Hyperinflation – Germany 1923

Hyperinflation – Germany 1923

I love exploring monetary history. In this blog post, let’s take a trip through time to one hundred years ago and delve into one of the fascinating economic events of the 20th century: the hyperinflation crisis in Germany in 1923. It’s a period that often leaves us scratching our heads, wondering how a country could go from being a significant European power to experiencing financial catastrophe in such a short time. Let’s examine this historical event and what not to do with a fiat currency. This is a warning to all nations who think their currency is too big to fail.

How did hyperinflation affect Germany in the 1920s?

Hyperinflation in 1923 was a nightmare for the German people. Prices for everyday goods skyrocketed, and the value of the German currency, the Reichsmark, plummeted. Imagine waking up one morning and finding that your life savings are worth less than a loaf of bread! That’s how bad it was.

The impact of hyperinflation went beyond mere economic distress. It tore apart the social fabric of the country. People lost faith in the government and the economic system. Desperation and poverty were rampant, making it increasingly difficult for families to provide for their basic needs. This crisis laid the groundwork for the rise of extremist political movements, as many Germans sought radical solutions to their problems.

What caused hyperinflation in Germany in 1923?

The roots of hyperinflation in 1923 can be traced back to the end of World War I. Germany was burdened with massive war debts and the infamous Treaty of Versailles, which required the country to pay colossal reparations to the victorious Allied powers.

The German government began printing vast amounts of currency to meet these obligations. The more money they printed, the less each Reichsmark was worth. Prices soared as the currency’s value dropped, creating a vicious cycle that ultimately led to hyperinflation. Be aware that in the forex markets, currencies are valued against other currencies in pairs; in the real world, currencies are valued against goods and services. This is the actual buying power.

The French occupation of the Ruhr, an industrial region in Germany, further exacerbated this disastrous situation. The French took control of the area to ensure that Germany would pay its reparations. As a result, the German economy lost a significant portion of its productive capacity, further destabilizing its fragile financial situation.

What was the hyperinflation rate in Germany in 1923?

Let’s take a look at some numbers to give you a sense of just how extreme the hyperinflation was in Germany in 1923. At its peak, the inflation rate reached a staggering monthly inflation rate of approximately 29,500% in October 1923. Yes, you read that correctly – per month! With an equivalent daily rate of 20.9%, it took approximately 3.7 days for prices to double. Exponential compounding is a deadly principle to bring into the inflationary rate of a country. In modern times this has also occurred in Zimbabwe and Venezuela.

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 spiraled, reaching 700 Reichsmarks (January), 1200 (May), 100,000 (July), two million (September), 670 million (October), and then 80 billion Reichsmarks (November). One dozen eggs cost a half-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).[1]

The exchange rate for the German Reichsmark to the US dollar also deteriorated rapidly. At the worst of the hyperinflation in 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)!

Who tried to fix hyperinflation in 1923?

As the situation in Germany became increasingly dire, the Weimar government scrambled to find a solution. One of the key figures in the fight against hyperinflation was Gustav Stresemann, the Chancellor and later Foreign Minister of Germany. He recognized the situation’s urgency and sought to stabilize the currency and restore economic confidence.

In collaboration with Hjalmar Schacht, the Commissioner of Currency, they introduced the Rentenmark, a new currency pegged to the value of German land and real estate. This helped end the vicious hyperinflation cycle and set the stage for Germany’s eventual economic recovery.

How did Germany survive hyperinflation?

The road to recovery from hyperinflation was long and challenging for Germany. The introduction of the Rentenmark was a crucial first step, as it provided a stable currency that allowed for the rebuilding of the nation’s economy. Additionally, the German government implemented a series of austerity measures and economic reforms to regain the trust of its citizens and the international community.

Another pivotal moment came with the signing of the Dawes Plan in 1924, which restructured Germany’s reparations payments and provided loans to help kick-start the economy. This influx of foreign capital significantly affected Germany’s ability to recover from the hyperinflation crisis.

Over time, the German economy began to stabilize, and the country gradually regained its footing on the international stage. However, the scars of the hyperinflation crisis remained, contributing to the social and political instability that would ultimately lead to the rise of Adolf Hitler and the Third Reich.

Key Takeaways

  • Hyperinflation in Germany in 1923 was catastrophic, leading to soaring prices, extreme poverty, and social unrest.
  • The crisis was triggered by the massive war debts, the Treaty of Versailles, and the French occupation of the Ruhr.
  • The peak inflation rate reached 29,525% per month in October 1923.
  • Gustav Stresemann and Hjalmar Schacht were instrumental in combating hyperinflation by introducing the Rentenmark.
  • Germany’s survival and recovery from hyperinflation were made possible through currency stabilization, economic reforms, and international support, such as the Dawes Plan.


The story of hyperinflation in Germany in 1923 serves as a powerful reminder of the devastating consequences that can arise from unchecked economic policies and the importance of maintaining a stable currency. The lessons learned from this dark period in history can provide valuable insights for policymakers and governments today, helping to ensure that such a crisis never occurs again. It also reminds us of the resilience and determination of the human spirit as the German people ultimately overcame this seemingly impossible challenge and rebuilt their nation.