• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Why Did Germany Experience Hyperinflation in 1923?

Extracts from this document...

Introduction

Amanda Belden L6A Dec 2001 WHY DID GERMANY EXPERIENCE HYPERINFLATION IN 1923? In 1923 the Weimar Republic experienced its biggest economic crisis yet, hyperinflation. The crisis was not created because of one event, but due to several, whose consequences escalated as the years went on. The root of the problem lay in the economic hangover of WWI as Germany lost the war and was severely in debt. The Weimar constitution prevented quick decisions to be taken and so the resolves were the 'easy way out' rather than those that would help the republic in the long-term. The invasion of the Ruhr was the last measure for the German economy, and as a result it succumbed to hyperinflation. It was unknown at the time how the decisions taken would affect Germany's economy later on, and so the government acted in the present rather than the future. However, with hindsight, it is possible to outline the lead up to the economic crisis and hyperinflation in Germany. After WWI, the defeated Germany was in a very bad position economically. Inflation had begun during the war itself, as the government of the time funded the war by borrowing and printing more money. The government's expenditure was high and taxation low. It had been assumed that Germany would actually win the war and that peace would lead to economic stability. ...read more.

Middle

Both of these reasons heavily impacted the decisions the Weimar government took in response to the inflation after WWI. In 1919 the German government had two options in which to curve the effects of inflation. One was to cut expenditure and to raise taxes. Naturally this would have been very unpopular with the German people who had little money. Such action would have hit the industries hard so unemployment would have risen and incomes fallen. However, there would have been an increased confidence in the currency and the foreign value of the mark would have been stabilised and inflation lowered. The other option open to the government was to borrow and print more money. This seemed much more attractive to the government as there was an acute need for money in the economy. With this method the government was able to maintain government expenditure, which meant that welfare payments would remain and the government's economic policies would seem popular. The government chose the easy and more favourable option, to print and to borrow more money. The problem with this was that with borrowing money, Germany fell further and further into debt. It also became imperative to feed money into the economy as the Weimar Republic was facing pressures on all sides. The victorious powers had imposed the Treaty of Versailles on Germany and were continually asking for reparations, and the people in Germany were starving as the living standard fell further. ...read more.

Conclusion

The above shows that the crisis was not triggered by one factor, there were several. Germany experienced inflation in 1923 because it was sparked by the Ruhr invasion, but it cannot be said whether hyperinflation would not have occurred without such a trigger. At the time the Weimar government was criticised for hyperinflation, but there were other factors involved, such as French revenge for WWI and the nature of the Weimar constitution. The pressure of reparations and welfare seemed to prevent a cure from being found in response to inflation. After such a destructive war the people were looking for an immediate response to the problem, not a long-term one. The government also decided to prevent unemployment, trying to act in the best interests of the people as Germany had just been hauled through a gruesome defeat, which had stripped the country of its pride, and the people were severely wounded. However the printing of more money caused inflation. Blame for the crisis was not placed on the Imperial government, which had borrowed the money during the war, but on the Republic, which had to 'clean up' the causes of such action. Unfortunately inflation was slow to take hold in the post-war period, if it had been more apparent, it may have been conquered earlier. Although Weimar ended up surviving hyperinflation, the Republic was tarnished with its memory. The crisis became a shadow, which only took its full form during the Depression of 1929 and contributed to the death of the republic. ?? ?? ?? ?? ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Markets & Managing the Economy section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Markets & Managing the Economy essays

  1. What are the origins of the Pension Crisis and what can be done to ...

    some circumstances, they can choose to leave the state second pension and join a private scheme of some kind instead and this is known as contracting out. An occupational pension (non-state) may be a Defined Benefit also known as a final salary says how much an individual will receive as long as they make certain contributions.

  2. The British Experience.

    In 1984, British Telecom, the UK government's own ex-monopoly carrier, was then privatised, and this was the first (and still largest) sell-off of public network assets in the world. Until 1991, this duopoly staggered along, showing much the same problems as Optus has had in Australia.

  1. The General Strike 1926

    However, following the Geddes Axe, there was a slight fall in the cost of living which improved life for a very short while. Another Royal Commission then recommended there be another cut to miners' wages. The working class were often hardest hit by the smallest fluctuation in wages and economics.

  2. Is the Government to Blame for Higher Petrol Prices?

    Price and Output both increase to a new equilibrium. A decrease in Demand means that less is demanded at each and every price. The Demand curve shifts inwards to the left (diagram I). Price and Output both decrease to a new equilibrium.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work