The Weimar Hyperinflation: When Money Lost All Meaning
By late 1923, prices in Germany were doubling every few days. How war reparations, deficit financing and a currency printing spiral combined to destroy the mark.
Sara Kimura
Contributing Historian
Germany entered the First World War financing much of its spending through borrowing rather than taxation, on the assumption — common among the major powers — that the war would be short and the costs recoverable from a defeated enemy. When Germany instead lost the war, it was left with enormous debts and, under the Treaty of Versailles, an obligation to pay substantial reparations to the victorious Allies.
The German government increasingly turned to printing money to meet its obligations, including reparations payments and domestic spending, rather than raising it through taxation, which was politically difficult in a defeated and economically strained country. As the money supply expanded far faster than the economy's actual output, prices began to rise — slowly at first, then with accelerating speed.
The crisis reached its most extreme phase in 1923, following the occupation of the Ruhr industrial region by French and Belgian troops after Germany fell behind on reparations deliveries. German workers in the region undertook a passive resistance campaign, and the government printed still more money to pay their wages and compensate lost production, pouring fuel on an already runaway inflation.
At the peak of the crisis in November 1923, prices were doubling roughly every two days. Workers were paid multiple times a day and rushed to spend their wages before they lost value further. Stories from the period describe wheelbarrows of banknotes being needed to buy basic groceries, and banknotes being used as wallpaper or children's building blocks once they became worth less than the paper itself.
The spiral was finally halted by a currency reform. A new currency, the Rentenmark, was introduced in November 1923, backed not by gold but by a mortgage on German industrial and agricultural land, and issued in strictly limited quantities. The government simultaneously committed to balancing its budget. Confidence returned quickly once the supply of the new currency was credibly constrained.
The episode left a lasting mark on German economic and political culture, contributing to a deep-seated aversion to inflation that continues to shape the country's monetary policy preferences, including its influence within the modern European Central Bank, nearly a century later.