When money dies -- 10/22/24

22 Oct 2024

When money dies -- 10/22/24

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Today's selection -- from Vertigo by Harald Jähner. Following the first World War, the German public faces unprecedented hyperinflation.

“Inflation was whipping out the ground from under the feet of the very people who saw themselves as pillars of society, and who had for that reason long felt protected by the state. The main beneficiaries of inflation, on the other hand, were debtors. Apart from the debt-ridden state itself, these included businesspeople who had invested in credit, landowners whose farms were heavily in debt, speculators with borrowed capital — they all had cause for celebration. They had only to recalculate their debts into dollars or loaves of bread to see that their burdens were miraculously getting smaller. The winners were anyone who lived on tick; the losers, anyone who economised in the traditional way. Honest people were made to look like fools — the conviction was rife among socially conservative citizens that they were living in a republic of rogues.

“Anyone who was unable or unwilling to speculate, anyone tied to a system of fixed incomes and who had to work their way gradually up established hierarchies, quickly came to see themselves as losers. Many senior officials who had easily been able to afford a maid and a gardener before the war now found themselves mowing their own lawns and cleaning their own kitchens. Maidservants now demanded the same wages as secretaries — and their employers worried about how long they would be able to afford to pay them.

The daily rise of the dollar was usually the most important news of the day.

“From June 1922 the value of the mark against the dollar had fallen monthly by 50 per cent; early in 1923 it went into freefall. Two developments were crucially responsible for hyperinflation: the withdrawal of foreign investors after the assassination of Walther Rathenau and another rise — an incredible one this time — in state spending after the French occupation of the Ruhr.

“The murder of the foreign minister, who was highly respected abroad and always determined to achieve fair play, was just one of many acts of far-right violence. But this attack attracted a great deal of international attention, and confirmed many foreign investors in their fear that Germany was turning into a banana republic and was liable to sink into political chaos. They became increasingly hesitant to invest, even though the falling value of the Reichsmark made economic commitments very enticing. The loss of foreign capital meant the loss of many jobs and further inflated the state budget by raising the cost of social services.

“With the occupation of the industrial Ruhr in January 1923, inflation spiralled completely out of control. A hundred thousand French soldiers invaded the region on the grounds that Germany had deliberately fallen behind with reparation payments. To reinforce their demands, the French wanted to cut off German industry from its raw materials and redirect the coke, coal and steel into their own country. In spite of brutal attempts at intimidation, however, the workers refused to go to the smelting furnaces or down the mines for the occupying forces. Over 150,000 people, not only workers but officials and office clerks, were violently expelled from the Ruhr. The rest went on striking or, sometimes with the help of Freikorps members, engaged in acts of sabotage.

“For a while the German public pulled together, as they had during the domestic political truce (Burgfrieden) declared during the war. It was only on the far right that people went on mocking what was known as the 'policy of fulfilment' — an agreement to repay reparations with a view to renegotiating the deal in due course. But there was little sign in government of its supposed submissiveness towards the victorious forces. On the contrary: in order to maintain resistance against the occupation, the state went on paying damages to the Ruhr companies and wages to the approximately 2 million striking workers. These strikers were known as 'Curio pensioners' after the acting non-party-aligned Wilhelm Cuno, President Ebert's sixth chancellor. To keep them fed, the government went on printing money for almost nine months — in vast quantities. More than 5,000 printing works were now churning out notes on behalf of the Reichsbank. New bills were constantly being designed to make the money manageable, in terms of weight at least, so that people didn't always have to go to the baker's with a wheelbarrow full of notes. In November, a pound of rye bread cost a thousand billion marks. In February 1923 the 100,000-mark note entered circulation. This was followed within eight months by the 50-million mark note, the 200-billion and finally the 100-trillion note.

“The Germans might not have had much of an idea what was going on, but they could still count. Never again were they such masters at calculating numbers with 12 zeros as they were in the autumn of 1923. It took some people a matter of seconds to work out how long they could survive on the trillions they had in their pockets. But the 100- trillion note marked the end. It was the largest denomination ever printed on a German banknote. As if this record had been predicted, the 100-trillion mark note was particularly fine to look at — a masterpiece of the money-maker's art. It was truly heart-rending that such trouble should have been taken with such a debilitated currency. On the right-hand edge of the note, there was a symbol of German culture: Albrecht Durer' s portrait of the humanist Willibald Pirckheimer. The watermark was a row of thistles; a complicated braiding of lines artfully made the note difficult to forge. But who would have wanted to forge it? This absurd level of accuracy didn't enhance the note's value. According to a widespread story; some thieves stole a whole laundry basket full of money. They threw away the money and kept the basket."