, had enough value, in gold or land or whatever it was choosing to use back that issue of currency, that, in case of need you could walk up to a teller and get the equivalent in silver, or a bag of wheat or a quarter inch of land in the lake district or whatever. For a long time most currencies were backed up by piles of gold sitting in bank vaults, which meant a country was limited in the amount of money it could issue. Nowadays, in most countries, as far as I can see, we just all choose to live the delightful and extremely useful mass illusion that our money has some intrinsic value. Spoiler alert: the final cure for the hyperinflation in Germany is a brand new currency that they issue backed up by the value of land in Germany.
To understand the madness of 1923 in Weimar Germany, when people are literally carrying piles of bank notes in wheelbarrows trying to buy anything that will hold its value, since by tomorrow those same notes will be virtually worthless, to understand that, we need to go to the start of WW1. A moment when Germany is simply one of the most successful economies on the planet. The symbol of rising modern industrialism. Prosperity, stability and optimism in Europe’s most efficient, powerful economy. As the war is starting, the German mark is set at a healthy level of around 4 marks to the dollar. From the outside it looks like Germany is overwhelmingly powerful. Huge Iron and Coal reserves, a booming industrial sector, massive railway system, skilled and educated population and a massive army. What could go wrong? However, what wasn’t immediately obvious was that Germany had some huge issues: they go into the war short of cash, and they are now at war with everyone, all their neighbours, so they have no one close by to trade with and since it is essentially landlocked, apart from Baltic coast and the North Sea, it was incredibly vulnerable to the British naval blockade of its few ports. A blockade which stopped all international trade, the possibility of earning more money from that trade, and its ability to import food for its population.
The German High Command have a simple answer to this. They will crush everyone around them in a matter of a few months and take their things. The money and food will come rolling in from the factories and agriculture and industry of France and Belgium and Poland and Russia, and after the war, when Germany controls most of Europe, it will impose devastating reparations on its neighbours, who, in Germany’s view, started this whole mess, and it will simply make them pay for the war.
Obviously this didn’t work out so well. However, to the planner’s credit, it wasn’t a crazy idea. Most of the wars since the fall of Napolean had only lasted a few months. Only 40 years earlier they had fought a war with France that had lasted 6 months, but had been more or less decided in the first 3 months. So Germany’s plan to move with overwhelming force, with the most modern, well equipped army in Europe sounded convincing. Except, this is the first ‘modern’ war and it doesn’t go as planned.
They launch into the war with the conviction that ‘it will all be over by Christmas’, but they need to pay for it now, and Germany’s assets at the beginning of World War I in 1914 would have been sufficient to finance only about two days of the war, and they can’t just print more money, because, they are on the Gold Standard. That is, their mark is backed up by piles and piles of gold sitting in vaults, and the German central bank only has the right to issue a limited amount of cash. Indeed by law, paper money can only make up two thirds of the money circulating in Germany. The rest must be in silver and gold and other metals. So they are limited in the amount of cash they can put towards the war effort, and because of the blockade, they can’t trade their way into prosperity. They can’t sell more things internationally to get the money to wage war, so, at least internally, for their own population, they abandon the Gold Standard.
And they do this partly because of the intuition of the German people, who are not fools and when war breaks out, suddenly get suspicious about the actual value of these pretty pieces of paper in their pockets. Germans begin to walk into banks carrying bundles of notes, ask for the equivalent in precious metals, and walk out clutching sacks of gold and silver, and I presume, they bury those in their back yard.
However, the German war machine desperately needed gold and silver. Not to build things with but first to buy important military products overseas, later to speculate on the international money markets to buy up marks and prop up the value, and also to justify the printing of more paper money to pay for the war: to pay the wages of soldiers, to subsidize industries making weapons and to buy those weapons, to pay the overtime wages of railway workers who were moving the army, to pay the pensions of wounded men coming back from the front etc etc etc. So, on August 4th, 1914, a new law declares that paper money can no longer be converted to gold, and in the hopes of getting all gold back from the pockets of its own population, and into the bank, the German government runs a massive propaganda campaign “Gold For The Fatherland”, asking all citizens to exchange precious metals for paper. A campaign which even included training schoolchildren to harangue their parents to turning over their savings. A pamphlet is printed where three high school students explain to a foolish old man skeptical about the trustworthiness of the central bank. The stupid man asks ‘What if they start printing too many notes and they lose their value? And the children laugh at his crazy, insane unpatriotic fears and say ‘how ridiculous “We can count on the Reich. What would happen if the Reich began to print notes without paying attention to its gold stock? It would immediately suffer a loss of confidence. The notes would no longer be accepted, especially abroad, or if accepted, it would only have a low exchange value” In the pamphlet, of course, the old fool realizes the Reichbank would never do anything to endanger the confidence in Germany’s money and he rushes to hand over his gold. And ironically, and spoiler alert, actually the pamphlet describes succinctly exactly what the Reichbank did do. However, despite all the propaganda and mean little children lying to their parents, overall, there were 5 billion gold marks in circulation in Germany, and only 2 billion end up in the hands of the Bank. Many unfoolish old Germans refused to dig up their stashes of gold.
10 Mark gold coin
As we all know the war didn’t end by that Christmas, or for several more, so things did not go as planned for the German High Command, however, at first they didn’t go terribly. By 1915, Germany controls most of Belgium with its great cities of industry and craft production, and its huge swathes of industrial, mining and agricultural lands, and they control much of northern France, with half of France’s coal mines, and much of the textile and metal production, and on the eastern Front much of Poland and all their industry is under German control.
So, it’s 1915, and the mark is at around 5 marks to the dollar. And here goes the beginning of the story of the disaster of Hyperinflation. The Reichsbank goes to the dark side of money. And, to be honest, this is the bit I’ve had to read like a thousand times and the whole thing still seems like black magic to me, but please bear with me – in order to get more money into the economy to pay for expenses for the war, but wanting to appear like all the money is backed up by some kind of solid assets, the Reichbank sets up loan bureaus in all the states and communities of Germany. Those bureaus are there to give loans in paper money to those communities for the expenses of the war. And those states and communities guarantee those cash loans with the assets of the communities and with the possibility of selling German Government Bonds to the population of those communities and those loans have no firm due date. Okay so far, but then there’s some magic sleight of hand, and the Central Bank claims those guarantees of value as assets to justify printing more paper money, which again goes to the Loan Bureaus to be handed out to the states and communities to pay more debts for the war effort and again be guaranteed against more potential value in the states and communities, which the Central Bank again claims as their own… each time inflating the amount of money that could be printed against the potential value of the states and communities and on and on and on. Essentially, it’s a way to make the printing presses in the mint run all day and night printing more money.
If this seems like it makes no sense, and your head is hurting, like mine is, then you are perhaps as perceptive as the several German economists from that time who were threatened with prison or military court martial if they printed their warnings against this system.
Okay, so we’re coming up to middle of the war, and inflation is beginning in Germany, but it’s happening in all the warring states. In the UK and France inflation is going up for the same reason as in Germany, they are struggling to pay for the war, prices of necessities are going up, and as they go up, wages need to go up, but as wages go up, prices also go up and round and round and round. However, in France and the UK, they can still count on international trade and more importantly, they borrow huge, colossal sums of money from the USA. Whereas in Germany, the British blockade is tightened as the UK declares they will stop all German imports, not just military goods. And as an aside, in doing that the UK also is breaking all international norms of war, as they deliberately target and starve the civilian population. A senior British defense official says “Although we cannot hope to starve Germany out this year, the possibility that we may be able to do so next year cannot be dismissed…” And hunger sweeps across Germany, with whole winters where the only nutrition is turnips, eggs are rationed out at one a week, meat and fat is unattainable. It’s estimated by the war’s end that 750, 000 civilians die in Germany because of starvation attributed to the Blockade.
butcher's shop looted in Berlin
And still Germany needs more money to pay for the war, so this time they reach out to their own population. They sell War Bonds. With a guaranteed 5% interest rate, payable win or lose, and backed by the value of the German State, redeemable after the war. And the population responds massively. 98 billion marks of War Bonds are bought by the German Population. A massive loan to the Reich from it’s own people. A massive statement of belief and loyalty and love for their own country. And most of the people making those loans are the middle class with a bit of cash to spare. And not only the middle class, but a specific and very important part of Germany’s pre-war population, the Bildungsburgertum, who for generations have been civil servants, or lawyers or professors or bourgeois merchants or even protestant pastors essentially working for the state. This huge segment of the German population have built up savings, have comfortable homes, perhaps a rental property or two, rely on their steady comfortable wages from the government and are resolutely loyal to Germany. These are the people who put all their faith and money, and sacrifice their own children, to the war effort and it is these people, an entire class, that later the German State will deliberately destroy by stealing their money and ignoring their desperation, and who will respond in fury and anger and misery by listening to the lies of the Nazis.
However, in the middle of the war, Germany still expects to win, recoup all it’s losses and pay back its debts. The Finance Minister Karl Hefferich makes a speech in the Reichstag parliament saying “We intend and are entitled… not to forget the question of costs. We owe this to the future of our people. The entire future maintenance of our life as a nation must, insofar as is at all possible, remain free of, and be relieved of, the enormous burden of debt that the war has caused to accumulate. It is the instigators of this war who deserve to carry this lead weight of billions. Let them drag it through the decades to come, not us” And in a terrifying military document, unearthed in an ex-East German secret police Stazi archive in the 1950’s, the German high command consider how they are going to get all that wealth with a document that considers destroying Belgium completely, turning smaller European countries into ‘Vassal states’, ensuring that the French economy is completely dependent on Germany, and setting up a sort of European Community, but with Germany as it’s ruler. And at the height of the war, when Germany is in control of so much foreign territory, they prove how serious they are about sucking value out of their conquered territory by systematically pillaging and destroying the industry and agriculture of those countries: 20,000 factories are destroyed or simply dismantled and shipped to Germany, millions of cattle and other animals are stolen and sent to Germany, at least 125000 workers are deported to Germany and used as forced labor.
Belgian steelworks deliberately destroyed by German occupying forces
Of course, on the other side, treaties are being made to redraw the post-war map of Europe, the Middle East and Turkey, in their favor, cutting up those regions to create new colonial empires for France, Britain and Russia, all with zero consultation from the local population. And France intends, if they win, to punish Germany in the most extreme fashion possible, with the intent to destroy their economic prosperity for generations to come. Everyone is making brutal, toxic decisions which are still affecting us today. Neither side is really with the angels in WW1.
Anyway, back to the money trail. By March 1918, after the victory for Germany against Russia, and the imposition of crushing reparations, the German mark, after dropping to around 7 marks, has improved to sit at around 5 marks to the dollar. International money markets are optimistic about Germany’s victory and expecting a new stability in Europe. However, things don’t go as planned. Against the wishes of many of the leaders of Germany, the high command decides to wage all out war on Atlantic shipping with their new U-Boats. Submarine warfare against merchant ships bringing supplies to the UK and France and also civilian boats, which leads to the sinking of the Lusitania, with 120 US civilians on board. Thereby pissing off the largest economy on the planet, which is never a good idea, and America enters the war, and by 1918, 10,000 American troops are arriving in Europe every day. In Germany, their final massive push to win the war before the USA arrives in full force, is a sort of catastrophic victorious failure, as they push to within 60 miles of Paris, but in doing so, they lose so many of their elite forces, and stretch their lines so thin that they also hollow out their army, and in only a few weeks they are in retreat and before a 100 days are up, Germany is asking for an Armistice, a pause in which to negotiate a surrender. Germany just lost the war, and so, will be the one saddled with all the debts of the Allied countries, and will never recoup all the money it has spent.
German u-boat fleet docked in Kiel
last picture of the Lusitania, leaving NY harbor
Well, that was a lot of war. Apologies to those who came in expecting only Weimar economics, but like I said, it turns out that it’s impossible to understand the terrible drama of the economics without the horrible history of the war.
Post war Germany is a disaster and it falls apart. The Kaiser abdicates, Princes flee, the government falls, revolutionary workers councils take over industry and the army. If you want the details of that collapse check out my episode on the revolutionary beginnings of the Weimar Republic. However, what doesn’t disappear is the absolute intent of the victorious countries to hold someone accountable for the debts they have run up during the war, and to find someone to take all the blame for the war. The Armistice is essentially a long pause while those countries get together and make up a wish list for extracting money, territory and assigning blame. All the blame. And those decisions are all wrapped up the Treaty of Versailles, which Germany will be ordered to sign, with no negotiation. A treaty that will strip them of land and territory and burden them with reparations that will stretch on for generations and also ask them to accept total and complete blame for WW1.
Now, as much as Germany acted unbelievably badly during the war, the actual causes for the start of WW1 are so complex and obscure that scholars are still arguing about it. There are reasonable arguments to be made that Germany felt that it was forced into the war. That argument would run something like, the heir to the Austrian throne is assassinated, the killers run to Serbia, where essentially they publish letters to the editor boasting about it, and the ruler of Serbia congratulates them, which is sort of like if Irish Terrorists killed the current prince that’s in line for the English throne, not Charles, or Harry, but the strange bald one, and then sat in Dublin posting videos about what a great thing they did, and the Irish president pressed ‘like’ and then shared them. One doesn’t have to think hard to decide what the English would do. So, Austria decided to invade Serbia, but Germany has a treaty to assist Austria, but Russia and France have treaties to assist Serbia. There are attempts to defuse the whole thing, until Russia mobilizes all its military and puts them on trains pointed at the German border. And at that point Germany sees itself as surrounded and puts its soldiers on trains, and because Britain has a treaty to assist Belgium, when the German armies cross that border all hell breaks loose, essentially a war no one wanted. (other interpretations are totally possible, but that’s one…)
And so that treaty of Versailles, and that enforced acceptance of complete responsibility, so hated in post-war Germany, becomes yet another piece of the fuel for the fires that will destroy the Weimar Republic and serve to push the Nazis into power. But it’s not like France and England have any choice. Each have gone billions of dollars into debt during the war to America, and America is not budging an inch on the need to repay those loans. So, they need to get that cash from somewhere. And by somewhere, they mean Germany, and if they want to legally justify getting all that cash, they also have to get Germany to accept all the blame.
mass demonstration against the Treaty of Versailles
But still, the German mark is now holding more or less steady at 7.4 marks to the dollar. International investors believe that with the war ending, even with the reparations, Germany will quickly return to its pre-war status as an efficient industrial engine. But that doesn’t happen quickly. The British decide to maintain the naval blockade during the Armistice negotiations, thereby continuing to illegally starve civilians inside Germany for the better part of a year, and prevent post war Germany from resuming trade. Meanwhile, inside Germany, politicians, are just trying to hold the country together: they can see the terrifying bloodshed and chaos just across the border in Russia and are trying to avoid the collapse of their own country into a Soviet style Bolshevik revolution, and so the left wing social democratic party are allowed to take the reins of power to siphon off some of the desire for change. Even the richest men and largest industrialists see the need for compromise and meet with the workers councils and agree to demands like an 8 hour day and worker representation on the management board.
When the Armistice ends, and a treaty is ready to be signed, well, the evil general Lundendorff had carefully stage-managed the surrender of Germany by passing the buck to the Civilian politicians and then exiting stage left, thereby making it look like the Army had actually never surrendered, which again, fuels the later Nazi claims that Germany was never defeated, and instead the new civilian democracy were the ones who had given up. And so it is two civilian politicians who travel to France to sign the Treaty of Versailles, and so, their new Weimar Republic begins life weighted down with the origin story that they were the ones, not the mad generals, who saddled Germany with the crushing debt of the treaty. Which, to add insult to injury, wasn’t even enumerated as a specific total in the treaty. They essentially signed a blank check, and were told that the Allies would later write in the total of what they wanted, but which would definitely be billions upon billions. Which sort of justifiably infuriates the entire country, the leader of the German parliament makes a speech where he ominously warns “Be mindful, you enemies, that from the bones of the fallen an avenger will arise. German women will still continue to bear children, and these children will break the chains of slavery and wash away the ignominy that has disfigured the face of Germany”
In Germany, the stage is set for the wild ride of Hyperinflation. On the other hand, postwar, in the UK and France, inflation is also getting out of control as they struggle with debt, but unlike Germany, each of those countries makes the decision that the most important thing is to get inflation and debt under control and to reestablish the strength of their currency. They had financed the war with loans from America and, also like Germany, by selling war bonds to those citizens who could afford to buy them, and they decide the most important thing is to repay those loans, and so to do this, each bring in brutal austerity programs, cutting services and laying off huge numbers of people. Returning servicemen who had risked their lives for their country are told those countries cannot afford to look after them and essentially ignored and thrown on the scrap heap. In post-war Britain millions of men are unemployed with only minimal state support to keep them and their families alive, a brutal decision that is considered a kind of class warfare and leads to the rise of the British Labour Party.
However, the new German social democratic party has other priorities than just paying back debts. They need to avoid a soviet style revolution, they have huge aspirations to bring about social change, they want to avoid a reason for the Army to stage a coup and restore the monarchy, they want to get German industry working again, and they also want to somehow show the Allies it is impossible for them to repay the huge reparations bill coming from the Treaty of Versailles. And so, essentially they decide to sacrifice their currency to do that. They decide on a policy ironically called, Fulfillment: which actually meant the opposite: while attempting to fulfill the treaties terms the German Government would consistently aim to show the impossibility of any such thing. To do so, it would use any means possible, including manipulation of the currency.
burning banknotes
Wow, that’s a lot of history and economics and treaties and war. Let’s try and imagine the actual life for people in Germany just post war. It’s been years of Total War, which meant that every resource of the state was pledged to the war effort, and all the men have been in the army and the factories have been mostly staffed by women. Immediately the Armistice is declared, suddenly those women are kicked out of work to open up places for the millions of returning soldiers, which is partly just sexism and partly because the government is terrified of having hundreds of thousands of men, often still with their weapons, roaming the streets with time on their hands. Those women are reluctant to return to their former lives and villages and are often choosing to stay in the cities, after all, the country has been declared a republic, The Weimar Republic, so everyone is testing the limits of their new freedoms. Radical politics have taken over in all the cities, and left wing and right wing paramilitary groups, armed with the weapons they brought back from the war, are fighting each other for control of various cities. Right wing factions of the army try to stage a coup, which is beaten by a massive workers strike which shuts down the country. And in Munich, a young racist corporal with a terrible moustache and no actual life skills has just come home from his time in Army convinced that the war was traitorously abandoned at the moment of victory because of Jewish and Communist control of the state. And as the Armistice drags on, and the Allies are deciding on the terms of the treaty, everyone, right, left and center is expecting that their country will be treated as a dignified enemy combatant who is about to given a path back to being part of the international community.
Let’s move on: it’s early 1920, and the value of the Mark has taken a plunge, as investors watch the attempted coup take place, see the chaos in the government and worry about the recovery process, and the mark is now listed at 90 marks to the dollar. However investors still believe that Germany will soon be back on its feet and they make the huge mistake to swoop in to buy up cheap German marks, believing they can make a quick profit by selling them when they recover their value. I guess I should be more sympathetic to the suffering of international money traders, but maybe the one bright spot in this whole thing is knowing how many of them lost their shirt on that one. Since for a normal person, a plunging mark means misery. 90 marks to the dollar means that your paycheck is essentially disappearing. Contemporary journalists travelling through Germany write how one meal in a nice hotel costs as much as a normal person spends on food for the entire month, and how people are cooking without meat or eggs, and if you want butter you have to buy it on the black market. And as for those middle class families who had invested their generational wealth in German War Bonds in a show of loyalty to their country. Well, they are waiting to find out when and how those debts would be paid back. They must have been made nervous by the publication by the brilliant economist John Maynard Keynes entitled ‘Economic Consequences of Peace’ where he wrote “By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.”
When the butcher’s bill finally comes due for Germany, well, damages to the French and Belgium infrastructure easily get totaled up to around 100 Billion Marks, plus there’s the Billions of Marks that were borrowed from the Americans, so the final total demanded is 132 Billion Gold Marks, and by Gold Marks, they mean hard currency: Germany could not simply print that money. The first payment happens by sending 560 cases of gold, selling massive quantities of cheap paper Marks on the foreign exchange markets to earn enough hard currency and borrowing from German companies with savings held overseas. However, after that, Germany is now essentially broke, so they need to earn more money by selling internationally, so how to stimulate exports? Well, once again, a devalued Mark would make German goods cheap on the international market, so another incentive to consider manipulating the currency.
And ‘ta-da’, later in 1920, the blockade is over, the value of the Mark is still low, but holding steady at 84 marks to the dollar and Germany is miraculously booming. German goods are cheap for foreign buyers and so trade is flourishing, factories are humming and unemployment is falling. What could go wrong? Well, a brutal vicious cycle could set in: all this success means that the German Mark gets stronger: i.e. fewer marks to the dollar. Which means that German goods get more expensive, which means that trade drops, so factories start laying off, and unemployed workers get angry and go looking for the guns they brought back from the war and join one of the left or right wing paramilitary groups and then the heads of industry make angry calls to their friends in Government. So, naturally enough the Finance Ministry and the Central Bank do their best to make sure the Mark gets weaker again. That is, they print more money. So much money.
outdated banknotes waiting for destruction
I’m putting the podcast out in early winter, 2024, and at this moment, just to survive as a modern human we have all had to learn new critical thinking skills to keep our heads above water in a sea, no, not a sea, a deluge, a tsunami of conspiracy theories pouring out from every media outlet and every social network. Many of us in North America are spending Thanksgiving listening to our nearest and dearest family members spout complete nonsense they learned is true from a friend’s social media post. And Germany in 1920 is pretty much the same. As the German Mark starts to fall, the average German doesn’t see the Mark as falling, instead they see the Dollar as something that is rising. And people start to put their money into the stock market, hoping to buy something with a fixed value, and so stocks are booming. And, since for generations the Jewish population have often been restricted in what they could do and one of those things they can do is deal with money, the average German sees the stock exchange and the American dollar as something that is “controlled” by the Jews, so a new conspiracy theory arises that the Jews are the ones causing inflation and making the money worthless. A British Journalist writes of being unable to spend his German marks in a country town, as the shopkeeper refused what he called “Jewish Confetti”. And in Munich, that more-than-a-little-insane ex-army officer, who it turns out is also a brilliant, inspiring, rousing speaker, is adding that story of a Jewish conspiracy to devalue the German currency to his tale about the Jews and Communists who forced the surrender of the German army just as it was on the verge of success in WW1. And people are listening.
Weimar era anti-semitic cartoon
Cities across Germany have made some pretty extreme choices at this point, with far right-wing and far-left wing groups taking control, and Munich is the center of every right wing nationalist, anti-semitic group. There’s Hitler, spouting his mad, appealingly simple racist ideas, and there’s also the terrifying ‘Organization Consul’, a secret group mostly filled with very well-educated, very racist young former army officers, and with the sole purpose to murder politicians and public figures, preferably Jewish, who they believe have betrayed Germany, either in the war or after. They succeed brilliantly, ironically killing two of the extraordinary politicians who were responsible for stabilizing the country after the war, both either Jewish or with Jewish family connections, Erzberger and Rathenau. Ironically and tragically, each time one of their assassinations succeed, the killings cause such chaos and international fear, that the German mark plummets in value once again.
So, we’re into 1921. Which is quite a year: The Prime Ministers of Japan and Spain are murdered, there’s a military coup in Portugal, Race riots in Tulsa destroy an entire neighbourhood, Russia still is fighting a civil war, Greece and Turkey are at war, England is fighting a brutal war in Ireland, unemployment is massive in the USA, France and Britain, and in Italy, a brand new party, the Fascisti under the leadership of Benito Mussolini has just entered parliament with 29 representatives. And in Germany in the Autumn of that year, the value of the German Mark now sits at 150 marks to the dollar and is about to go off a cliff. Or, as some people might say in Germany at that time, ‘My God, look at how the Dollar has gone up in the last months, our honest German mark cannot compete against all Jews doing back room dealings that are making it impossible to for our currency to compete against that Jewish controlled dollar.’ The politician Mathias Erzberger has been murdered by Organization Consul. And, God, it’s all tragic irony at this point, Erzberger had been the architect of the best chance to stop Hyperinflation. He had created a new tax system for Germany. Since international trade was a whirlwind of currency manipulation and swings of unemployment, the idea was that a modern tax system would surely provide a steady income for the state, so they could slowly pay off the burden of Reparations and build a new modern Germany.
Now, I’ve been living in the USA of the 1% owning 90%, where a few angst ridden honest billionaires go on TV begging the government to close loopholes in the tax system to force them to pay their share, and a whole lot of happy billionaires don’t go on TV saying stupid things but simply take every tax loophole available so they can pay nothing. But what if there was an even better trick built into the system, so you could pay your taxes in full, and it didn’t hurt at all. Imagine if your tax bill arrived in April, say it’s 100,000 marks, which at that moment is worth say 10,000 dollars, but you have a month to pay it, and it’s also possible to ask for a delay of a few months, or perhaps appeal, or ask another question, to delay payment, and what if every month that passes there is inflation to the point where at the end of say six months delay, that 100,000 marks is now worth 10 dollars. So you simply drop by the tax office, reach into your pocket and pay it with a single banknote. That is what happens to the new German tax system. Even knowing that means catastrophe for any functional state, I can’t say I’m not faintly jealous…
So there’s no money coming from taxes, and yet there’s reparations to be paid, and inside Germany there are war pensions to be paid and a country to be rebuilt, and most importantly there is an entire class of people, 15% of the german population, the Bildungsburgertum, the civil servants, academics, lawyers even pastors who invested much of their life savings into the German war effort, and who are now eagerly awaiting the repayment of those War Bonds, with 5% interest. Well, what if a country could play the same trick with inflation. Delay, postpone, suspend, and all the time the value of the money you owe those people is slowly disappearing. An estimate of the value of the entire German War Debt, the entire cost of running WW1, including all the money they spent from those war bonds, was 143 Billion Marks. But by the end of 1923, that amount had been reduced by hyperinflation to 14 pfennig. 14 pennies. I’m just going to repeat that, since it boggles my mind. The entire cost of Germany’s war effort, 143 Billion Marks, by 1923 has been reduced to the small change you find at the bottom of your pocket. Certainly th Bildungsburgertum could have demanded their money to be repaid, and the state would have happily done so, but I imagine the cost of cashing the check would have been more than the amount on it. But even worse than that, as the inflation turns to hyperinflation, a savings account built up over years is suddenly not worth the charge to withdraw the money, an apartment bought as a rental property suddenly has tenants who can pay a years rent with their small change, and your fixed wages from your skilled government job, for which you trained for years, and which are paid to you every month, suddenly cannot cover a week of expenses for your family. The middle class lose everything and in understandable anger and resentment many fall prey to wild conspiracy theories. The economist John Maynard Keynes writes with chilling foresight: “Gemany has confiscated most of the means of livelihood of her educated middle class, the source of her intellectual strength; and the industrial chaos and unemployment, which the end of the inflationary boom seems likely to bring, may also disorder the minds of her working class, the source of her political stability”
And things get worse. It’s spring 1922, and the value of the German Mark is now at 284 marks to the dollar. This is not yet Hyperinflation, but inflation even at this level is insane. Insane in the sense that money is destroying the country while making it more prosperous, if that makes any sense at all. Trade has been stimulated, unemployment is down, production has increased, German net national production grows by 10% in 1920, and 7% in ’21, but the cost of living has gone up 40%, children are being diagnosed with malnutrition, and basic necessities are difficult to find, much less buy. And, with more tragic irony, because of inflation, there are huge profits to be made for those who already have money. Imagine you have a factory that makes a chair for export worth 1000 marks, which, lets say, is perhaps equal to 10 dollars. You ship it to the USA and get paid 10 dollars. You put that $10 in the bank in the USA for few months, and when you bring it home, it’s now worth 100,000 marks, which you invest into land, or buildings, or another factory, because the last thing you want to own is money. And because you now own all these material goods, land and buildings, you can go to the bank and use that collateral to get a loan to buy more of them, perhaps a loan of 1,000,000 marks repayable say, in only a few months. I guess you know where this is going…. and in a few months you walk back into the bank and repay that loan with your pocket change. The rich got much richer and much more powerful.
And then things get much worse. France and Belgium had the right, in the treaty of Versailles to physically take possession of German lands and industry if Reparations were not paid. Above all, Germany wanted to avoid this disaster, which might lead to civil war, or might simply restart WW1. The one man that might pull Germany out of its plunge into hyperinflation and chaos and find a way towards some sane compromise on the Reparations problem was the brilliant Jewish industrialist and politician Walter Rathenau. And this was the moment when there was a chance of change, even the Americans were rooting for some kind of compromise on the Reparations that were killing Germany’s possibility of recovery. The Banker JP Morgan met the heads of France and Britain and said “ they must make up their minds if they want a weak Germany who could not pay, or a strong Germany who could…. If they wanted her to pay they must allow Germany to exist in a condition of cheerfulness, which would lead to successful business”. Rathenau, who speaks perfect Italian, French and English, has been involved in business, was close to the Kaiser before the war, was brilliant and urbane and charming, and was the man for the moment. As Foreign Minister he is shuttling between capitals and sitting in late night meetings with German Industry leaders.
Walter Rathenau
However, it was not to be: a brutal nationalist drinking ditty was being sung in all the right wing bars, it refers to Rathenau and the catholic Chancellor Wirth
If just the Kaiser would come back
Chancellor Wirth to a cripple we would hack
The Guns would rattle, tack, tack, tack
Against that rotten socialist pack
Whack Chancellor Wirth like no tomorrow
Whack his skull until it’s hollow
Shoot down that Walter Rathenau
That God Accursed Jewish Sow
And so, unsurprisingly and tragically and ironically, on the 24th of June, 1922, Organization Consul, the far-right group of smart, well-educated young men, murders Rathenau, Germany’s best hope, in broad daylight. A symbol for the world that Germany is descending into chaos, and the world loses faith in Germany’s recovery. By the end of July, the value of the German mark has dropped to 670 marks to the dollar and it keeps falling. Prices are rising by 50% a month, the definition of Hyperinflation, and now the most important thing for everyone in Germany is how get rid of their money. By which I mean that prices are changing daily and money is the worst thing to hold onto, you have to get it out of your pocket. At 3pm every day, the new dollar rate is announced, so any money that you possess in the morning must be spent before 3pm, since at that moment it’s value will plunge.
Although one very, very smart young student, who might be the envy of all modern American university students currently struggling under the weight of student loans figures out how to game the system: he writes “I went to Holland that spring, looking for anything that would earn hard currency and I found a job…. And by spring vacation I’d saved fifty guilders, which was about 25 dollars. I used the guilders as security for a short term bank loan back in Germany, and then later, I’d repay the bank loan with the deflated marks and take out another loan. I paid for a whole semester of school that way, and at the end I still had the same fifty guilders.” Not everyone was so lucky: anybody who did contract work was screwed. A signed contract to deliver something for X amount of marks, say, a piece of furniture, or a new house, or any job contracted now, but delivered in the future, that contract condemns the worker to work for nothing, since whatever amount was agreed on today will be worthless when the goods are delivered. And anyone on a fixed income is essentially broke, which means retirees, disabled, civil servants, teachers, employees at state corporations like the railways. Anyone on a fixed income must do constant workarounds to stay alive, all of which involved getting rid of money as quickly as possible, one woman writes about the moment her husband’s paycheck arrived: he would receive his monthly salary and then acquire a monthly pass for the railway as soon as possible so he could at least travel to work and back … then the next day the entire family would get up at 4am and go to the market and spend whatever was left on non-perishable food…and that was the end, for another month there was no more money
But still, the government needs to keep the economy afloat and now with international investment drying up, there seems to be only one solution, which is to print more money, and anyway, as new one hundred thousand and one million marks notes start to enter circulation, the presses must keep churning them out, desperately trying to keep up with inflation. So, the most important thing for the German government to keep the printing presses running. They are running 24 hours a day and the state bank hires independent printing companies to start producing banknotes and they are still falling behind. There is a crisis when for a single day the printing union goes on strike, and an executive order is issued from the president’s office to force them back to work.
In October 1921, the value of the German mark falls to 3000 marks to the dollar, by December it is 7,500 marks to the dollar, by January 1922, it is 18,000 marks to the dollar. And in 1922 in Munich the Nazi Party holds its first National Conference, with Adolph Hitler at it’s head. And then things get much, much worse. The French have elected a new Prime Minister, the rabidly nationalist Poincare, who is convinced, not without cause, that Germany is manipulating its currency to pretend that it is unable to pay Reparations. So in January 2023, France and Belgium invade Germany and occupy the Ruhr Valley, the heartland of Germany’s coal production and heavy industry. They intend to hold those hostage, taking their production directly and demanding that Germany pay up on their outstanding reparations. 150,000 German civilians are expelled from their homeland across the internal border. Germany declares a policy of passive resistance. A general strike across the all industry in the Ruhr. And promise the German Government will make up all the money lost by the strikers and all the industries affected. Hundreds of thousands of skilled laborers and massive manufacturing corporations are promised that all their lost wages and profits will be replaced. And to do that, the Government simply prints more money.
French and Belgium troops face a German laborer “You Can't Force Me!”
Now, I have to admit that right around this point, I sort of lose my ability to totally understand what the hell was going on with the endless printing of more money. These are smart people. What they hell were they thinking. And okay, I admit, I’m the worst at understanding how money works, both on a micro, personal level and on a macro national level, but even I can sort of understand with some gut instinct that this is probably not a great idea. The best explanation I can come up with is that at this point they are simply in too deep. No one knows how to turn off the flood of money without chaos and starvation and civil war, but at the same time everyone is kind of aware that they are walking towards a cliff edge. And, as we’ll shortly see, confidently striding off the cliff edge.
So, before we get to that cliff edge, one can ask, what, apart from artificially boosting trade and letting the rich get even richer, were the good things about inflation. Well, if you are a renter, then because Germany had rent control, your rent is fixed and can’t rise along with inflation, so the portion of your money going towards rent drops to close to zero. If you had bought a house with a mortgage, well, you have the ability to pay off that mortgage with the money that you might carry in your wallet. Another odd side effect is that for Germany’s middle class at that time a woman was still expected to bring a dowry, in the form of a large cash payment from her parents, into a marriage, and when the family savings set aside for years to pay that dowry disappear, a lot of planned marriages are cancelled and many women find themselves instead entering the job market and realizing new dreams as independent women. Another very mixed blessing is that with no other choices a huge number of people, some male but mostly female, enter into sex work, and there has been some thought that some women do find in that world an opportunity to claim ownership of their own sexuality in a way that would not have been possible in a traditional, male dominated protestant marriage. And of course for those who were able to convert their money into things, they could make money on the black market: the Painter Georg Grosz recalls a friend who was a chef in an upscale Berlin restaurant, late one evening Georg was invited back to the chef’s black market stash. Grosz writes: “on the top floor of a faceless house behind triple bolted doors we picked our way through crates of pots of jam, jars of tomatoes and pickles and delicacies, blue tins of Russian caviar, all piled high as the ceiling, that is as much as one could see the ceiling, because from it dangled all kinds of sausages, Italian salamis, bolognas, slabs of bacon and ham. ‘I don’t know where to put it all’, the chef confessed cheerfully. ‘Money isn’t worth a damn these days, so even the hallways are bursting with the stuff’ and then he set up a luxurious meal for Grosz and toasted the inflation “Cheers, My Dear Fellow. Long live this fool’s paradise!”
Weimar sex-workers
February 1923, the value of the German mark is at 28000 marks to the dollar. A small donation of dollars from an American supporter turns into enough German marks to allow the Nazi Party to turn its party newspaper into a daily newspaper. It is now being read across the country.
May 1923, the value of the German mark is now at 48000 marks to the dollar. A German activist in the Ruhr, fighting against the French is caught and executed. When it turns out that he was once a member of the National Socialist Party, Hitler declares him the first Martyr for the Party. Hitler is making speeches against what he calls the Jewification of the Economy: he says, “The government calmly goes on printing these scraps of paper because, if it stopped, that would be the end of the government…. The state itself has become the biggest swindler and crook. A robbers’ state. If the horrified people notice that they can starve on billions, they must final agree: we shall no longer submit to a state which is based on the fraudulent idea of a majority and instead demand a dictatorship.”
July 1923, the value of the German mark is now at 350,000 marks to the dollar. The printing presses produce the first 500,000 mark notes, plans are made to create a million mark note. Farmers are refusing to sell their products in cities, preferring instead to smuggle them into neighbouring countries where they can sell for hard currency. Roaming gangs of starving city dwellers start to invade country towns and farms, stealing crops and butchering animals.
August 1923, the value of the German mark is now Four and a Half million marks to the dollar. A loaf of bread costs 200,000 marks. The German government is hemorrhaging money in its support for the Ruhr valley and begins to make plans to abandon the resistance there. The Nazis declare this to be another decision of Jewish politicians betraying Germany. The national printing presses are working so hard to produce more money that states and municipalities are authorized to start minting their own bills, one produces a 500,000 mark note on which is written “when my value is no longer enough to buy a lump of coal, please feel free to burn me instead”
Sep 3rd, the mark is now at 9.7 million marks to the dollar
Sep 6th, 33.2 million marks to the dollar
Sep 7th, 53 million marks to the dollar
Sep 13th, 92.4 million marks to the dollar
Oct 1st, 242 million marks to the dollar
Oct 8th, 838 million marks to the dollar
Oct 10th, 2.9 billion marks to the dollar
Oct 31st, 25 billion marks to the dollar
Nov 15th, 2.5 trillion marks to the dollar
Today, outside my window, it is 2024, approaching winter, and still, four years later, the whole world is coping with the collective trauma of the Covid lockdown. Some friends recently introduced me to their charming son, who at 20 years old, is struggling with complex mental issues that mostly came on during the time in which he was isolated from the rest of the world. I’d ask you to imagine what it must have felt like to have money, this thing which orders our entire world, which we rely on at every moment, from the most banal transaction to the most important decisions we make in life, become, over the course of two years, instead of a symbol of order, of possible stability and literal wealth, become a symbol of complete insanity and unreliability, where the very worst thing that you could possible own was money. Personally, I have a nasty moment of angst in that tiny pause between when I place my credit card on the scanner at a store, to when I see the words ‘accepted’. Whereas, one shopper in 1923 writes “the boy at the drugstore makes calculations on a paper bag, they seem to worry him, he begins them all over again on the other side of the paper bag. There are several weary shoppers waiting behind me in the store. At last he looks up and says ‘the price is 375 millions’. I recover my breath and turn out my market basket, in which million mark notes are done up in bales.” I can’t imagine the nightmare of having money turn into this rotting, terrible thing. Nothing can excuse the actions of the German population during WW2, however, in terms of looking for ways to explain how they came to act the way they did, that collective trauma must have been a factor.
And in 1923, along with the disorder in personal lives, Germany is falling apart. A left wing uprising is brutally suppressed. A right wing uprising in Munich, led by Hitler, turns out luckily to be a farcical mess and fails completely to gain popular support. A huge gang of out of work Berliners are told that there is no cash left to pay their unemployment wages, and a rumour starts that Jewish money changers used up all the available paper money. Huge riots start in Berlin, destroying Jewish homes and businesses. When the police are called they beat up and arrest the Jews who are being assaulted.
Hitler marches in the attempted coup in Munich
And strangely, the end to hyperinflation, when it comes, comes quickly. After a great deal of infighting from politicians and industrialists, where the captains of industry finally manage to get themselves a majority on the board of a new bank, thus ensuring they will have control over the post-inflation economy. a new currency is introduced, the Rentenmark. Not based on the gold standard, since there isn’t enough gold left in Germany’s banks, but based against the mortgaged value of the agricultural and business land in Germany. The value of one Rentenmark is fixed as 1 trillion old paper Reichmarks, and in a matter of a few months, that new stable currency replaces the old rotten one.
At the same time, France and Belgium are admitting that the invasion of the Ruhr Valley cost them more than they gained, American politicians are declaring themselves open to some renegotiation of the French and British Dept, a new Reparations committee is set up, for the first time including members from Germany, to begin new discussions on how Germany will pay its war debt, and a new German president passes tax decrees which severely raise penalties for non payment and get rid of the possibility of delaying payments. Germany begins to find it’s feet again.
For ordinary Germans the introduction of the new currency means a short period of intense hardship, however, mostly the morale of the country is good and the hardest thing to learn is remembering how to deal with this new money, where butter doesn’t cost a million marks, and where the next day the price of that butter is the same as it was the day before. Most of all, Germans are thrilled some stability is coming to their lives.
If all of this seems familiar, well, that’s the whole point of this Podcast, trying to prove the unprovable idea that the Weimar Republic invented the modern world. And maybe this one is easier to prove than normal. After all, sometimes it seems like the last 20 years has been all about the drama of money.
We’ve had to watch bank failures, and bailouts, austerity programs and unending fiscal crisis. Greece and Spain and Ireland and Iceland have all had their bubbles and then been forced to cut services and spending, Brexit has hit the British Economy like a European made tank, and in the US financial institutions like Bear Stearns, Lehmann Brothers, Freddie Mac and Fannie Mae have become such infamous outlaws that they’ve made hit movies about them. The Drama of Money. We’re still doing it, but man, Weimar did it so spectacularly and helped to give birth to the modern world.
Thanks for listening. Hit subscribe or follow if you want to know when the next episode appears. I don’t have any advertising budget for this show or really a budget at all, I’m just some obsessed singer repurposing an old microphone, so if you leave a review on your app, or hit the star button, it really encourages the podcast to be found by other listeners, or just forward a link to a friend, that’d be great. And I hope you’ll join me in the coming months as I explore more about the strange birth, life and death of an experiment in creating a new society.
And who am I to discuss Weimar? Well, I’m not a sociologist, a political scientist or an historian. I’m an obsessive artist. A singer, play-write and cabaret performer who has been obsessed with the arts and music of the Weimar republic all my life. I’ve recorded three albums dedicated to the music of this time and particularly the music of Kurt Weill and Bertolt Brecht. If you want to listen to them, just search for Bremner Fletcher Duthie in any music streaming site, and you’ll find all my albums. And if you want to know more about my work, see the images from the period, or suggest a specific Weimar subject for an episode, check out bremnersings.com
Join me next time for another walk through the amazing creative madness of 1920’s Germany.