How do dollar stores explain inflation

The hyperinflation of 1923

Who pays for the war?

The 1923 inflation was a late aftermath of World War I, a bubble that finally burst five years after the capitulation. War costs money, a lot of money. Money that a state has to spend on weapons, ammunition, soldiers, food, transport and logistics.

The First World War devoured enormous financial resources. Money that the German Reich did not have. In the summer of 1914, the state's reserves were just enough for two days of the incredibly expensive war maintenance, but the war lasted more than four years.

The material battles of World War I not only claimed millions of lives in the trenches. They also meant an immense destruction of capital in Europe. Money that literally went up in smoke.

The German Reich leadership was convinced that it would win the war. The cost of the war was then to be paid by the defeated enemy - a calculation that did not work out. But not only Germany had calculated in this way, the Allied opponents had also started from similar considerations. The defeated Germany was therefore targeted in the Versailles Peace Treaty with enormous claims for damages.

Traumatic inflation

But at the beginning of the 1920s, the German Reich was not only in the chalk with the victorious powers, but also, in particular, with its own population. In so-called war bonds, the common man on the street had advanced millions of dollars to the state to cover the costs of the war.

Economically, the German Reich had its back to the wall. It had to rebuild the war-torn country, repay war bonds to its own people and raise money for reparations.

When the French occupied the Ruhr area in 1923 because of late reparation payments, the situation worsened. The German government called for passive resistance, sabotage and strikes. In return, she passed the wages on to the strikers. It was the drop that broke the barrel. Germany got caught up in the maelstrom of the most dramatic inflation that the country should ever experience.

In order to meet its payment obligations, the government put more and more money into circulation, even if there was no material equivalent in the country for the increasing number of banknotes.

This started the vicious circle of inflation. More and more money was soon worth less and less, prices and wages exploded. Money had become play money. Anyone who did not spend their wages immediately after receiving them could hardly buy any more days, sometimes hours later. Those who received their wages at the end of the month were literally destitute.

Civil servants and civil servants were hit hardest by inflation. Many shops stashed their stocks and supplies and withdrew them from the uncontrollable movement of goods, from which they could no longer earn money. Inflation exploded.