Post World War I Medal - The High Cost of War

BRONZE MEDAL - GERMAN POST WWI HYPERINFLATION
Year: 1923+



German bronze medal minted and issued in Saxony commemorating the devastating hyperinflation in post WWI Germany listing the cost of different common goods on November 1, 1923.

Weimar Republic Hyperinflation: This is one of several variants of a medal issued to commemorate the rampant hyperinflation that led to the collapse of the German economy in late 1923.

The Treaty of Versailles (signed in 1919) required Germany to pay 132 billion gold marks in reparations to cover civilian damage caused during the war. Germany made an initial payment of 250 million in gold in August of 1921 which put a tremendous strain on the German economy and began a slow but steady inflation, as well as an increasingly rapid devaluation of the mark, as the government could not back the value of its currency with a depleted gold reserve. To pay reparations, Germany began the printing of bank notes en masse in order to buy foreign currency, which where then used to pay reparations, greatly exacerbating the inflation of the paper mark.

With dwindling gold reserves and little trade, Germany asked for a moratorium on payment which was granted in May of 1922. This same year the value of the Reichsmark plummeted and Germany continued to claim it was unable to meet its obligations. After repeated failures by Germany to make reparation payments, France and Belgium, believing that Germany was able to pay and was instead simply withholding payments, occupied the industrial Ruhr region on January 11, 1923 which is referred to as the Ruhrkampf. In response, the German government of Chancellor Wilhelm Cuno reacted by announcing a policy of passive resistance causing the productivity and regional economy of the Ruhr, the industrial heartland of Germany, to screech to a halt putting further financial strain on the already faltering German economy.

Top: Weary and suffering man, woman and child with thorny hedge in background. - DES DEUTSCHEN VOLKES LEIDENSWEG MM / The Suffering of the German People Issued by: E. Mitlehner at the Mittweidar Metal (MM) Goods Factory Below: AM 1.NOV.1923 KOSTETE - 1 PFUND BROT 3 MILLIARDEN - 1 PFUND FLEISCH 36 MILLIARDEN - 1 GLAS BIER 4 MILLIARD. / November 1, 1923 Costs: 1 Pound Bread 3 Billion - 1 Pound Meat 36 Billion - 1 Glass of Beer 4 Billion​

In answer to the strike and acts of sabotage by the German people, the occupation forces began mass arrests and deportations. As businesses lost income and those left without a paycheck by the Ruhrkampf required financial assistance from the governemnt, tax revenues shrank while financial obligations rose putting even more of a financial burden on the Government. The government's answer was to cover its need for funds by printing even more money and releasing even more currency into an already saturated economy. As a result, inflation went into overdrive and the economy went into a freefall resulting in hyperinflation.

50 million Reichsbanknote / Jul 25 1923​

For most of the first half of 1922, the mark was worth about 320 marks per dollar but in December it rose to 7,400 marks per US dollar. By November 1923 the exchange rate was 1 dollar to 4,210,500,000,000 German marks. From November 1, 1923 to November 15, 1923 represents 2 weeks of the most severe hyperinflation in Germany. Prices increased by about 2500% within that time frame. Seeking to resolve the crisis, On November 16, 1923, the Central Bank of Germany began to issue a new currency: the Rentenmark.

The Rentenmark translates to Pension (or mortgage) Dollar. As there was little gold available to back the currency, Finance Minister Hans Luther, with the help of economist Karl Helfferich, sought to create a currency backed by real goods. This new currency was backed by the land used for agriculture and business. This was mortgaged, largely with significant input from US business, for roughly 3.2 billion Goldmarks.

1 Rentenmark / "Issued on the basis of the decree of October 15, 1923 good until January 30, 1937"​

2 Rentenpfennig / 1923​

The exchange rate was 1 Rentenmark to 1 Trillion Deutsche Mark. 1 Rentenmark was equivalent to 1 Goldmark. Effectively cutting off 12 zeros from the prices of all goods & services and effectively ending the hyperinflation crisis. While many will claim that it was the eventual return to the Gold Standard that was the cure to an economy destroyed by the use of so called 'fiat' paper money. It was, in fact, the valuation of Germany as a nation along the lines of its land and resources, ALL its holdings, not just gold, that stabilized the monetary system. Germany was on the gold standard during hyper-inflation, they just didn't have any more gold. They had to return to the gold system after recovery as the rest of the world was on the gold standard.

It was this more realistic, holistic way of assessing the value of a nation and the power of its currency that is now the standard instead of basing monetary worth on simply how much gold a nation can hoard to back its currency. Contrary to what some may say, there is little similarity between the German economy and monestary systems of the early 1920's, strained by post war issues and demands leading to hyperinflation, and the modern US, and world, economy.

All images are mine. I studied post world war I in college and wrote my thesis on the subject and I am thinking of expanding it in book because I have already written so much about it.

 

Log in or Sign up to hide this ad.

Are you a fan of MMT?

 

I have a very similar one of those. In fact I would be surprised if it wasn't the same medallist. Great post.

 

Great article, unless I missed it, you left out one little known aspect of the inflation which I will share with you. When the German workers went on strike the German government decided to pay them all unemployment compensation which made the entire government complicit in French eyes. The French then threatened to take over the entire economy. To prevent that the German gov. with a degree of "schadenfreude" started printing money as fast as possible to destroy the economy and thus prevent a French take over.

 

Great looking medal up there, here's one I picked up last week as I like the art work, fat man on a bushel of wheat. At least that's what it looks like to me. You know anything about it @Cachecoins?

 

Yes, well the French wanted their money and began loading up anything not tied down. They wanted to take control of the country as a whole ( they were already occupying the most productive area of Germany). However, as you say, the German government had promised to support the workers for NOT working (on top of those who couldn't) so they had to print that money anyway because they most certainly did not have it to pay out. Of course printing more money was not the answer but after a certain point it was like a car half over the cliff, no stopping it.

Germany funded much if the war through loans and war bonds already, intending to pay them back once they won.... This was another serious problem as those loans were due and they had to pay them as well as reparations and support a population, many of whom could not work, find work, or were told not to work.

They also began using the money they were printing to buy foreign currency which simply made matters worse still. On top of that they had sold war bonds they could not pay off...and although they were technically on the gold standard they had made it legal to issue unbacked notes out of neccesity . It was just all bad.

When they did pay reparations their money almost immediately devalued. Then they made higher denominations and more of it to compensated. But the currency was being valued to currency on the gold standard and without gold, even though they were still quite resource rich and retained most of their infrastructure after the war, their money became comparatively worthless.

There are those who say they COULD pay reparations or that they deliberately crashed their own economy but in researching this topic using many primary sources I have found that indeed they were in a hole they could not dig out of and I did not find any evidence they had a deliberate plan to crash the economy as much as they knew what they were doing WOULD eventually do so but they were unable to achieve any political consensus on any other way forward so the reichsbank just continued to print and buy foreign currency.

Politically Germany was fractured to put it lightly. There was no unified way forward and it seems to me that once it was clear their attempts had failed they were more in a state of paralysis than in a nefarious plan to tank the economy but they were well aware that was what was happening.

I don't envy them because even this far from the event, I couldn't tell you or see a way to prevent what happened, it was just a long series of bad choice beging with the implementation of the schlieffen plan.

 

I can certainly say I have never seen that one...I think I would remember it.

 

Okay fair enough!

 

More Money Trees?

 

I think he means modern monetary theory.