Lords of Finance

In the book "Lords of  Finance", following WWI while Germany was negotiating the reparation demands its economy floundered. There was a series of weak governments which collectively proved unable to control the country's finances that causes of which were for the most part self –inflicted. To make the reparation payments Germany resorted to printing money. Know any other countries that do that?

In 1914 the mark stood at 4.2 to the dollar worth a little under 24 cents. By the beginning of 1920 after the full effects of the war finance had worked its way through the system there were 65 marks per dollar worth around 1.5 cents and prices were nine times as much as they were in 1914. Over the next eighteen months the mark stabilized. Foreign private speculators, betting the mark had fallen too far moved some $2 billion into the country.  Germany was viewed, before the war, as the epitome of discipline, orderliness, and organization. It was inconceivable it would give up on restoring order.

A series of events in 1921 resulted in the public losing confidence that Germany's problems were soluble and abandoned the mark. Foreign speculators bailed, losing most of the $2 billion they had pumped into the economy. 

On June 24, 1922 the man recognized as architect of the economy was murdered, panic set in. Prices rose fortyfold during 1922 pushing the mark from 190 per dollar to 7,600 per dollar.

Early in 1923 Germany defaulted on some reparation payments and the budget deficit almost doubled to around $1.5 billion. To finance the shortfall Germany printed ever-increasing amounts of worthless paper marks. In 1922 around 1 trillion marks of additional currency were distributed, In the first six months of 1923, 17 trillion marks were printed.

It took 133 printing works with 1,783 machines and 30 paper mills. Over the next few months Germany's economy destructed. By August 1923, a dollar was worth 620,000 marks and by early November 1923, 630 billion.

A kilo of butter cost 250 billion marks, a kilo of bacon 180 billion, a ride on a street car, which before the war cost 1 mark now cost 15 billion.  Currency was available in denominations of up to 100 billion marks and were carried around in bags, in wheelbarrows, in laundry baskets and hampers and in baby carriages.

In the last three weeks in October prices doubled every couple of days and rose ten thousandfold. In the time it took to drink a cup of coffee in a café the price might have doubled.  Money received at the beginning of the week lost nine-tenths of its buying power by the end of the week. 

Workers who were once paid weekly were paid daily and given a half-hour to go and buy something. They bought what they thought they would be able to barter.

On July 31, 2008 the Zimbabwean dollar reached 500 billion to the U.S. dollar. It can happen to us.