In 1920, Germany had enjoyed a remarkable prosperity. Prices were steady, business was humming, everyone was working, the stock market was skyrocketing.

Until it was all over, no one seemed to notice any connection between the earlier false boom and the later inflationary bust.

As F.A. Hayek pointed out perfectly: „The place you should study isn't the bust. It's the boom that should make you feel leery, that's the thrust of my theory. The capital structure is key. Malinvestments wreck the economy. So the boom turns to bust as the interest rates rise.“

All the German marks that existed in the world in the Summer of 1922 (~ 190 billion dollar) were not worth enough to buy a single newspaper or a tram ticket just one year later (by November 1923).

During the boom, almost any kind of business could make money. Business failures and bankruptcies became few. The boom suspended the normal process of natural selection by which the nonessential and ineffective otherwise would have been culled out.

During the bust, farmers, who were comfortable enough, would not sell their food for worthless money. Starvation and abject poverty reigned. The middle class virtually disappeared. Doctors and lawyers pawned their earthly goods and turned to field or factory to earn a little food.

The Rentenmark was placed in circulation beside the devalued Reichsmark and carried no real value of its own but the naked avowal that there would be a fixed supply. The return to a stable currency was so absurdly simple as to become known as the “Rentenmark miracle”.

Germany now took its stored-up dose of hard times. Credit for businesses was impossible. Unemployment skyrocketed. Government spending was slashed, government workers dismissed, taxes raised, working hours increased, wages cut. Millions of voters flocked from moderate to Nazis.

The largest gainers by far was the Reich government and privat debtors. Inflation relieved them of their entire crushing debt.

On the other side, everyone who had owned marks or notes, or any sort of contractual right to money suddenly and magically owned nothing.

Farmers in particular were the classic case of invulnerability to inflation, because they always had food, their farm were constant values, and the many who had mortgages on their farms were forgiven their debts outright.

The worst of the agony suffered Germans middle class, the savers, pensioners, purchasers of life insurances and bond holders. This class paid the piper for all of Germany. Germany left the levy to fall on those who were too innocent to evade it, and from them it took everything.

Keynes himself noted that “The best way to destroy capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. They can confiscate arbitrarily.”

The inflation was merely a transfer of wealth, like any tax, and not in any sense a destruction of wealth. For every Germans total loss, there was an equivalent gain to some other German debtor or to Germany as a whole, through the discharge of their debts.

The reversal of the payment deficit was a sure signal that the end was near. In the collapsing stages, Germany ran a huge payments surplus as all the worthless marks came home in search of something to buy. This reversal of balance was an occasion for deepest fear, not hope.

Once begun, the inflation required ever more inflationary expansion just to support the old debts. Germany had to run faster and faster to stay ahead of the engulfing wave, until it simply could not run any faster.