✍️ Summary

• The book portrays the devastating effects of hyperinflation on the German economy, currency & society as well as the even more painful consequences of the return to stabilisation of the currency (following hyperinflation) during that period.
• “Money is no more than a medium of exchange. Only when it has a value acknowledged by more than one person can it be so used. The more general the acknowledgement, the more useful it is.”
• “Once no one acknowledged it, the Germans learnt, their paper money had no value or use – save for papering walls or making darts.
• "The discovery which shattered their society was that the traditional repository of purchasing power had disappeared, and that there was no means left of measuring the worth of anything.”
• “In hyperinflation, a kilo of potatoes was worth, to some, more than the family silver; a side of pork more than the grand piano. Theft was preferable to starvation; warmth was finer than honour, clothing more essential than democracy, food more needed than freedom.”

📖 Importance of reading

• “When a nation’s money is no longer a source of security, and when inflation has become the concern of an entire people, it is natural to turn for information and guidance to the history of other societies who have already undergone this most tragic and upsetting of human experiences.“

😢 Who Lost

• *** The general population, especially the middle class and those on fixed salaries, experienced severe financial hardships as their savings and purchasing power were wiped out by the rapid devaluation of the currency.***
• Many small businesses and local industries struggled as the costs of production skyrocketed and customers were unable to afford their goods and services.
• “The best- paid workers were unable to purchase the barest necessities of life. The others and – as ever – those on fixed incomes or dependent on savings suffered accordingly.”
• “The failure of wages to keep pace with prices, and the consequent impoverishment of even the most fortunate workers, had a direct effect upon the trade unions.”

😅 Who Benefited

• Speculators and those who had access to foreign currencies or tangible assets (such as property, gold, or other commodities) were able to profit from the chaos and protect their wealth from the effects of hyperinflation.
• Some industrialists and large corporations were able to benefit from the situation by buying up assets and smaller competitors at heavily discounted prices due to the currency collapse.
• There were however many small business owners early-on who were able to stave-off bankruptcy simply by being able to increase prices of in-demand goods in the face of increased inflation.
• “In the countryside the landowners and farmers were less affected than anyone, producing most of their own essentials and putting up commodity prices as regularly as the shopkeepers.”
• “Foreigners were also buying up real property and interests in factories and all kinds of businesses. To some extent this was at the expense of the workman whose wages lagged behind the climbing cost of living, but it was mainly at the expense of the middle classes whose capital was destroyed and largely exported.”
• “Anyone who was alive to the realities of inflation, he said, could safeguard himself against losses in paper currency by buying assets which would maintain their value: houses, real estate, manufactured goods, raw materials and so forth.”

😠 Effects on Society

• The hyperinflation crisis led to a significant decline in the standard of living for many Germans, as the cost of basic necessities became prohibitively expensive.
• “In view of the rocketing cost of labour, the eagerness of manufacturers to extend their works, renew their plant and embark on large improvement schemes was at first sight somewhat extraordinary.”
• “From a social point of view, too, so much commercial building was unfortunate in a country now short of over a million houses – in part the result of the rent restriction Acts which had throttled the private sector of the building industry. “
• “Those eating well in restaurants were those who could afford to eat well in restaurants. As money saved diminished like a lump of ice on a summer’s day, there was in any case every incentive to eat it, drink it or be merry on it.”
• “Few families can afford meat more than once a week, eggs are unprocurable, milk terribly scarce and bread already sixteen times the price of a few days ago when the maximum price was abolished.”
• “It was quite impossible to quote prices in advance, and customers themselves would not take the risk of committing themselves”
• “Exorbitant interest rates, at 25 per cent a month, and the universal shortage of money meant that normal commercial life was seriously hampered. “
• “When people do not understand what is happening, or why it is happening, and have no idea about what to do about it, and are not told, panic must follow.”
• “Petty crime, the crime of desperation, was flourishing. Pilfering had of course been rife since the war, but now it began to occur on a larger, commercial scale. Metal plaques on national monuments had to be removed for safe-keeping.”

🔽 Reduced Bankruptcies & Perverse Incentives

• “The government can have seen only two relatively bright patches…one was that the country’s internal debt, to the distress of the stockholders, had dwindled to nothing. The other was the almost total absence of unemployment.”
• “Before the war, when the mark was sound, there were normally about 9,500 bankruptcies a year. As wartime inflation increased, the number regularly dropped, from 7,739 in 1914, to 807 in 1918. The total number in 1921, during the first seven months of which the mark was fairly stable, was 2,975, more than double the 1920 figure and three times that of 1919.”
• “The 1921 figures were the most indicative; for in comparing the number of bankruptcies during the various months of the year it could be shown that a falling mark was associated with a decline in bankruptcies, and vice-versa”
• “The government was aware, rises in wages – and government salaries – would always be 15 days in arrears of the rise in the cost of living “

👨‍👩‍👧‍👦 Stories from People

• “Communities printed their own money, based on goods, on a certain amount of potatoes, or rye, for instance. Shoe factories paid their workers in bonds for shoes which they could exchange at the bakery for bread or the meat market”.

• There are stories of people needing wheelbarrows full of cash just to buy basic necessities, such as bread or milk. The rapid decline in the value of the currency meant that people had to carry large amounts of banknotes to make everyday purchases.
• “There were stories of shoppers who found that thieves had stolen the baskets and suitcases in which they carried their money, leaving the money itself behind on the ground”
• “There were stories of restaurant meals which cost more when the bills came than when they were ordered. A 5,000-mark cup of coffee would cost 8,000 marks by the time it was drunk.”

• “Speculation in currency was in no way the exclusive domain of the financially informed – banker, politician, businessman or workman (too).”
• “Those with foreign currency, becoming easily the most acceptable paper medium, had the greatest scope for finding bargains. The power of the the dollar, in particular, far exceeded its nominal rate of exchange.”

• “My relations and friends were too stupid. They didn’t understand what inflation meant. They didn’t rush to get rid of their money (that was what the Jews and the Germans did). All my relations thought it would stop the next week – and they went on thinking so. They woke up very late. They started selling their valuables because they couldn’t buy food – the china from the mantelpiece, the furniture, the silver.”

• During the hyperinflation period, there were times when prices appeared to be stabilizing, giving people a sense of hope that the worst was over. However, these moments of respite often proved to be temporary, leading to further disillusionment and despair as the economic situation continued to deteriorate.

• “The countryside had had a bumper harvest, but there it remained because of the farmers’ steadfast refusal to take paper for it at any price.”
• “No pork was being delivered because, said the reports, the farmers were eating it themselves. Owing to the absence of artificial oils from abroad there was a shortage of cattle feed, and milk yields were falling off."
• "Berlin’s daily milk litres had fallen to 130,000, and the city’s biggest dairy, was selling only 25,000 litres a day against more than a million before the war. Butter was not obtainable, and would anyway have been too expensive for most people.”

• “It was the natural reaction of most Germans, or Austrians, or Hungarians – indeed, as for any victims of inflation – to assume not so much that their money was falling in value as that the goods which it bought were becoming more expensive in absolute terms; not that their currency was depreciating, but – especially in the beginning – that other currencies were unfairly rising, so pushing up the price of every necessity of life.”
• “Circumstances rapidly grew more favourable to the forces of Fascist darkness operating in the south.”
• “Economic distress is leading the people to be much more amenable to authority as representing the only hope of salvation from the present state of affairs.”

• “Dr Schacht’s account of the inflationary years recalled that farmers ‘used their paper marks to purchase as quickly as possible all kinds of useful machinery and furniture – and many useless things as well. That was the period in which grand and upright pianos were to be found in the most unmusical households.”

• “In Vienna most people lived in flats, for only the very rich had houses which they could afford to keep in repair. Because rents were kept so low (rent restriction is habitually one of the first and cheapest of government devices to restrain the cost of living under inflation) flats themselves were in short supply.”
• “Though unable to raise their rents, many landlords at least had the consolation that their own mortgage payments were no more than a nominal burden to them “

💰 Scale of Devaluation

• "In the eight years since 1913, the price of rye bread had risen by 13 times; of beef by 17. Those were the commodities which had fared best. Sugar, milk, pork and even potatoes had risen between 23 and 28 times; butter had gone up by 33 times."
• "These were only the official prices – real prices were often a third higher – and all these prices were roughly half as much again as in October, only two months before.”

• “A litre of milk, which had cost 7 marks in April 1922 and 16 in August, by mid- September cost 26 marks. Beer had climbed from 5.60 marks a litre to 18, to 30. A single egg, 3.60 in April, now cost 9 marks.”
• “September’s 26-mark litre of milk became October’s 50-mark litre. Butter at 50 marks a pound in April could be had for 480. In two months the price of an egg had doubled to 14 marks. A pocket comb cost 2,000 marks; a pot of honey 8,000; a pair of child’s trousers 5,000; a dozen kitchen plates 7,500; a pair of silk stockings 16,500; a roll of lavatory paper 2,000; a pair of children’s shoes 2,800. Three masses for a relation, however, were still available at the old price of 150.”
• “Milk which had cost him an unbelievable 78 marks a litre in the first week of November cost him 202 marks a month later. Butter had risen from 800 to 2,000 marks a lb.; sugar from 90 a lb. to 220; eggs from 22 each to 30. Although potatoes were still available for 8 marks a lb., an increase of only 1 mark, he had to pay 1,400 marks for 1 lb. of eatable sausages to go with them.”
• “The gold value of the money in circulation, equivalent to nearly £300 million before the war, and to £83 million in July 1922, had by November fallen to £20 million.”

• “In October 1923 it was noted in the British Embassy in Berlin that the number of marks to the pound equalled the number of yards to the sun."
• "At the end of the Great War one could in theory have bought 500,000,000,000 eggs for the same price as that for which, five years later, only a single egg was procurable.”
• “Although in real terms the stock market began to go up, the mark’s purchasing power continued to go down.”

🚫 Capital Controls

• “At home in Germany, where people were resorting to trade by barter and progressively turning to foreign currencies as the only reliable medium of exchange, new Orders were brought in relating to the purchase of foreign bills and the use of foreign exchange to settle inland payments.”
• “A currency speculator who borrowed from the Reichsbank on January 1, 1923, enough paper marks (about 1,98m) to buy 100,000 dollars, and on April 1 sold enough dollars (about 80,000) to repay the bank, and who again borrowed the equivalent of 100,000 dollars and continued thus until the end of May, could have made the equivalent of a quarter of a million dollars at the expense of the acceptors of pure marks."
• "His problem then, of course, was in what form to keep his profits: if they were in marks, they would evaporate before his eyes.”

🧻 Stability then created Unemployment

• “The overriding issue was the swelling unemployment. The extent to which the act of stabilisation contributed to the number of workless is not easily determinable.”
• “The old currency having been reduced to total unacceptability, there was no way whereby printing money could keep anyone in his job any more.”
• “The choice had simply become between unemployment and financial chaos or unemployment and monetary discipline.”
• “When the mark was still falling, the merchants had been able to charge high prices with the justification that they had to cover themselves against the fall…The biggest importers, who had ordered when depreciation was in full spate hoping to repay in depreciated marks at the Reichsbank’s expense, found themselves threatened with bankruptcy, panicked, and began to throw their stocks on to the market.”
• “Stabilisation had ended the period when entrepreneurs could borrow as much as they wished at the expense of everyone else. A vast number of enterprises, established or expanded during monetary plenty, rapidly became unproductive when capital grew short.”
• “More realistic transport, fuel and food prices, and the return of rents to economic levels meant that wages, too, had to be raised substantially in real terms.”
• “Companies were often unable to buy new machinery after stabilisation came, so much so that huge stocks of unsold iron and coal began to build up.”
• “In the inflationary period new factories were built, old establishments reorganised and extended."
• “The conflicting objectives of avoiding unemployment and avoiding insolvency ceased at last to conflict when Germany had both. The longer the delay, the more savage the cure.”

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