delanceyplace.com 9/26/11 - hitler's hyperinflation

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In today's excerpt - in the early 1920s, a small, fringe political group led by an inexperienced Adolph Hitler was able to get more attention than it ever deserved because German economic circumstances were catastrophic. Hyperinflation destroyed savings accounts, families and lives. In 1923, a single egg cost as much as 30 million eggs had cost in 1913, and Hitler himself had to pay one billion marks for a single beer, on the night of his historic beer hall putsch. When this hyperinflation was finally tamed, Hitler and his party began to dramatically lose votes and influence. But Hitler's luck returned—in 1929, the U.S. led Great Depression brought renewed economic catastrophe across the globe and his party once again made gains in German national elections:

"Another aspect of fate, in the guise of the inflation, also appeared to be working in favor of Hitler and his march on Berlin. By the beginning of October it took 6,014,300 marks to equal a single prewar mark. The price of one egg equaled that of 30,000,000 in 1913. Many municipalities and industrial firms took to printing their own 'emergency money' to meet expenses. The Reichsbank could not refuse to accept this emergency money or to treat it as of equal value with their own notes. 

"The printing of government money itself became farcical: a thousand-mark note issued in Berlin the previous December was now stamped over in red: Ein Milliarde Mark; and a 500,000,000-mark note printed by the Bavarian State Bank a few weeks earlier was stamped: Zwanzig Milliarden Mark. This 20-billion-mark note presumably could be exchanged for more than $800, but by the time the holder of the modest-looking little note with the astronomical figure got to the cashier it would be worth a fraction of that—providing any cashier was willing to surrender hard foreign currency for it. People were frantic. They dared not hold currency for an hour, a missed trolley car to the bank could mean a man's monthly salary was reduced to a quarter or less. A waiter in Baden told a young American reporter, Ernest Hemingway, that he had saved up enough money for a Gasthaus. Now the money wouldn't buy four bottles of champagne. 'Germany debases her money to cheat the Allies [out of reparations],' said the waiter. 'But what do I get out of it?'

"The burden of inflation naturally fell on those who could not pay with notes—the workers and the elderly. The first were reduced to a near starvation diet and the latter were brought to poverty level overnight. Pensioners and those who lived on interest from bonds and life insurance found themselves destitute. Securities bought with gold marks were paid off in paper money that deteriorated in value in one's hand. In America only Southerners, whose families had suffered a similar fate after the Civil War days, would have understood.

"About the only ones who rejoiced were those deeply in debt who could pay off their obligations with worthless paper. But the greatest beneficiaries were the exchange barons, the profiteers and opportunistic foreigners who bought up jewelry and real estate at ridiculously low prices. Large estates and buildings went to these vultures for a few hundred dollars. Family heirlooms were exchanged for enough to feed a family a few weeks. There were scenes beyond belief: a woman who had left a basket-full of money on the street, returning a moment later to find the money dumped in the gutter and the basket stolen; a worker with a salary of two billion marks a week able to buy his family only potatoes."