How did the Weimer Republic make inflation worse in Germany?

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brettd's profile pic

brettd | High School Teacher | (Level 2) Educator Emeritus

Posted on

I agree that much of the economic ruin that followed World War I and the Treaty of Versailles was inherited by the Weimar Republic rather than caused by it.  To meet the outrageously high reparations payments demanded by the Treaty, shipments of gold were sent from Germany every six months, depleting national gold reserves and raising inflation.

Germany was given a six month reprieve when it missed a payment, and then they missed another one and the French invaded the Ruhr Valley and began confiscating not only factories and trucks, but the minerals from the Ruhr mines.  Germans went on strike rather than mine for the French, and inflation went through the roof.

So if the Weimar Republic was responsible for anything, perhaps it would be their inability or unwillingness to enforce order within the country, or to engage diplomatically outside of the country.  Still, I don't think it would have been enough.

hi1954's profile pic

hi1954 | Teacher | (Level 1) Associate Educator

Posted on

It's true that the provisions of the Versailles Treaty ruined the economy of Germany to an extent that most Americans today can't comprehend, with literally wheelbarrows of cash needed to buy a loaf of bread, and banknotes for a hundred marks being recalled and reissued as million mark notes, etc.  And the situation was made worse by the seizure of German businesses by France mentioned above, but the loss of teritory in East Prussia and other parts of Germany which became parts of Czechoslovakia, Poland and France decreased the capacity of Germany to function economically, and the worldwide depression caused by the war and the stock bubble in the US in the 1920s made it even worse.  The chaos of Socialist and Communist revolutions throughout the German states and the internal warfare of the Spartacists and Freikorps kept any sort of coherant policies about anything from being instituted by the Weimar government.  The fact is that the people of Germany were not fully in favor of the Weimar regime, and many were not happy with any democratic government.  Although people wanted the vote and a voice in the running of the state they also wanted a strong leader of the government, preferably one from the upper classes, not socialist ministers from the working classes.

In 1924 financier Hjalmar Schact and Montagu Norman, governor of the Bank of England, agreed to the credit terms of the formation of the Golddiskontbank, a German national bank with gold reserves of 200 million marks, half borrowed from the B. of E.  This actually put the Weimar regime on a sound financial footing, until the Great Depression came after 1929.  At that point there was little the German government could do to affect the inflation rate for several years.

pohnpei397's profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted on

A lot of the fault for the inflation and hyperinflation that hit Germany in the early 1920s should really be pinned on the government of Germany during the war, not on the Weimar Republic.

Because of the war, the Weimar government inherited a lot of debt.  Because of the Treaty of Versailles, it had to pay out a lot of money in reparations and had to allow the French to take a lot of equipment and such out of the Ruhr.

So the government didn't have much money.  And the government also feared that unemployment in Germany would lead to communist take over.  So they kept printing money to try to take care of their debts.  This was the main thing they did wrong -- they printed money instead of trying to cut back on spending and such.  By printing money, the made the inflation worse.

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