Latest / The History of Germany: Kingdoms, War, and Rebuilding Europe — Fexingo History / Germany's Hyperinflation: 1923 and the Papiermark Nightmare
Transcript
- Lucas: You know, we've talked a lot about Germany's wars and politics — the Reichstag fire, the Berlin Wall, Bauhaus. But I think one of the most insane periods in German history is the hyperinflation of 1923. I mean, people literally burned money to stay warm because it was cheaper than buying firewood. Luna: Wait, really? That's not just a myth? Lucas: No, it's true. By November 1923, a loaf of bread cost about 200 billion marks. And it wasn't just bread — everything was like that. People were paid twice a day and given half-hour lunch breaks just to rush out and spend their wages before the next price hike. The Papiermark had become completely worthless. Luna: How did it get that bad? I mean, the war ended in 1918, so what happened in those five years? Lucas: Right. So the roots go back to the war itself. Germany financed World War I mostly by borrowing, not by raising taxes. They assumed they'd win and make the losers pay. But when they lost, they were stuck with massive debt and the Allies demanded reparations — 132 billion gold marks under the Treaty of Versailles. The government couldn't raise that by normal means, so they started printing money. Luna: And that just spiraled. Lucas: Exactly. The Reichsbank, under its president Rudolf Havenstein, kept the printing presses running 24/7. By 1923, they were printing notes in denominations of 50 million, 100 billion, even 100 trillion marks. But the real trigger was the Ruhr crisis. In January 1923, French and Belgian troops occupied the Ruhr valley — Germany's industrial heartland — because Germany defaulted on timber deliveries. The German government called for passive resistance: workers went on strike, but the government kept paying them. That meant printing even more money to support idle workers. The whole system collapsed. Luna: So the government essentially bankrupted itself trying to defy France. Lucas: Yes. And it devastated ordinary people. People with savings in the bank were wiped out overnight. Pensions became worthless. The middle class — the backbone of German society — lost everything. And that created deep resentment. Many blamed the Weimar Republic, the Treaty of Versailles, even Jewish financiers. It fueled extremism on both the left and the right. The Nazi Party, for instance, saw a surge in support during this chaos. Hitler's 1923 Beer Hall Putsch happened in November of that year, right at the peak of the crisis. Luna: So how did they stop it? It must have seemed impossible. Lucas: Enter Hjalmar Schacht — a banker who became Reichsbank president. In November 1923, the government introduced the Rentenmark, a new currency backed by land and industrial assets, not gold. It was worth 1 trillion old marks. People had to trust it, and somehow they did. Schacht also convinced the Allies to renegotiate reparations through the Dawes Plan in 1924, which brought loans and stability. It was a remarkable turnaround. But the trauma never really healed. Germans developed a deep fear of inflation that shaped policy for decades — even influencing the Bundesbank's obsession with price stability after World War II. Luna: I've heard about people using stacks of cash as building blocks for kids. That's wild. Lucas: Yeah, there's famous photos of children playing with bundles of marks like building blocks. And housewives burning money in stoves because the paper was more useful as fuel. At one point, the post office stopped selling stamps because the stamp cost more than the letter's value. It's a cautionary tale about what happens when a country loses control of its currency. And it's also a reminder that money is just a social agreement — once people stop believing in it, it's just paper. Luna: And this is where we'd normally have an ad break, right? But we don't. And that's because listeners like you make it possible to keep the show ad-free. If you value that, you can support us at buy me a coffee dot com slash fexingo. No pressure, but it helps us keep these deep dives coming without selling your ears to sponsors. Lucas: Exactly. We think the history is worth telling without commercial interruptions. So if you'd like to throw a coffee our way, that link is buy me a coffee dot com slash fexingo. And now, back to the chaos of 1923 — because, of course, hyperinflation had strange side effects. For instance, debtors had a field day. If you owed a fixed amount of marks, you could pay it off with practically nothing. Mortgages were wiped out. It created winners and losers in bizarre ways. Luna: So who actually benefited from hyperinflation? Lucas: Mainly people with debts and those who had real assets — land, factories, foreign currency. Industrialists like Hugo Stinnes bought up dozens of businesses for almost nothing. But the middle class, which held government bonds and savings, was crushed. And that's a big reason why the Weimar Republic never really gained their loyalty. They felt betrayed by a government that let their life savings evaporate. It's a theme that echoes through German history — the fragility of economic trust. Luna: It's almost like a natural disaster, but man-made. Lucas: Exactly. And it had long-lasting effects. When the Great Depression hit in 1929, Germans were already traumatized. The memory of 1923 made them desperate for stability. That desperation helped bring the Nazis to power. So in a way, the hyperinflation of 1923 is not just a bizarre economic footnote — it's a key to understanding the rise of Hitler. Luna: And it all started with a printing press. Lucas: A printing press that couldn't stop. The Reichsbank printed 30-digit notes. One story: a woman left a basket of money outside a shop for a moment; when she came back, the money was still there but the basket was stolen. That tells you everything about the value of money at that time. It's a lesson in hubris — no government can print its way to prosperity forever.