alternatehistory.com

Hi!

I'm not sure how plausible this is, but how would history have unfolded had there not been the hyperinflation in Germany in the 1920's? I figure inflation of some sort is necessary to help pay for the First World War, but I can't imagine things getting THAT bad. Then again, perhaps I've been fortunate to live in a country where 10% inflation a year is "bad" so I can't imagine something like this happening to pay off debt (I hope it doesn't happen to the US with the national debt!)

Here's something from Wikipedia on the inflation.

It is sometimes argued that Germany had to inflate its currency to pay the war reparations required under the Treaty of Versailles, but this is misleading, because the treaty did not allow payment in German currency. The German currency was relatively stable at about 60 Marks per US Dollar during the first half of 1921.[1] But the "London ultimatum" in May 1921 demanded reparations in gold or foreign currency to be paid in annual installments of 2,000,000,000 (2 billion) goldmarks plus 26 percent of the value of Germany's exports. The first payment was paid when due in August 1921.[2] That was the beginning of an increasingly rapid devaluation of the Mark which fell to less than one third of a cent by November 1921 (approx. 330 Marks per US Dollar). The total reparations demanded was 132,000,000,000 (132 billion) goldmarks which was far more than the total German gold or foreign exchange. An attempt was made by Germany to buy foreign exchange with Marks backed by treasury bills and commercial debts, but that only increased the speed of devaluation. The monetary policy at this time was highly influenced by the Chartalism, and was notably criticized at the time from economists ranging from John Maynard Keynes to Ludwig von Mises.[3]
During the first half of 1922 the Mark stabilized at about 320 Marks per Dollar accompanied by international reparations conferences including one in June 1922 organized by U.S. investment banker J. P. Morgan, Jr.[4] When these meetings produced no workable solution, the inflation changed to hyperinflation and the Mark fell to 8000 Marks per Dollar by December 1922. The cost of living index was 41 in June 1922 and 685 in December, an increase of more than 16 times. In January 1923 French and Belgian troops occupied the industrial region of Germany in the Ruhr valley to ensure that the reparations were paid in goods, such as coal from the Ruhr and other industrial zones of Germany, because the Mark was practically worthless. Inflation was exacerbated when workers in the Ruhr went on strike, and the German government printed more money in order to continue paying them for "passively resisting."[5] Although reparations accounted for about one third of the German deficit from 1920 to 1923,[6] the government found reparations a convenient scapegoat. Other scapegoats included bankers and speculators (particularly foreign). The inflation reached its peak by November 1923, but ended when a new currency (the Rentenmark) was introduced. In order to make way for the new currency, banks "turned the marks over to junk dealers by the ton"[7] to be recycled as paper.
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