The 1923 hyperinflation

1923 hyperinflation
A German woman lights a fire with worthless banknotes, 1923

In early 1923 German workers embarked on a prolonged general strike, a protest against the Ruhr occupation. The Weimar government decided to subsidise this strike, a decision that had a devastating impact on Germany’s already depleted economy. In 1922 the ministry ordered increased print runs of banknotes, hoping to stimulate the economy and pay striking industrial workers in the Ruhr. Government economists understood the dangers of flooding the economy with paper money; it was intended as a temporary measure rather than a long-term policy. But as the French occupation and the Ruhrkampf continued into the summer and autumn of 1923, the government could find no alternative way to address the crisis. Berlin continued to pump paper money into the German economy, an approach that devalued banknotes and gave rise to the hyperinflation of late 1923. The effects of hyperinflation on German society were disruptive for many and utterly disastrous for some.

Both the amount of paper Reichsmarks in circulation and price inflation had been increasing steadily since 1921. By April 1923 Wilhelm Cuno’s government was spending more than seven times the amount it received as revenue. Most of this spending was funded by increased print runs of banknotes. By mid 1923 the nation’s central banks were using more than 30 paper factories, almost 1,800 banknote printing presses and 133 companies to print and issue banknotes. The production of paper money, ironically enough, was one of Germany’s few profitable industries. At the height of the crisis Germany’s state governments, major cities, large companies, even some pubs were all issuing their own paper money. The problem was compounded by Germany’s wartime decision to abandon the gold standard, leaving paper Reichsmarks without any intrinsic or supportive value.

As more banknotes were sent into circulation the value and buying power of each Reichsmark decreased, prompting sellers to raise prices. In 1918 a loaf of bread cost one quarter of a Reichsmark; by 1922 this had increased to three Reichsmarks. In 1923 the market price for bread spiralled, reaching 700 Reichsmarks (January) 1200 (May) 100,000 (July) 2 million (September) 670 million (October) and then 80 billion Reichsmarks (November). Eggs followed a similar pattern. One dozen eggs cost half a Reichsmark in 1918 and three Reichsmarks in 1921. In 1923 the market price increased to 500 (January) then 30 million (September) and four billion Reichsmarks (October).

Since the Weimar government was not strong enough to fix either wages or prices, its only response was to issue more paper money and larger denominations. This tit-for-tat cycle of price inflation and banknote releases spiralled through 1923. The size of banknotes increased; the largest note had a face value of 100,000,000,000,000 (100 trillion) Reichsmarks. Denominations of postage stamps also increased, the largest valued at five billion Reichsmarks – though by late 1923 even this was not enough to post an ordinary letter. On one day alone (October 25th) the government released banknotes with a face value of 120,000 trillion Reichsmarks – but announced plans to triple its daily output. By November, the Treasury reported that there were 400,338,236,350,700,000,000 (400.3 billion trillion) Reichsmarks in circulation.

The rapid devaluation of paper money created ludicrous scenes. The value of paper money evaporated so quickly that some companies paid employees in late morning so they could rush off and spend their wages at lunchtime. Wives waited at their husbands’ factories on payday so they could hurry to the stores. One man reported ordering a coffee but learned its price had doubled by the time it arrived at his table. By September 1923, as the hyperinflation crisis neared its worst, Germans needed enormous amounts of paper money to buy even basic commodities. It was not uncommon to see shoppers hauling buckets, bags, even wheelbarrows full of banknotes. One Munich woman dragged a suitcase of banknotes to her local grocery store; she left it outside briefly, where someone stole the suitcase – after emptying the money onto the street. Children used worthless banknotes as toys; their mothers used them to light stoves and boilers, line cake tins, even as wallpaper. Many Germans abandoned money altogether and began bartering as a means of obtaining what they needed.

The hyperinflation crisis had broader effects on the economy, rendering foreign exchange almost impossible. Before World War I, one US dollar had purchased about four Reichsmarks. By the end of 1920 this had increased to 70 Reichsmarks; a year later it was 180. But by late 1923 the exchange rate for one US dollar had skyrocketed to 48,000 Reichsmarks (January) then 192,000 (June) 170 billion (October) and four trillion (November). German corporations found it impossible to do business or trade abroad. Unable to acquire gold or foreign currency, the Weimar government had no capacity at all for meeting reparations instalments. Some claimed it had deliberately sabotaged the German economy as a protest against the reparations burden, though there is no direct evidence of this.

“The government virtually yielded its role to the representatives of major industrial and financial interests. Employers were on the offensive: workers were battered and worn down by the economic crisis. The mine owners had taken the lead in September 1932, and every major industry quickly followed. By spring 1924, the pre-war work shift, twelve hours in the factories and eight and a half hours in the mines, had been re-established. Employers also won greater freedoms to fire workers at will and to ignore labour representation in the workplace. The crisis of hyperinflation enabled business to destroy – not totally, but to a significant degree – the social measures it had reluctantly conceded in 1918-19.”
Eric Weitz, historian

There were winners and losers from the 1923 hyperinflation. The worst affected were those of the Mittelstand (middle class) who relied on investments, savings or incomes from pensions or rents. In 1921 a family with 100,000 marks in savings would have been considered wealthy – but within two years it would not be enough for a cup of coffee. Public servants also suffered, since the increases in their wages failed to keep pace with the private sector. Those who fared better included farmers, business owners or producers who manufactured and sold important commodities. While the value of money fluctuated, the real value of these goods did not; those who possessed them could sell or barter on their own terms. Those with large debts also benefited from hyperinflation, since they could be easily repaid. Some clever businessmen borrowed early in the inflationary cycle to buy property, then repaid the loan weeks or months later for next to nothing.

The 1923 hyperinflation forced the Weimar government to confront its own extinction. There was open talk that the government might be removed by a popular revolution or a military putsch. An attempted coup in Munich, launched by Hitler and the NSDAP in early November 1923, seemed a sign of what might come. The crisis forced the collapse of two cabinets as ministers bickered about the best way to end the crisis. Newly appointed finance minister Hans Luther produced the eventual solution. In October, Luther ordered the formation of a new reserve bank (Rentenbank) and a new currency (the Rentenmark). The value of the Rentenmark was indexed to the value of gold – though it could not be redeemed in gold since the government had no gold reserves. One Rentenmark was initially valued at one billion ‘old’ Reichsmarks, while foreign exchange was pegged at 4.2 Rentenmarks to one US dollar. Eager to bid farewell to hyperinflation of 1923, the German public embraced the new currency, allowing prices and wages to gradually normalise.


1. The hyperinflation of 1922-23 came after an emergency decision to print additional currency became standard policy.
2. By mid-1923 the printing of banknotes, which were not backed by gold, had reached unsustainable levels.
3. As banknotes flooded the economy their value plummeted, leading to rapid increases in prices and wages.
4. Hyperinflation eroded the cash savings of the middle class and disrupted commercial activity.
5. The crisis was eventually ended with the formation of a new reserve bank and the issue of a new national currency.

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