EARLY ECONOMY / HYPERINFLATION Flashcards
WHAT was the state of the German economy post WW1?
- In debt (from the war and from reparations)
- Reduction in raw materials after the loss of areas like the Saarland from the Versailles Treaty
- Food shortages and rising prices
HOW did Germany finance WW1?
Through increased borrowing and printing more money (increased government debt and decreased the value of the German currency)
HOW MUCH was Germany’s debt in 1919 (not including reparations)?
1.44 billion marks
WHY didn’t the government intervene during the rapid inflation from 1918-20?
Because the Centre Party (leader of 1920 coalition) was backed by industrialists who benefitted from inflation by taking short-term loans and paying them off when they were worth less
WHAT did English economist John Maynard Keynes say about reparations?
He calculated that £2 billion was a “safe maximum figure of Germany’s capacity to pay” and predicted that reparations would damage the economies of both Germany and the Allied countries (e.g. due to trade)
WHAT did historian Detlev Peukert say about reparations?
- Reparations were manageable and Germany exaggerated it possibly to use it as an excuse to abolish reparations as a whole
- Final figure was only 2% of Germany’s gross national product
- Government allowed inflation as it benefitted them
WHAT was the ratio of pounds to marks in 1914, 1921 and November 1923
1914: £1 : 20 marks
1921: £1 : 256 marks
November 1923: £1 : 1.7 quadrillion marks
WHY was government expenditure rising before 1923?
- New welfare benefits: widows’ and veterans’ pensions and compensation for war victims
- Compensation to people who had lost land under Versailles Treaty
WHY did France and Belgium invade the Ruhr?
Germany had fallen behind on their reparations payments
WHEN was the French-Belgian invasion of the Ruhr?
January 1923
HOW MANY French and Belgian men were sent to occupy the Ruhr?
60,000 initially, which later grew to 100,000
WHAT was the government’s response the the French-Belgian invasion of the Ruhr?
‘Passive resistance’ - the government stopped reparation payments and told workers to stop working
WHY was the policy of ‘passive resistance’ bad for the German economy?
The government promised to pay the wages and provide goods for striking workers and they now had no income from the Ruhr so had even less money to pay for this.
Compared to reparations, how much was the combined cost of Germany’s response to the invasion of the Ruhr?
Almost double annual reparations.
HOW did the Allies hamper (hinder) Germany’s export trade after WW1?
They confiscated Germany’s entire merchant fleet and later, imposed high tariffs on imported German goods