#4: Germany Doesn’t Understand How Money Works
Hyperinflation, as the Greeks experienced yesterday, is when money is so worthless that you are literally better off eating it than spending it. Probably the most famous example of hyperinflation in history is the German Depression of 1923. You may have seen old photographs of children playing with stacks of banknotes in the streets.
Every single one of those thousands of notes these children are playing with is totally without value. The entire stack is worth practically the same as one note. How could Germany, one of the most industrialized of nations, ever have fallen on such rough times?
Have you heard the one about the time Germany was forced to pay through the nose for damage caused to Europe and the world during the First World War? Here’s the punchline:
Germany’s 1923 economic collapse, as well as the events leading up to it, was largely what allowed this world-renowned ‘stache-burglar to come to power. So, what, Germany had to pay a lot of money to other countries, and thus had no money left in their own?
This is approximately the German train of thought when faced with massive reparations:
Klaus: So, how much must we pay, again?
Hans: One English Standard Shit-Tonne.
Klaus: How will we ever manage?
Hans: Well, we have printing presses….
Klaus: Brilliant! We’ll just print lots and lots of money, and nothing will ever go wrong!
Hans: Or we could just sell the presses to….
Klaus: Start printing money now!
You know how whenever a large quantity of a valuable commodity is discovered, like a gold vein or an oil deposit, the value of said commodity tends to plummet? It’s only common sense. Rare things are worth more than prodigious amounts of things. Everybody knows that. Everybody, except the Germans of the 1920s.
The Papiermark had been the German currency since the abandonment of the gold standard in 1914. Things had been okay, except for all that wartime debt they had to pay in addition to reparations. Contrary to popular belief, Germany did not pay its reparations with their own currency. No, they were required to pay it in foreign currency only. So all those newly printed Papiermarks went not towards paying other countries, but towards buying foreign currency to pay other countries.
Germany’s hyperinflation got bad, fast. The Papiermark was introduced at a rate of 4.2 Mark per U.S. dollar. By November of 1923, when the situation was at its worst, one contemporary dollar was worth 238 million Papiermark. This resulted in “Zero Stroke,” an officially reported mental disorder brought on by staring at the increasing numbers of zeros on price tags, and sometimes resulting in “the desire of patients to write endless rows of zeros.”
People used banknotes to wallpaper their walls:
…fuel their stoves:
…and play LEGOs at the office:
…all because the bills were otherwise totally worthless. People took their wages home in wheelbarrows and suitcases, and million-Mark raises were seen less as a good thing and more as a harbinger of the end times. Stories from the era are particularly shocking. One has a man leaving a cash-filled suitcase unattended, and returning to find the case stolen and the money left behind. A woman sold her house, hoping to live on the proceeds. A few weeks later, the money couldn’t even buy a loaf of bread.
The Worst It Got
Although there was eventually a one-hundred trillion Mark note, the bill that best sums up the severity of Germany’s hyperinflation is this one here:
This is a former one-thousand Mark note printed at the end of 1922. Because Germany couldn’t print money fast enough, they took to stamping new denominations on old bills. In a few months, this thousand-Mark note became a one-billion-Mark note. Even the man on the bill is ashamed to be involved. Just look at his face.
Finally, in November of 1923, the Rentenmark was announced. Instead of a conventional exchange rate, they just took twelve zeros off the Papiermark.
Oh, and Germany’s World War I debt? It’s all paid off… as of 2010, 92 years later.
So, yeah, Germany was bad and all, but you ain’t seen nothing yet.
Tomorrow: Yugoslavia, apparently.
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The Media Manifesto – Because Communism does, in fact, mix well with mass media.
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