¶ … inflation that occurred in Germany in the early 1920s has been well documented and discussed. It has been blamed for the rise of the Nazi Party and the downfall of the Weimar Republic; yet, few understand how inflation in Germany developed so rapidly and how it was ultimately brought under control. The purpose of this paper will be to examine both the cause of this inflation and its eventual resolution.
In the year leading up to the hyperinflation that occurred there were some mild signs that the German economy may be trouble but the signs were mixed. Although food prices were increasing the price of purchasing American dollars was dropping as was the price of purchasing American products. This was seen as a stabilizing situation by most economic experts and there was minimal concern. This situation, however, changed dramatically as prices in Germany began to increase between mid-1921 and mid-1922. During this period, prices began to rise rapidly and there is actually evidence that they increased by as much as 600% but this was only a small sign of what was to happen in the coming months.
During the period from mid-summer 1922 and the following year, the price of food in Germany increased by 100 times which was only a prelude for the increases that occurred in the following year. In the following year inflation in Germany saw prices increase completely out of control as they rose faster than anyone could possibly measure. Some estimate that prices increased over a million times from July, 1922 to November, 1923 (Hall, 1982, p.73).
Germany was not alone in its inflationary plight. Several other nations in Europe, including Austria, Hungary, and Poland were suffering similar problems but Germany's was the most spectacular and crippling....
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