 Case study on German

Hyperinflation
Group (13)
 Presented to :
 Mr. Harsh
maheshwari
 Presented by :
 Varsha kumari(22gsob2010522)
 Anchal (22gsob2010523)
 Richa singh (22gsob2010565)
 Alfia fatima(22gsob2010171)
 Prasoon srivastva (22gsob2010545)
 Nitin kumar tomar(22gsob2010469)
Introduction
 The German Hyperinflation of 1923 was one of the
most infamous episodes of hyperinflation in history,
and it had a profound impact on Germany's
economy and society. This hyperinflation was a
result of a combination of factors, including the
economic and political turmoil that followed World
War I and the punitive terms of the Treaty of
Versailles. Here are the key points :

 Political instability
 Financial Instability
 Financial Reforms
Political instability

 The Weimar Republic, established in the aftermath of World War

I, experienced significant political instability in its first five years:
 Frequent Governmental Coalitions: The Weimar Republic saw a
high degree of political fragmentation, with frequent changes in
governmental coalitions.
 Short-Lived Cabinets: Between 1919 and 1924, there were
twelve cabinets formed, but only two of them managed to last for
about a year. Seven others survived for less than six months.
 Treaty of Versailles: The Treaty of Versailles, often seen as a
"shameful dictate," imposed heavy reparations on Germany,
causing widespread resentment and dissatisfaction.
 Stab-in-the-Back Myth: The "legend of the stab in the back"
narrative fueled resentment, suggesting that Germany's defeat in
World War I was due to betrayal from within rather than military
failure.
 Electoral Results: Extreme nationalist and anti-
democratic sentiments were reflected in the electoral
results of the period 1920-1924.
 Formation of Nationalist Groups: Numerous small
groups of extreme nationalists emerged, advocating
anti-Semitism, anti-Bolshevism, the annihilation of
democracy, and the abrogation of the Treaty of
Versailles.
 The NSDAP: The German Workers' Party, founded in
1919, later transformed into the National Socialist
German Workers' Party (NSDAP) under Adolf Hitler,
which became a powerful instrument for the rise of the
Nazi Party.
Financial instability

 The issue of reparations following World War I created significant

financial instability and dilemmas for Germany:
 Indeterminate Reparations Claims: The Treaty of Versailles did not
specify the methods of payment or a final total amount for
reparations, leaving Germany with an uncertain financial burden.
 Surrender of Assets: Initially, Germany surrendered its remaining
gold reserves, foreign assets, manufactured goods, and raw
materials to the Allies in lieu of reparations.
 Reparations Commission: The Reparations Commission held
multiple conferences in 1920 and 1921 in locations such as Spa,
Paris, and London to determine the allocation of reparations.
 Division of Reparations: The Allies agreed that France would
receive 52 percent of the total reparations, the British Empire 22
percent, and the remaining 26 percent would be divided among
Italy, Belgium, and other nations. The United States did not
demand a share.
 Threat of Sanctions: The Allies tacitly accepted the French
proposal to impose sanctions against Germany if it defaulted on
reparations payments.
 Enormous Reparations Bill: The total reparations bill amounted
to a staggering 33 billion gold dollars in gold marks and
reparations in kind. It was to be paid over a thirty-year period.
 Government Crisis: Germany faced a government crisis in
response to the enormous demand for reparations. The
semiconservative German People's Party resigned, leading to
the formation of a new cabinet in which the Social Democrats
played a major role. The Social Democrats were one of the few
parties willing to accept the obligations of defeat.
 Threat of Invasion: The Allies threatened to invade the Ruhr
region of Germany unless the country accepted the reparations
bill.
Financial reforms
 During the ongoing financial crisis in Germany, there were
attempts at financial reform and revenue generation:
 Reparations and War Debt Burden: The German
government faced significant financial challenges, including
the burden of reparations, servicing large war debts, and
providing relief for war victims.
 Financial Reforms in 1920: Decisive financial reforms were
initiated in 1920, including tax increases, such as the
turnover tax, and the introduction of export duties.
 Reich Emergency Levy: In December 1919, the Reichstag
approved the Reich Emergency Levy (Reichsnotopfer),
which imposed a capital levy taking up to 65 percent from
the largest properties while also affecting smaller ones.
 Weakness of Nominal Taxation: The financial policy defined
taxes in terms of nominal money values, which proved
problematic as the currency continued to depreciate rapidly.
 The hyperinflation period in Germany not only led to economic
instability but also a surge in unproductive economic activities, with
the growth of middlemen and the establishment of numerous joint-
stock and limited liability companies in the commercial sector. These
developments were indicative of the financial challenges and
speculative behaviour prevalent during this During the
hyperinflationary period in Germany, the banking sector experienced
significant changes:
 Surge in Banking Employment: The number of individuals employed
in all the banks increased dramatically, rising from approximately
100,000 in 1913 to 375,000 in the autumn of 1923.
 Increased Banking Business: The growth in banking activity was not
driven by a more robust economy but was a result of the banks
being inundated with orders for buying and selling shares and
foreign exchange. The public, in increasing numbers, participated in
speculative activities on the stock exchange.
The Death of Money and the Political Birth of Adolf
Hitler
 the impact of Adolf Hitler's speeches, particularly one he
delivered in 1923 using a poignant story. Here are the key points:
 Initial Skepticism: The speaker attended National Socialist
meetings and initially perceived Hitler's speeches as nonsensical
and lacking in substance.
 Gradual Realization: Over time, the speaker came to realize that
behind the seemingly nonsensical rhetoric, Hitler possessed
unrivaled political cunning.
 The Story: Hitler told a story in 1923 during a large meeting. The
story involved an old woman who sold picture postcards during a
big gymnastic festival in Munich.
 Economic Ruin: The old woman's sales had exceeded her
expectations, but she was later devastated when she couldn't buy
even a fraction of her old stock with the devalued paper money
that she had earned.