(Published privately, 1979. Glencoe, Illinois. Copies available from The Foundation for Economic Education, Inc., Irvington-on-Hudson, N.Y. 10533) • 42 pages • $3.50
The German inflation of 1923 is the classic illustration of what to expect when a government pursues a policy of inflation to the bitter end. It evokes vivid pictures of panicky buying, wheelbarrows overflowing with the paper money needed to buy a day’s food, workers’ wives taking their husbands’ pay each morning and rushing out immediately to buy something, anything, before prices rose still more. By the end of 1923, prices of many everyday items were reckoned in the billions and trillions of Marks. Fantastic! Incredible! But true! Yet these descriptions reveal little or nothing of the effects the inflation had on the people themselves—on their mental, psychological and moral attitudes.
By the end of World War I, the defeated Germans were war-weary, exhausted and famished. Millions had been killed, maimed or were missing in battle. The Allied blockade had reduced their diet to “ersatz” foods, horse and dog meat. Many had not had a decent meal since 1916.
The Kaiser was ousted. The new government was weak and insecure. Yet it did what it thought best to help the people recover from the effects of four long years of fighting and deprivation. It tried to increase food supplies by imposing land reforms, subsidizing cereal imports and buying produce from farmers to sell cheap to the poor. But these programs cost money. And the government was as destitute as the people. Tax collections fell far short of what it spent. To finance its domestic expenditures, therefore, it continued the practice of printing paper money. By 1921, the German Mark—worth about 24¢ in U. S. money before the war—had fallen in value to about 1/15th of the U. S. dollar (6.6¢). A year later it had dropped to 1/450th of the dollar.
When England and the United States brought their wartime inflations to an end, both experienced economic depressions. Many were out of work while business enterprises were readjusting in 1921-1922. As a result, German officials concluded that inflation was the way to insure “full employment” and to expand exports—as indeed it was in the very short run. So the German government continued inflating.
By this time, every German was speculating on still more inflation and still higher prices for- all goods and services. No one was saving any more. The demands of the Allies for reparations was an added blow to a people already beaten, impoverished and nervously exhausted by having to cope daily with the problems of inflation. They grew bitter at the heavy penalties exacted by the Allies. To pay the reparations, real goods—gold, minerals, factory products, investment securities—not paper money, had to be delivered to former enemies. The government had to impose heavy taxes for this purpose. Yet little or nothing remained for domestic expenditures. So the government continued inflating.
Discontent and political turmoil, already rife throughout the land, mounted. Restless agitators of every ideological hue—right, left, communist, fascist—attempted periodically to overthrow national and regional governments. Political murders or assassinations were commonplace—about 300 in four years.
No one was able to escape the catastrophic effects of the inflation and political unrest. The farmers, perhaps in the best position to weather the storm, had their savings wiped out and they themselves were worn down by government regulations. Laborers and salaried employees be came destitute, for no wage or salary could keep pace with the spiralling cost of living. Landlords and tenants suffered as the quality of housing declined, because the government imposed ceilings on rents while all other prices were rising through the roof. University professors and students had to dig ditches, work in mines and factories or on farms in the summer to survive, and the quality of their library and research materials suffered. Because of the volatility of prices, businessmen found it impossible to calculate or plan. As they used up their investments, enterprises that had been profitable suffered losses. Even German bureaucrats who had always enjoyed prestige and high salaries were destitute. Less food was brought to the stores to be sold and the available consumer goods were of poorer quality. Standards of nutrition declined. Susceptibility to disease and infection increased. Children, always hungry, grew up undernourished and physically debilitated. Only those few Germans with investments abroad were able to avoid complete impoverishment.
By October 1923, the Mark was worth less than one four-billionth of its pre-war value. Inflation had utterly destroyed the German people financially, economically and morally. A people long known for their energy, industry, education and culture were destitute and degraded. Traditional methods of providing for themselves and their families—hard work and saving—proved useless. The people were emotionally, mentally and morally prepared to welcome a charismatic leader who offered hope. They were ready to believe Hitler’s lies and promises of economic rescue and pride in the “Thousand Year Reich.” By choosing Hitler over the economic disaster they knew, they accepted in time the consequences of that choice—controls, censorship, war and even the “holocaust.”
Stanton Brody, the author of this booklet, was an established businessman in his mid-40s when he returned to college to study history. He became fascinated with this period in German history. In his desire to bring readers the important message—that inflation must be stopped lest we lay the groundwork for another world war and holocaust—he wrote this account and published it privately. Mr. Brody’s booklet is well worth reading.