Just Finished Reading: The Downfall of Money – Germany’s Hyperinflation and the Destruction of the Middle Class by Frederick Taylor (FP: 2013)

Countries across the globe have experienced periods of rapid inflation but the hyperinflation of the early 1920’s in Germany is by far the most frightening example of this economic disaster. Fuelled by internal debt to pay for WW1 – ironically ‘buttressed’ by the thought that the victorious Central Powers that future Reparations could be used to ‘service’ it – and tacitly encouraged in the years following her defeat it quickly got out of hand producing the now famous images of housewives wheeling baskets full of bundles of money to the shops before the prices changed and people using money as wallpaper because it was either that or use it as fuel. Interestingly the author makes reference to the, what I thought was, apocryphal story of the shopper who left her baby carriage outside the shop with bundles of Billion Mark notes only to return to find that the carriage had been stolen and the money left behind as true. Reading this fascinating (almost car-crash style) economic history of a country completely out of control I can certainly believe it.

Now I’ve lived through inflation rates that would horrify the kids living around me today. Back in 1975 (books about the period to come) the UK inflation rate hit and amazing 24.2%. Now that’s a LOT. Indeed the very idea of that rate of inflation is pretty scary. Now imagine living somewhere where inflation hits 50% a MONTH and gets worse…… that’s Germany in the 20’s! The most surprising thing was how well Germany society coped – in the fact that the whole structure didn’t simply collapse under the weight of all that paper money. Of course if you had any savings and didn’t withdrawer them smartish then you were essentially screwed – the author relates a story of a pensioner who withdrew his entire pension pot, which he expected to live for years on, spent it all on a tram ticket to go home where he starved to death – less so if you were on a fixed income where the local and national governments tried as much as possible to provide an amount of money people could live on. Of course if you had ‘things’ rather than cash (or nothing) the increasing inflation created many opportunities for the rich to get even richer which should as no surprise to anyone.

Of course with an economy out of control the political consequences were profound. The post-revolution Left Wing government garnered many followers and did the trade unions but the far Right prospered too holding the incumbent government responsible for both the Army’s ‘stab in the back’ and for the post war chaos. These people could not, of course, ever be trusted. When strikes broke out and spread to open insurrection in some parts of Germany the Army was only too happy to intervene to crush the Communist menace. When a similar breakaway group attempted a poorly thought out ‘putsch’ in Munich neither the local authorities nor the nation Army agreed to step in. Being notoriously ‘blind in the Right eye’ they slapped the hands of the ring leaders (including an up and coming young firebrand Adolf Hitler) and allowed them to continue. Nothing lasts of course and eventually, when things got really bad, the government stepped in, issued a new currency and stabilised the situation. But not before the German Middle class had been effectively destroyed and the rise of the Right was unstoppable.
 

Told with a deft hand this is an excellent tale of what happens when economies are allowed to get out of hand and the very avoidable consequences we are all familiar with and still living with. Excellent political history with some fascination insights into the German Revolution of 1918-1919. Highly recommend for anyone interested in a true nexus of world history.