On 15 November 1923 decisive steps were taken to end the nightmare of
hyperinflation in the Weimar Republic: The Reichsbank, the German central bank,
stopped monetizing government debt, and a new means of exchange, the
Rentenmark, was issued next to the Papermark (in German: Papiermark). These
measures succeeded in halting hyperinflation, but the purchasing power of the
Papermark was completely ruined. To understand how and why this could happen,
one has to take a look at the time shortly before the outbreak of World War I.
Since 1871, the mark had been the official money in the Deutsches Reich.
With the outbreak of World War I, the gold redeemability of the Reichsmark was
suspended on 4 August 1914. The gold-backed Reichsmark (or “Goldmark,” as it
was referred to from 1914) became the unbacked Papermark. Initially, the Reich
financed its war outlays in large part through issuing debt. Total public debt
rose from 5.2bn Papermark in 1914 to 105.3bn in 1918.[1]
In 1914, the quantity of Papermark was 5.9 billion, in 1918 it stood at 32.9
billion. From August 1914 to November 1918, wholesale prices in the Reich had
risen 115 percent, and the purchasing power of the Papermark had fallen by more
than half. In the same period, the exchange rate of the Papermark depreciated
84 percent against the US dollar…..To Read More….
No comments:
Post a Comment