How did Germany respond to the financial crisis?
They printed money and increased spending, so debt grew and the value of currency dropped.
How did this compare to other countries?
Britain increased taxes and government borrowing.
Why was Germany’s plan seen as ‘flawless’?
They thought they would win the war and annex their enemies industrial areas.
What was the outcome of a defeated Germany on the economy?
1.44 billion marks of debt
What options did the Weimar Republic have?
- reduce spending, dangerous because civil servants needed to be paid
- increase taxes, could alienate the public support
Why was inflation not always bad?
- businesses can borrow from central banks
- value decreases and they don’t have to pay that worth
- lessened debts
- didn’t work for treaty which had to be paid in goods
How did Germany deal with unemployment?
still high national debt, but unemployment gone by 1921
How bad had inflation got?
- prices doubled from 18-19
- quadrupled from 19-20
- by 1920, the currency had increased to 14x higher than 1913
Why didn’t the government intervene with hyperinflation?
It was lessening Germany’s debt.
How did loans lead to hyperinflation?
Levels of loans became uncontrollable and by 1923 reached hyperinflation.
How did Germany believe they would pay back the reparations?
The treaty never stated a specific amount, but in cash and goods.
What was the reparations committee?
A committee set up to scale the damage caused by Germany. It concluded Germany would pay 6.6 billion in annual investments.
What happened in 1921 and how did this cause issues for the government?
- Reparations report presented to Germany and they had 6 days to sign it.
- chancellor Fehrenbach refused and Wirth took over
- no choice but to sign
- policy of fulfilment starts
What happened in Jan 1922?
The reparations committee agreed to a postponement of the January and February payments.
What happened in July 1922?
The German government asked for further payment suspensions.
What happened in Nov 1922?
German Government asked to be freed from 3-4 years of reparation payments
Explain gold reserves in regard to the impact of reparations
Germany didn’t have enough gold to pay off the gold requirements
Explain coal reserves in regard to the impact of reparations
Their coal reserves had been taken away but they still had to pay in coal.
Explain manufactured goods in regard to the impact of reparations
Allies wouldn’t accept this form of payment as it threatened their jobs and businesses. They needed to rebuild their own economies.
How did the allies make repayment difficult?
- wouldn’t let them pay in manufactured goods
- confiscated fleet merchants
- high tarrifs on German goods
What did Maynard Keynes suggest about reparations?
6.6 billion was too much, 2 billion would’ve been better
What did Peukert suggest about reparations?
Reparations were only 2% of Germany’s GNP
What was the occupation of the Rhur?
In 1923, Ebert was president. Germany was behind on reparations so France and Belgium invaded the Rhur with 60,000 soldiers.
What did the soldiers do in the Rhur?
Took control of mines, factories, steelworks and railways. They wanted the Germans to produce the missing coal to cover the debt.
What was the idea of passive resistance?
To not fight back, but to refuse to work.
What did the government promise to the workers?
That they would cover their wages, but this lead to inflation as they had to print more money.
What did the German army do?
Secretly organised sabotage acts against the French, such as blowing up railways.
How did the French respond to the German ‘passive resistance’?
They set up military courts and punished mine owners.
132 Germans were shot during the occupation.
How did the French decide to ensure that the good were retrieved?
They brought in their own workers, but by 1923 the output had fallen by 1/5 of pre- occupied Rhur.
How successful was passive resistance?
It ended up costing Germany twice as much as reparations.
What were the economic effects of the occupation?
- paying Rhur worker wages caused a drain on government finances
- tax revenue was lost from closed businesses
- Germany had to import coal
- Shortage of good pushed prices further
Why did the German constitution form a basis of ‘the right to work or welfare’?
Those who had overthrown the Kaiser wanted a better and freer life.
What social welfare laws were introduced as a result?
1919 - max working hours a day is 8 hours
1919 - state health insurance by Bismarck, but only the employed and wives, daughters and disabled
1919 - aid for war veterans, war widows and orphans
1922 - national youth welfare act, all children had right to education and protection
What were the impacts of the social welfare acts?
Huge demand for the economy. Lots of money went into providing it.
How did hyperinflation impact the Weimar Government?
- parts of gov debt paid off, but not reparations
- collapse of new democracy
- people’s faith lost
How did hyperinflation impact the Students?
- rapid rise in food prices, malnutrition
- suicide rates increased
- people turned to crime
- relied on loans which didn’t keep up
How did hyperinflation impact the Mortgage holders?
- paid loans in devalued currency
- fixed income
How did hyperinflation impact the Farmers?
- food remained in demand
How did hyperinflation impact the Entrepreneurs?
- access to cheap credit
How did hyperinflation impact the Workers?
- received wage rises but they fell behind
- unskilled workers lost 30% of their spending power from 1913-23
- unemployment went up 4.1% in 1923
How did hyperinflation impact the black marketeers?
- could buy large stocks ans sell at a higher price
How did hyperinflation impact the big businesses?
- bought property with worthless money
- paid off mortgages
Who was Hugo Stinnes?
- business owner in coal, iron and electrical industries
- granted workers more rights as a DVP reichstag member despite his conservative views
- “king of the Rhur”
How did Stinnes manage inflation?
- granted workers more rights
- by 1924 owned 1535 companies, 20% of Germany’s industry
- used cheap credit to buy struggling competitors
- paid off loans in valueless marks