wheelbarrow inflation -- 12/10/14

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Today's selection -- from When Money Dies by Adam Fergusson. An unimaginable inflation ravaged Germany in 1923 and left scars that were not healed when the world had sunk into Depression in the 1930s.

"Just before the First World War in 1913, the German mark, the British shilling, the French franc, and the Italian lira were all worth about the same, and four or five of any were worth about a dollar. At the end of 1923, it would have been possible to exchange a shilling, a franc or a lira for up to 1,000,000,000,000 marks, although in practice by then no one was willing to take marks in return for anything. The mark was dead, one million-millionth of its former self. It had taken almost ten years to die.

"The mark's fall began gradually. In the war years, 1914-1918, its foreign exchange value halved, and by August 1919 it had halved again. In early 1920, however, although the cost of living had risen less than nine times since 1914, the mark had only one-fortieth of its overseas purchasing power left. There followed twelve months of nervous fluctuation, but then the mark sped downwards with gathering momentum, dragging social misery and political disruption in its wake. Not until 1923 did Germany's currency at last go over the cliff-edge of sanity to which it had, as it were, clung for many months with slipping finger-tips. Pursuing the money of Austria and Hungary into the abyss, it crashed there more heavily than either.

Children playing with stacks of hyperinflated currency

"The year 1923 was the one of galloping inflation when a kind of madness gripped Germany's financial authorities and economic disaster overwhelmed millions of people. It was the year of astronomical figures, of 'wheelbarrow inflation', of financial phenomena that had never been observed before. The death of the mark in November 1923 came as a merciful release, for the events of the preceding eight months had ensured that the old mark could never recover. They ensured, too, that Germany would have to undergo appalling rigours of financial reconstruction such as might otherwise have been escaped. The reestablishment of monetary sanity, which bankrupted thousands, robbed millions of their livelihoods, and killed the hopes of millions more, indirectly exacted a more terrible price which the whole world had to pay. ...

"Certainly, 1922 and 1923 brought catastrophe to the German, Austrian and Hungarian bourgeoisie, as well as hunger, disease, destitution and sometimes death to an even wider public. Yet any people might have ridden out those years had they represented one frightful storm in an otherwise calm passage. What most severely damaged the morale of those nations was that they were merely the climax of unreality to years of unimagined strain of every kind."