Archive for the ‘HYPERINFLATION’ Category


Posted by Gilmour Poincaree on November 30, 2008

by Alex de Jonge


The year 1923 has a special and dreadful connotation in German history, for it was the year of the great inflation. If defeat, abdication and revolution had begun to undermine the traditional values of German culture, then the inflation finished the process so completely that in the end there were no such values left. By November 1918 there were 184.8 marks to the pound. By late November 1923 there were 18,000,000,000,000. Although the mark was eventually "restored," and the period of inflation succeeded by a time of relative prosperity for many people, life for anyone who had lived through the lunatic year of 1923 could never be the same again.

Such a cataclysmic loss of a currency’s value can never be ascribed to a single cause. Once confidence goes, the process of decline is a self-feeding one. By late 1923 no one would hold German money one moment longer than it was really necessary. It was essential to convert it into something, some object, within minutes of receiving it, if one were not to see it lose all value in a world in which prices were being marked up by 20 percent every day.

If we go back beyond the immediate cause of hyperinflation—beyond a total lack of confidence in a currency that would consequently never "find its floor," however undervalued it might appear—we find that passive resistance in the Ruhr was a major factor. Effective loss of the entire Ruhr output weakened the mark disastrously, encouraging dealers to speculate against it, since the balance of payments was bound to show a vast deficit. Confidence in the currency could only begin to be restored when resistance ended late in 1923.

It has been the "patriotic" view that reparations were also a significant factor. Certainly they constituted a steady drain upon the nation’s resources, a drain for which it got no return. But reparations alone would not have brought about hyperinflation. There were still other causes. Sefton Delmer believes that the true explanation lay in Germany’s financing of the war. She had done so very largely on credit, and was thereafter obliged to run a gigantic deficit. There were other more immediate causes, such as a total incomprehension of the situation on the part of Havenstein, director of the Reichsbank. Failing to understand why the currency was falling, he was content to blame it upon forces beyond his control—reparations—and attempted to deal with the situation by stepping up the money supply!

The first British ambassador to the Weimar Republic, Lord d’Abernon, had no illusions about the economic plight of Germany. He observed in his diary that "German finance is dying beyond its means," 1 and no one seemed to know why. In the meantime, he noted:

Currency experts have a sad fate. During life they empty every room in which they hold forth, and death finds them in madhouses. Berlin has been deluged with these gentlemen for the last week and still survives; but the currency has gone to the devil.2

He saw the Reichsbank compounding its own mistakes:

In the whole course of history, no dog has run after its own tail with the speed of the Reichsbank. The discredit they throw on their own notes increases even faster than the volume of the notes in circulation. The effect is greater than the cause; the tail goes faster than the dog.3

By October 1923 it cost more to print a note than the note was worth. Nevertheless Havenstein mobilized all the printing resources that he could. Some of the presses of the Ullstein newspaper and publishing group were even commandeered by the mint and turned to the printing of money. Havenstein made regular announcements to the Reichstag to the effect that all was well since print capacity was increasing. By August 1923 he was able to print in a day a sum equivalent to two-thirds of the money in circulation. Needless to say, as an anti-inflationary policy, his measures failed.

In his documentary novel Success, Leon Feuchtwanger has suggested that inflation had less obvious and more sinister causes. Certainly it had its beneficiaries as well as its victims. Anyone living on a pension or on fixed-interest investments—the small and cautious investor—was wiped out. Savings disappeared overnight. Pensions, annuities, government stocks, debentures, the usual investments of a careful middle class, lost all value. In the meantime big business, and export business in particular, prospered. It was so easy to get a bank loan, use it to acquire assets, and repay the loan a few months later for a tiny proportion of the original. Factory owners and agriculturalists who had issued loan stock or raised gold mortgages on their properties saw themselves released from those obligations in the same way, paying them off with worthless currency on the principle that "mark equals mark." It would be rash to suggest, as Feuchtwanger hints, that the occupation of the Ruhr was planned by industrialists to create an inflation which could only be to their benefit. Yet we should remember that Stinnes, the multi-millionaire, had both predicted that occupation and ended up the owner of more than 1,500 enterprises. It should also be remembered that some businessmen had a distinctly strange view of the shareholder. He was regarded by many as a burdensome nuisance, a drag upon their enterprise. He was the enemy and they were quite happy to see him wiped out to their benefit. Inflation was their chance to smash him. Witness the behavior of a banker at a shareholders’ meeting at which it was suggested he should make a greater distribution of profit: "Why should I throw away my good money for the benefit of people whom I do not know?"4

The ingenious businessman had many ways of turning inflation to good account. Thus employees had to pay income tax weekly. Employers paid their tax yearly upon profits which were almost impossible to assess. They would exploit the situation of a smaller businessman, obliged to offer six to eight weeks of credit to keep his customers, by insisting on payment in cash. The delay between paying for the goods and reselling them eroded any profit the small man might make, while the big supplier prospered.5

Whether or not the industrialists actually caused inflation, their visible prosperity made them detested by an otherwise impoverished nation. Hugo Stinnes became an almost legendary embodiment of speculation and evil. Alec Swan remembers how hungry Germans would stare at prosperous fellow countrymen in fur coats, sullenly muttering "Fabrikbesitzer" (factory owner) at them. The term had become an insult and an expression of envy at one and the same time.

Hyperinflation created social chaos on an extraordinary scale. As soon as one was paid, one rushed off to the shops and bought absolutely anything in exchange for paper about to become worthless. If a woman had the misfortune to have a husband working away from home and sending money through the post, the money was virtually without value by the time it arrived. Workers were paid once, then twice, then five times a week with an ever-depreciating currency. By November 1923 real wages were down 25 percent compared with 1913, and envelopes were not big enough to accommodate all the stamps needed to mail them; the excess stamps were stuck to separate sheets affixed to the letter.6 Normal commercial transactions became virtually impossible. One luckless author received a sizable advance on a work only to find that within a week it was just enough to pay the postage on the manuscript. 7 By late 1923 it was not unusual to find 100,000 mark notes in the gutter, tossed there by contemptuous beggars at a time when $50 could buy a row of houses in Berlin’s smartest street.8

A Berlin couple who were about to celebrate their golden wedding received an official letter advising them that the mayor, in accordance with Prussian custom, would call and present them with a donation of money.

Next morning the mayor, accompanied by several aldermen in picturesque robes, arrived at the aged couple’s house, and solemnly handed over in the name of the Prussian State 1,000,000,000,000 marks or one halfpenny.9

The banks were flourishing, however. They found it necessary to build annexes and would regularly advertise for more staff, especially bookkeepers "good with zeros." Alec Swan knew a girl who worked in a bank in Bonn. She told him that it eventually became impossible to count out the enormous numbers of notes required for a "modest" withdrawal, and the banks had to reconcile themselves to issuing banknotes by their weight.

By the autumn of 1923 the currency had virtually broken down. Cities and even individual businesses would print their own notes, secured by food stocks, or even the objects the money was printed on. Notes were issued on leather, porcelain, even lace, with the idea that the object itself was guarantee of the value of the "coin."10 It was a view of the relationship between monetary and real value that took one back five hundred years. Germany had become a barter society; the Middle Ages had returned. Shoe factories would pay their workers in bonds for shoes, which were negotiable. Theaters carried signs advertising the cheapest seats for two eggs, the most expensive for a few ounces of butter which was the most negotiable of all commodities. It was so precious that the very rich, such as Stinnes, used to take a traveling butter dish with them when they put up at Berlin’s smartest hotel.11 A pound of butter attained "fantastic value." It could purchase a pair of boots, trousers made to measure, a portrait, a semester’s schooling, or even love. A young girl stayed out late one night while her parents waited up anxiously. When she came in at four in the morning, her mother prevented her father from taking a strap to her by showing him the pound of butter that she had "earned."12 Boots were also highly negotiable: "The immense paper value of a pair of boots renders it hazardous for the traveler to leave them outside the door of his bedroom at his hotel.". 13

Thieves grew more enterprising still in their search for a hedge against inflation.

Even the mailboxes are plundered for the sake of the stamps attached to the letters. Door handles and metal facings are torn from doors; telephone and telegraph wires are stolen wholesale and the lead removed from roofs.14

In Berlin all metal statues were removed from public places because they constituted too great a temptation to an ever-increasing number of thieves. One of the consequences of the soaring crime rate was a shortage of prison accommodation. Criminals given short sentences were released and told to reapply for admission in due course.15

It was always possible that one might discover an unexpected source of wealth. A Munich newspaperman was going through his attic when he came upon a set of partly gold dentures, once the property of his grandmother, long since dead. He was able to live royally upon the proceeds of the sale for several weeks.16

The period threw up other anomalies. Rents on old houses were fixed by law, while those on new ones were exorbitantly high. As a result in many parts of Germany housing was literally rationed. If one were fortunate enough to live in old rented property, one lived virtually free. The landlord, however, suffered dreadfully: to repair a window might cost him the equivalent of a whole month’s rent. Thus yet another of the traditional modes of safe investment, renting property, proved a disaster. Hitherto well-to-do middle-class families found it necessary to take in lodgers to make ends meet. The practice was so widespread that not to do so attracted unfavorable attention suggesting that one was a profiteer. Pearl S. Buck records the case of one family where the woman of the house reluctantly confessed to her husband that they would have to have a lodger. He greeted the news not with anger, but with a sigh of relief: the neighbors had begun to talk. Real property lost its value like everything else. Pearl Buck notes the case of a couple selling their house in order to marry their daughter in some kind of style. More telling is a famous song of inflation:

We are drinking away our grandma’s

Little capital

And her first and second mortgage too.17

As noted in the famous and highly intelligent paper the Weltbühne, the song picked out the difference between the "old" generation of grandparents who had scraped and saved carefully in order to acquire the security of a house, and the "new generation" for whom there could be no security any more, who "raided capital" or what was left of it, and were prepared to go to any lengths to enjoy themselves. Where their parents’ lives had been structured with certainties, the only certainty that they possessed was that saving was a form of madness.

Not all Germans suffered, of course. Late in 1923 Hugo Stinnes did what he could to alleviate the misery of his fellow countrymen by the magnanimous decision to double his tipping rate in view of the inflation.18 Along with rents, rail fares were also fixed and did not go up in proportion to inflation. Consequently, travel appeared absurdly cheap. Alec Swan recalls crossing Germany in the greatest style for a handful of copper coins. Yet even this was beyond the means of most Germans. A German train in 1923 would consist of several first-class carriages occupied entirely by comfortable foreigners, and a series of run-down third-class carriages crammed to bursting with impoverished and wretched Germans.

Although the shops were full of food, no one could afford it except foreigners. Germans often had to be content with food not normally thought of as fit for human consumption. In Hamburg there were riots when it was discovered that the local canning factory was using cats and rats for its preserved meats. Sausage factories also made much use of cat and horse meat.19 Moreover, as we shall see, some of the most famous mass murderers of the age used to preserve and sell the meat of their victims in a combination of savagery and an almost sexual obsession with food that mythologizes much of the darkness and the violence that were latent in the mood of Weimar.

If 1923 was a bad year for the Germans it was an annus mirabilis for foreigners. Inflation restored the sinking morale of the army of occupation ; small wonder when every private found himself a rich man overnight. In Cologne an English girl took lessons from the prima donna of the opera for sixpence a lesson. When she insisted that in future she pay a shilling, the prima donna wept with delight.20 Shopping became a way of life: "All through that autumn and winter whenever we felt hipped we went out and bought something. It was a relaxation limited at home, unlimited in the Rhineland.". 21

Germany was suddenly infested with foreigners. It has been suggested that the English actually sent their unemployed out and put them up in hotels because it was cheaper than paying out the dole.22 Alec Swan stayed with his family in a pension in Bonn. They had moved to Germany because life was so much cheaper there. The inmates of Swan’s pension were mostly foreigners of strange complexion, such as the Swede suffering from tertiary syphilis who would bombard heads of state with urgent telegrams. There was also an extremely fat German, christened Glaxo by the Swans. He was in the habit of helping himself to gigantic mounds of the spaghetti which formed the staple diet of the common table, saying apologetically, "My stomach, my stomach," with a hand upon the offending organ, as a form of explanation.

To find oneself suddenly wealthy in the midst of tremendous hardship proved rather unsettling. Inflation corrupted foreigners almost as much as the Germans. The English in Cologne could think of nothing else.

They talked with sparkling eyes and a heightened color, in the banks, the streets, the shops, the restaurants, any public place, with Germans standing around gazing at them.

Scruples were on the whok overwhelmed by the sudden onslaught of wealth and purchasing power beyond one’s dreams.23

As Alec Swan put it:

You felt yourself superior to the others, and at the same time you realized that it was not quite justified. When we went to Bellingshausen, which was a sort of wine place near Königswinter, we would start drinking in the afternoon. I would always order champagne and my Dutch friend would shake his head in disapproval. We’d have two ice buckets: he with some Rhine wine and me with German champagne. It was really rather ridiculous for a chap of my age to drink champagne on his own.

Being as wealthy as that was an extraordinary feeling, although there were many things you couldn’t get in Germany. It was impossible to buy a decent hat, for instance. But you could have any food you wanted if you could pay for it. I haven’t eaten anything like as well as that in my life. I used to go to the Königshalle (that was the big café in Bonn) at eleven o’clock in the morning for a Frühschoppen and a Bergmann’s Stückchen, a large piece of toast with fresh shrimps and mayonnaise. For a German that would have been quite impossible.

I paid two million marks for a glass of beer. You changed as little money as you could every day. No, one did not feel guilty, one felt it was perfectly normal, a gift from the gods. Of course there was hatred in the air, and I dare say a lot of resentment against foreigners, but we never noticed it. They were still beaten, you see, a bit under and occupied.

My mother did buy meat for three or four German families. I remember I bought an air gun, and, when I grew tired of it, I gave it to my German teacher’s son, with some pellets. Some time later the woman came to me in tears saying the boy had run out of pellets, and they could not afford to buy any more.

On another occasion Swan, all of twenty-two at the time, took the head of the Leipzig book fair out for a meal and looked on incredulously as the elderly and eminent bookseller cast dignity to the winds and started to eat as if he had not had a meal in months.

Stories of money changing and currency speculation are legion. Bureaux de change were to be found in every shop, apartment block, hairdresser’s, tobacconist’s. An Englishman named Sandford Griffith remembers having to visit a number of cities in the Ruhr which had local currencies. He stopped at a dealer’s to change some money, but when he produced a pound note the dealer was so overcome by such wealth that he simply waved a hand at his stock of currency and invited the astonished Englishman to help himself.24 Foreigners acquired antiques and objets de valeur at rock-bottom prices. A favorite trick was to buy in the morning with a down payment, saying that one would fetch the rest of the money from the bank. By waiting until the new exchange rate had come out at noon before changing one’s money into marks, an extra profit could be made on the amount that the mark had fallen since the day before.25

The population responded to the foreign onslaught with a double pricing system. Shops would make their prices up for foreigners. It would cost a tourist 200 marks to visit Potsdam, when it cost a German 25. Some shops simply declined to sell to foreigners at all.26 In Berlin a Schlemmsteuer, or tax on gluttony, was appended to all meals taken in luxury restaurants.27

Foreign embassies were also major beneficiaries of inflation, giving lavish banquets for virtually nothing. Indeed the Weltbühne noted with great resentment the presence of foreign legations of nations so insignificant that they would never hitherto have dreamed of being represented in Germany.28 The spectacle of foreigners of all nations, living grotesquely well and eating beyond their fill in the middle of an impoverished and starving Germany did not encourage the Germans to rally to the causes of pacificism and internationalism. The apparent reason for their inflation was there for all to see, occupying the Ruhr.

The surface manifestations of inflation were unnerving enough, but its effect upon behavior, values and morals were to reach very deep indeed, persisting for years after the stabilization of the mark, right up to the moment when Hitler came to power. The middle class—civil servants, professional men, academics—which had stood for stability, social respectability, cultural continuity, and constituted a conservative and restraining influence was wiped out. A French author met a threadbare and dignified old couple in spotless but well-worn prewar clothes in a cafe. They ordered two clear soups and one beer, eating as if they were famished. He struck up a conversation with the man, who spoke excellent French and had known Paris before the war. "Monsieur," the man replied, when asked his profession, "I used to be a retired professor, but we are beggars now.".29

There was a general feeling that an old and decent society was being destroyed. If the year 1918 had removed that society’s political traditions and its national pride, 1923 was disposing of its financial substructure. In response, people grew either listless or hysterical. A German woman told Pearl Buck that a whole generation simply lost its taste for life—a taste that would only be restored to them by the Nazis. Family bonds melted away. A friend of Swan, a most respectable German whose father was a civil servant on the railways, simply left home and roamed the country with a band. It was a typical 1923 case history. Young men born between 1900 and 1905 who had grown up expecting to inherit a place in the sun from their well-to-do parents suddenly found they had nothing. From imperial officer to bank clerk became a "normal" progression. Such disinherited young men naturally gravitated toward the illegal right-wing organizations and other extremist groups. Inflation had destroyed savings, self-assurance, a belief in the value of hard work, morality and sheer human decency. Young people felt that they had no prospects and no hope. All around them they could see nothing but worried faces. "When they are crying even a gay laughter seems impossible . . . and all around it was the same . . . quite different from the days of revolution when we had hoped things would be better.".30

Traditional middle-class morality disappeared overnight. People of good family co-habited and had illegitimate children. The impossibility of making a marriage economically secure apparently led to a disappearance of marriage itself.31 Germany in 1923 was a hundred years away from those stable middle-class values that Thomas Mann depicted in The Magic Mountain, set in a period scarcely ten years before. Pearl Buck wrote that "Love was old-fashioned, sex was modern. It was the Nazis who restored the ‘right to love’ in their propaganda.".32

Paradoxically, the inflation that destroyed traditional German values was also largely responsible for the creation of that new, decadent and dissolute generation that put Berlin on the cosmopolitan pleasure seeker’s map, and has kept it or its image there ever since. It was no coincidence that 1923 was the year that the Hotel Adlon first hired gigolos, professional male dancers, to entertain lady clients at so much per dance. It was also a period when prostitution boomed. A Frenchman accustomed enough to the spectacle of Montmartre was unable to believe his eyes when he beheld the open corruption of Berlin’s Friedrichstrasse.33 Klaus Mann remembers:

Some of them looked like fierce Amazons strutting in high boots made of green glossy leather. One of them brandished a supple cane and leered at me as I passed by. "Good evening, madame" I said. She whispered in my ear: "Want to be my slave? Costs only six billion and a cigarette. A bargain. Come along, honey.".

. . . Some of those who looked most handsome and elegant were actually boys in disguise. It seemed incredible considering the sovereign grace with which they displayed their saucy coats and hats. I wondered if they might be wearing little silks under their exquisite gowns; must look funny I thought … a boy’s body with pink lace-trimmed skirt.34

Commercial sex in Berlin was not well organized and was considered by connoisseurs to be inferior to that of Budapest, which had the best red-light district in Europe. But in Berlin there was no longer any clear-cut distinction between the red-light district and the rest of town, between professional and amateur. The booted Amazons were streetwalkers who jostled for business in competition with school children. Hans Fallada has painted the following portrait of a shop girl:

Pepa Ledig was at twenty-two no longer a blank page. She had ripened, not in a peaceful atmosphere, but during the war, postwar and inflation. Only too soon she knew what it meant when a gentleman customer in her bootshop touched her lap significantly with his toe. Sometimes she nodded . . . 35

Stefan Zweig gives us another glimpse of inflationary Berlin:

Along the entire Kurfürstendamm powdered and rouged young men sauntered, and they were not all professionals; every schoolboy wanted to earn some money, and in the dimly lit bars one might see government officials and men of the world of finance tenderly courting drunken sailors without shame. . . .

At the pervert balls of Berlin, hundreds of men dressed as women, and hundreds of women as men danced under the benevolent eyes of the police…. Young girls bragged proudly of their perversion. To be sixteen and still under suspicion of virginity would have been considered a disgrace in any school in Berlin at the time.36

Another visitor was struck by what he referred to as Berlin’s "pathological" mood:

Nowhere in Europe was the disease of sex so violent as in Germany. A sense of decency and hypocrisy made the rest of Europe suppress or hide its more uncommon manifestations. But the Germans, with their vitality and their lack of a sense of form, let their emotions run riot. Sex was one of the few pleasures left to them. . . .

In the East End of Berlin there was a large Diele (dancing cafe) in which from 9 p.m. to 1 a.m. you could watch shopkeepers, clerks and policemen of mature age dance together. They treated one another with an affectionate mateyness; the evening brought them their only recreation among congenial people. Politically most of them were conservative; with the exception of sex they subscribed to all the conventions of their caste. In fact, they almost represented the normal element of German sex life.

… There was a well-known Diele frequented almost entirely by foreigners of both sexes. The entertainment was provided by native boys between 14 and 18. Often a boy. would depart with one of the guests and return alone a couple of hours later. Most of the boys looked undernourished…. Many of them had to spend the rest of the night in a railway station, a public park, or under the arch of a bridge.37

Inflation made Germany break with her past by wiping out the local equivalent of the Forsytes. It also reinforced the postwar generation’s appetite for invention, innovation and compulsive pleasure seeking, while making them bitterly aware of their own rootlessness. It is not surprising that cocaine was very much in vogue in those years. The drug was peddled openly in restaurants by the hat-check girls, and formed an integral part of the social life of Berlin.

Inflation was also taken as evidence that the old order was morally and practically bankrupt. Capitalism had failed to guarantee the security of its citizens. It had benefited speculators, hustlers, con men and factory owners. It had spawned Hugo Stinnes, but had done nothing for the common good. The need for an alternative system appeared universally self-evident, and until one came along the thing to do was to enjoy oneself, drink away grandma’s capital, or exchange one’s clothes for cocaine: a dinner jacket got you four grams, a morning coat eight.38

Inflation and the despair that it created also acted as the catalyst of aggression. It was at this time that anti-Semitism began to appear in Berlin. An attractive German lady remembers walking through a prosperous suburb with a Jewish friend when someone called to her in the street, "Why do you go around with a Jew ? Get yourself a good German man." In one sense she found it understandable. The ordinary German was very slow to adjust to the special situation of inflation, and in 1923 anyone who was not very quick on their feet soon went under. Jews were better at economic survival in such situations than were other Germans—so much so, she says, that by the end of inflation they had become terribly conspicuous. All the expensive restaurants, all the best theater seats, appeared to be filled by Jews who had survived or even improved their position.

One can imagine that Germans who had lost their own status might have resented the spectacle. One old conservative I spoke to added a second reason for the rise of anti-Semitism in a Prussian society which had traditionally been quite free of it. The arguments advanced are his own, and tell us something of his prejudices. He believes that the Weimar Republic was too liberal with regard to immigration from the East, admitting thousands of Jews from Galicia and the old pale of settlement, persons who, in his words, were "Asiatics, not Jews." They found themselves in a strange anonymous town, free of all the ethical restraints imposed by life in a small community where their families had lived for several generations. They tended therefore to abandon all morality as they stepped out of their own homes, morality being strictly a family affair. They would sail as close to the wind as the law would allow, for they had no good will, or neighborly esteem to lose. The gentleman in question is convinced that their mode of doing business during the inflation did a great deal to create or aggravate more generalized anti-Semitic feelings.

Yet precisely these immigrants were to prove a mainstay of the republic. An old Berlin Jew who had spent some time in prewar Auschwitz told me that it was just these Eastern Jews who offered the most active and effective resistance to National Socialism. They were activists where native Berliners, Jew and Gentile alike, were more inclined to remain on the sidelines.

Certainly the period saw a rise in pro-National Socialist feelings. The first Nazi that Professor Reiff knew personally was a schoolboy in his last year. The young man’s father, a small civil servant, had just lost everything through inflation, and as a result his son joined the party. Pearl Buck records the views of an antimonarchical businessman worried by inflation, who said of the Nazis: "They are still young men and act foolishly, but they will grow up. If they will only drop Ludendorff and his kind, maybe someday I’ll give them a chance.".39

For many people, who felt that they had lost all zest for a life rendered colorless by war and poverty, who
could see that they lived in a world in which Schieber won and decent folk lost, a new ideology combining patriotism and socialist anticapitalism seemed to be the only viable alternative to a totally unacceptable state of financial chaos and capitalist laissez-faire. The shock of inflation had made people mistrustful of the past, immensely suspicious of the present, and pathetically ready to have hopes for the future. It was perfectly clear to them that new solutions were needed, equally clear that until such solutions should appear they could put their trust in nothing except the validity of their own sensations.

The mood of the inflationary period is summed up by Stefan Zweig. It is a mood that endured well beyond inflation itself to become the mood of the Weimar age, a blend of pleasure seeking, sexual and political extremism, and a yearning for strange gods.

It was an epoch of high ecstasy and ugly scheming, a singular mixture of unrest and fanaticism. Every extravagant idea that was not subject to regulation reaped a golden harvest: theosophy, occultism, yogism and Paracelcism. Anything that gave hope of newer and greater thrills, anything in the way of narcotics, morphine, cocaine, heroin found a tremendous market; on the stage incest and parricide, in politics communism and fascism constituted the most favored themes.40

It was indeed a time for the revaluation of all (devalued) values.

The mood of 1923 persisted long after inflation ended, which is why the manner of its ending is offered here as a postscript, for nothing was restored but the currency.

Restoration of confidence was only possible when passive resistance in the Ruhr ended in the autumn of 1923. At the same time, the Reichsbank appointed Hjalmar Schacht to deal with inflation. He was an extremely able man with a clear grasp of essentials. He realized that his main problem was to restore confidence both within and without Germany, and to try to prevent people from spending money as soon as it came into their hands. He established a new currency, based on the notional sum total of Germany’s agricultural wealth, the Roggen-Mark (rye mark). This had the effect of restoring psychological confidence in the currency. He combined the move with a gigantic bear trap laid by the Reichsbank to catch the speculators who would regularly build up huge short positions in marks, in the almost certain expectation that the mark would continue to fall against the dollar: i.e., they sold marks they hadn’t got, knowing that they could buy them for a fraction of their present value when the time came to meet the demand. When the mark stopped falling, thanks to the Reichsbank’s engineering, they had to rush to close their positions, and were forced to buy marks which had actually begun to go up. Many speculators lost the entire fortunes which they had built up over the year.

Schacht’s measures sufficed to stop the rot, but in the period between the ordnance declaring the new currency and the appearance of the first notes, there was an interim of pure chaos in which, as Lord d’Abernon noted, "four kinds of paper money and five kinds of stable value currency were in use. On November 20,1923,1 dollar =4.2 gold marks =4.2 trillion paper marks. But by December the currency was stable." The last November issue of the weekly Berliner Ulustrirter Zeitung cost a billion marks, the first December issue 20 pfennigs. Confidence seemed to have been restored overnight. Germany could breathe again.

There were those, however, who could not accept that the old certainties were lost, as this sad little postscript will prove. In the old days the highest denomination printed had been the brown thousand-mark note which had a prestigious, almost magic significance. Many people among the older generation found it impossible to accept that its value was now gone forever. The notes were seen as the symbol of the golden age of stability before inflation, and it was the touching hope of many that one day they would be restored to full value. In the meantime they were hoarded and even collected. They could be bought in the Munich flea market for five marks a million. That there was still a demand for them at all is proof of the belief that one day the Reichsbank would honor its pledge and exchange paper for gold. Weimar’s electoral system of proportional representation encouraged the proliferation of small political parties, of which there were many. But without a doubt, the strangest and saddest political party of them all was the "Party for the Revaluation of the Thousand-Mark Note.".



Chapter 6 – INFLATION

1 d’Abernon, vol. II, p. 23
2 Ibid, p. 22
3 Ibid, p. 24
4 Bonn, p. 2 78
5 Buck, p. 143
6 Ludecke, p. 148
7 Zweig.p. 237
8 Ibid, loc. cit.
9 Daily Express, February 24, 1923
10 Ostwald,p. 63
11 Adlon.p. 99
12 Ostwald,p. 130
13 Clark, p. 11
14 Ibid, loc. cit.
15 Ibid, p. 12
16 Schonberger, p. 155
17 Ostwald.p. 181
18 Adlon.p. 98
19 Ostwald, pp. 84-5
20 Tynan.p. 132
21 Ibid, p. 157
22 Zweig.p. 223
23 Tynan.p. 157
24 Lochner, p. 102
25 Ibid, p. 103
26 Got, p. 67
27 Ibid, p. 57
28 Weltbuhne,
November 1922
29 Beraud.p. 82
30 Buck, p. 163
31 Ibid, p. 141
32 Ibid, loc. cit.
33 Beraud.p. 22
34 Mann, p. 77
35 Fallada, Wolf, Among Wolves, p. 15
36 Zweig.p.238
37 Landauer, pp. 77-80
38 Got, p. 53
39 Buck, p. 232
40 Zweig.p.238



Posted by Gilmour Poincaree on November 22, 2008

Nov 21, 2008

TBT Staff in cooperation with BNS

VENTSPILS – The rector of Ventspils University College has expressed his surprise over the detention of a lecturer for attempts to destabilize the Latvian financial system.

University College Rector Janis Vucans told the Baltic News Service that he did not know the exact reasons for the detention of lecturer Dmitrijs Smirnovs, but that he expected to receive a written explanation.

The rector said that the discussion that led to the lecturers detention was an ordinary talk in which each participant voiced his own opinion and vision.

Asked whether Smirnovs’ detention should be taken as interference with a person’s freedom of speech, Vucans said that Smirnovs is a lecturer at the Ventspils University College, delivering lectures on banks and monetary systems. “On what basis should we lecture? Not on examples of some Switzerland or the US, the situation in Latviais more important to us,” he said.

“The question is whether we are teaching something abstract, what does not refer to us, or we are trying to educate our students on issues that are topical,” said the rector. “As far as I understand, his statements are not populist, but based on analysis,” said the rector.

Smirnovs’ detention was one in a string of detentions allegedly following a rumor that the lat was on the verge of devaluation. Parliament made it a crime to spread such rumors after a previous incident saw hundreds of thousands of lats sold over the course of a few days.

Smirnovs said in the discussion: “The only thing I can advise: first, not to keep money in banks, second, not to accumulate savings in lats as it is very dangerous now. Convert them to the US dollars. The euro is an artificial currency, and what is achieved by the euro in a year, can be lost in a month. These are real threats to the value of the euro. Maybe some people do not understand it, but the main oppositionist and competitor to the US is the European Union (EU). The main goal of the US is to destroy the EU as it does not benefit from a strong and united Europe, strong currency – the euro.”


PUBLISHED BY ‘THE BALTIC TIMES’ (Estonia, Latvia and Lithuania.)