German Economy After World War I

[Csargo]

I am currently reading The Rise and Fall of the Third Reich, A History of Nazi Germany by William L. Shirer. I was wondering why the German mark plummeted in value. I understand that because of the Versailles treaty that the German government had to pay billions of marks in war reparations to the Allied powers. I just can't figure out why the value of the mark dropped so dramatically over the course of one year. If anyone could explain this to me I'd greatly appreciate it.

[Evil_Maniac From Mars]

Essentially, to meet the demands of the Allied forces, which required a certain amount of marks to be paid off, the German government simply printed off more money, causing massive inflation.

Spoiler Alert, click show to read: 

That's how I understood it, at least.

[Csargo]

I figured it would be more complex than that.

[Evil_Maniac From Mars]

I'm sure there are people here who can give you a long and complex explanation, but I'm not good enough with economics to do that.

[Csargo]

I'm sure there are people here who can give you a long and complex explanation, but I'm not good enough with economics to do that.

Maybe a general discussion over the state of Germany from 1919-1933? I would be interested in that

[Franconicus]

Excellent topic. I had to have a look:

Reasons go back to 1914, when the war started. The government ended the coupling of the money to gold. Until the end of the war, the money lost about 50% of its value.

This was done to finance the war by reducing the fortune of the people with money (mainly middle class) and the wages of the workers. Buying power went down and most of the production went into war efforts.

Additionally, they sold war loans. They promised that after the victory the defeated enemies would have to pay for the war they had started. Furthermore the government collected precious metal and food.

However, the war was longer than expected and I the end it was lost. Now the war loans were worth nothing. Further more it was Germany that had to pay reparations. Not only money; for example, Germany had to give almost the complete trade marine. Exports went down!

The years 1921/22 did not look too bad. Due to inflation the wages in Germany were extremely low and therefore German industry grew faster than in the countries of the winners.

However, the government kept inflation on a high level. They feared that a stable currency would end the growth and lead to unemployment, sinking wages and social riots. Then, everybody feared the raise of communism in Germany, even the former Entende members. On July 3rd 1922 the Mark was worth 1/100 of the value it had had at August 1914, at October 3rd1922 it was on 1/1000.

The value collapsed completely during the Ruhrkampf. The German government claimed that it could not fulfil the demands of Versailles. France occupied the Ruhr (one of the most important industrial areas), Germany reacted with strike. The strike was paid with money, fresh printed. The result was a hyperinflation.

http://de.wikipedia.org/wiki/Deutsch..._1914_bis_1923

The hyperinflation made German’s economy break down. Unemployment rate increased, wages dropped without an end, communist party had more and more followers. The unions were broke and government had to fund them. At September 26 the government had to end the ‚Ruhr-Kampf’.

Afterwards there was a monetary reform and a new agreement about the reparations.

Due to the inflation, the costs of the war were paid by the employees and those that had their fortune in money. It took until 1928 before the wages reached the level of 1913. The majority of the middleclass, used to live without support from the state or even enemies of the welfare state found them in poverty, dependant on warfare now.

[Csargo]

Excellent post Franconicus.

It says here that "the industrial tycoons, the Army and the State were benefiting from the ruin of the currency." It also says that "the government deliberately let the mark tumble in order to free the State of its public debts, to escape from paying reparations and to sabotage the French in the Ruhr"

So if I understand it right the hyperinflation helped out the Army, the State, and heavy industry because it basically let them pay off there debts with the now useless mark. Of course the common people were left with a piece of paper that was totally useless and couldn't buy them anything they needed.

[Franconicus]

Right! Plus the inflation lowered the wages of the employees!

My mother told me that my GrandGrand father was ruined by the hyperinflation. He was an artisan (making tomstones and several other things made of stone) but he was more an artist than an undertaker. Many people owed money to him. He did not care because they were all farmers from the neighborhood and he had no doubt that they would pay some day. Well, they paid.

[Csargo]

I'm glad someone else is interested in this other than me. It'd be kinda weird if I was talking to myself

[Sarmatian]

[QUOTE=Ichigo It'd be kinda weird if I was talking to myself [/QUOTE]

Why? When you are talking to yourself, at least you know you're talking with an intelligent person...

[Csargo]

Why? When you are talking to yourself, at least you know you're talking with an intelligent person...

I guess so.

[Pantsalot]

I think the "Great Depression" might of had something to do with it as well?
http://en.wikipedia.org/wiki/Great_Depression

[Csargo]

I think the "Great Depression" might of had something to do with it as well?
http://en.wikipedia.org/wiki/Great_Depression

I think Germany was already in a depression or possible just got out of it.

[Franconicus]

There were many factors increasing the effect.

Germany had to pay reparations to England and France, England and France paid war loans to the US, so essentially Germany paid to the US.

There was a lot of US money invested in the German economy, that made the German industry run quiet good after WW1. However, the New York Crash made the AMerican invertsors calling their money back - German economy was hit twice as hard!

If memory serves there were also such things as a bank crash as well as regulations about food price etc.

In the end the middle class was ruined, the workers poor and unemployed. The people had lost their confidence in the state. It think the hyperinflation and the effects are one root for the antisemitism (I think the majority of the people did not understand the reasons for the inflation and where willing to believe that the Jews were to blame) and that many people accepted that the government should control economy.

I think that the German history after the revolution of 1848 is most interesting, esp. the period between the WWs. Although I red many books there are still many aspects I do not understand.

If you are interested too, you could read some books of Oscar Maria Graf (Unruhe um einen Friedfertigen).

[King Kurt]

Franc

This topic is particuarly interesting as its effects were felt for so long. The roots of WW2 can be seen in this period. Also the german hyperinflation then the Great depression lead to changes in international economics - World Bank, IMF etc. It could be called the end of the old way of things and the begining of the new.

One question - and, as a German Franc, you have some insight - is why did Germany not plunge into revolution during this time? They had been close before in 1918/19, so I would have thought that this might have been the time it might have flared up again. If it had - I wonder what the consequence would have been? - Communism throughout Germany, Poland following suite, no WW2?

[Franconicus]

Germans do not like revolutions at all. There is no revoltionary culture like there is in France. And yet, things were very close to a revolution.

In 1919 there was a revolution, or better said several small ones. For example there was the Räterepublic At Munich. They had driven the König away.

However, there was also a strong counterrevolution, that overwhelmed the revolution. These so called 'Whites', Freikorps as well as soldiers of the new republic topped the terror of the red revolution by far.

After 1919 people were tired of war and tired of revolution. Things went bad, many lost their social position, but it was easy to find some black sheeps: the winners of WW1 (esp. France), the international finance (means Jews, bankers, Americans and English) and communists (means Jews, again, and Russians). The nationalistic right wing gained more and more followers. They had the military, the administration and the courts on their side.

Of course the communists gained power, too. Most of the time between 1919 and 1932 there was a big struggle between the extreme right and the extreme left. Both sides, - antidemocratic as they were - grew. Soon parliament was unable to rule. The result was a kind of presidential dictature.

There was a lot of political terror and murdering from both sides. This and the chaos in economy made people want to have a strong leader, like they had had in the good old imperial age.

In the early 30ies, there was a huge risk of a communist revolution. Therefore the president decided to take the right wing into the government, led by Adolf Hitler. The rest is history.

Everyone had expected that Hitler would try to make another putsch. The left was alert. They had their weapons on stock, in all trade union buildings, their plans for a general strike.

They were surprised that Hitler became Kanzler the legal way. They did not know what to do and hesitated too long. Most of them were arrested and either killed or put into concentration camps.

[Sarmatian]

Franc
One question - and, as a German Franc, you have some insight - is why did Germany not plunge into revolution during this time? They had been close before in 1918/19, so I would have thought that this might have been the time it might have flared up again. If it had - I wonder what the consequence would have been? - Communism throughout Germany, Poland following suite, no WW2?

Quite interesting issue... What would have happened in the next half a century or so, if instead of the Nazi party, communist party came to power...

[Franconicus]

Quite interesting issue... What would have happened in the next half a century or so, if instead of the Nazi party, communist party came to power...

Love, peace and understanding ...

Maybe an interesting topic for an Utopian Interactive

[Csargo]

I think it is highly unlikely that a communist lead government would have formed. Probably just another political party similiar to Hitler's.

[Sarmatian]

I think it is highly unlikely that a communist lead government would have formed. Probably just another political party similiar to Hitler's.

I know. I just mentioned it like an interesting what if discussion...

[Csargo]

I know. I just mentioned it like an interesting what if discussion...

The world would be under a red blanket. With German technology and Soviet manpower if an alliance formed, which it most likely would, the German-SU alliance would be unstoppable!!! We'd probably be living in a much different world right now.

[CountArach]

Yes, that would be interesting. However, with the "Export-Socialism" of Stalin, and undoubtedly this 'Communist' party (And I use the term losely) would still have probably split Poland up, not to mention the parts of the Balkans that did not cooperate.

Then it would be likely that Britain (and later America) would be forced to ally with the Fascists against the much larger threat (Essentially picking the weaker of the two evils) of 'Communism'. It would also have pushed Britain itself much further to the right, because not only would the Fasists not have been as vilified as they were, but the Communists would have been vilified. Afterall, the mentality at the time was largely anti-German, so if they shift to the left, Britain may not want to go that way.

This would lead to a situation where perhaps Franco would not have gained power, because he would have had no German weapons to back him up, and the Communists in Spain would have had German funding as well. An interesting prospect, because if they succeed, then there are 3 large European Communist powers, Germany, Spain and the SU, as well as whoever would be under their dominion.

The United States would probably have come to Britain's aid much earlier, perhaps at the very outbreak of the innevitable War. This may have pushed them further to the right as well (though judging by Modern America, they are there anyway...). Perhaps this would have changed the outcome of elections?

Once the war itself started, it is likely that the Germans and SU would have simply swamped everyone with numbers. Think Stalin's Patriotic War, then combine it with the German numbers as well as the SU... that's a lot of men! Likely enough to conquer mainland Europe.

There would have been no oil shortage for Germany, afterall they have the SU's oil fields to back them up! However, there would have been far less money invested into the Tanks and Aircraft, instead they probably would have used Soviet designs. That fact alone changes Modern Tank warfare.

Now the war itself would have seen no 'Blitzkrieg', as the Generals who saw that way probably would not have come to the fore. Instead it would be like WWI all over again, with far mroe men on the German side. That would probably result in a German win, at least until they collapse from the inside...

[Franconicus]

I think you can imagine another scenario, too.

The German communist where not all followers of Stalin. I think most of them had a more radical and fundamental approach. Maybe the two countries would have build an alliance after all.

This would have created a huge political and economic pressure on many other countries. It would have been an alternative to the nationalistic/capitalistic model.

Even though the French did not like the Germans at that time, there was a large part of the population that was tired of this conflict and also tired of the econmic situation. French communists were always very strong. It is not unlikely that France would have turned into a Socialist country too.

You already mentioned Spain. With a German/French/USSR block, Franco would hardly have dared to rebel. So there would have propably been a left government, too.

I think Italy and GB would have contered with a right wing-nationalistic government, with Fascistic character.

Was there a need for war? I do not know. The communist block would have drawn Poland, the Balkans and mabye Finland into its ecomonic system.

[CountArach]

The way I see it is that GB and the other Right Governments would see this "drawing into the economic system" as a threat to their way of life, expecially if they were fascist. This would innevitably lead to War, probably with a mainland European victory.

[InsaneApache]

I think Italy and GB would have contered with a right wing-nationalistic government, with Fascistic character.

Historically the UK doesn't 'do' extreams. The BUF was never popular. Our democratic traditions are too well ingrained.

Interesting topic, please carry on chaps.

[Csargo]

The way I see it is that GB and the other Right Governments would see this "drawing into the economic system" as a threat to their way of life, expecially if they were fascist. This would innevitably lead to War, probably with a mainland European victory.

It depends. I see it as unlikely that the UK would go to war without support from America or a facist Italy for that matter. The RN was strong, but its unlikely that it would be able to hold out very long against a combined German-French navy. Of course this is all speculation on my part I could be horrible horrible wrong, which I am usually.

[CountArach]

It depends. I see it as unlikely that the UK would go to war without support from America or a facist Italy for that matter. The RN was strong, but its unlikely that it would be able to hold out very long against a combined German-French navy. Of course this is all speculation on my part I could be horrible horrible wrong, which I am usually.

When you throw in the Navy of the US, they could probably hold for a long time simply due to the amount of experience, not to mention the reputation, which would almost certainly scare whoever they are up against.

Historically the UK doesn't 'do' extreams. The BUF was never popular. Our democratic traditions are too well ingrained.

Hmmm, I never considered this. I suppose they would remain Democratic, however the Left would still be victimised as supporters of these regimes.

Now an interesting question, what would Fasist Japan have done? Would they have managed to concluded a Peace Treaty with the Soviets before the Manchurian campaign? It is unlikely they would have had any reason for agression, as there woudl be no pressure on the Soviet Eastern Border.

If they didn't achieve this, I would forsee a heightened Soviet Presence in South-East Asia, perhaps leading to far more revolutions over the years (I would say Cold War, but that is what the entire war would be about anyway). Then the big question. If the Soviets pushed Japan out of China earlier, early enough so that Japan would not have started the Pacific theatre, would the US have joined the war?

They really would have had a need. However, if they did, then there would be more men for a push against the Communist Europe. Perhaps there would be a push through Spain (Assuming it was allied with Communist Europe) and then a fight for France from the Pyreneese {sp?}?

The way I would see the innevitable war going would be:

• The "republican" Spanish win any contest
• Fascist Italy gears up for war
• German Revolution - Communists Win
• Soviet-German alliance
• French Revolution - Communists call in external suport
• Any non-Socialist parties would call on the Fascists and Britain
• A proxy war is waged in France
• Communist eventual victory through sheer manpower and larger amount of resources coming in
• Communist Europe (CE from now on) formed
• Soviet Winter War against Finland, perhaps the rest of Scandinavia as well
• Communist Victory
• CE expands into Balkans, setting up Puppet Governments
• Alliance of the Right (AR) formed - Britain and Commonwealth, Italy, Turkey, Greece (?)
• Fighting in Italy
• Naval Battles in the English Channel - BN hard pressed
• Britain appeals to US
• US joins AR
• US Navy helps win English Channel
• Italy eventually taken over - Puppet Government
• British and US counter-attack in SPain
• Spain falls
• A War is waged over Southern France
• Communist Victory is likely here, though partisan support would perhaps favour AR
• Japan probably joins AR
• promised a blind eye in Asia
• SU fighting in Manchuria
• Eventual victory due to not having too many forces deployed
• South-East Asia starts Communist Revolutions
• Japan sent back to Island, protected by Navy and Air Force
• Peace eventually concluded with AR holding onto Spain, Japan, Turkey (Perhaps), US and UK

[Sarmatian]

[*]CE expands into Balkans, setting up Puppet Governments[*]Alliance of the Right (AR) formed - Britain and Commonwealth, Italy, Turkey, Greece (?)[/LIST]

Greece is in the Balkans.


Maybe communist rule in Germany would provoke immediate attack from France and GB. Since they wouldn't be facing strong and organized Germany it is fairly possible that they would win.

Then the situation would be quite similiar to the Cold War, just a decade earlier...

[Franconicus]

You see it in a very imperialistic way. However, there are other aspects as well.

Assumption:
If the Nazi's would not have gained power in Germany, the left parties (esp. the communist ones) would have won the elections.

Conclusions:

1. There would have been a riot caused by an alliance of Fascists, military and the rich. On the other side there would have been the worker, represented by communists and trade unions.
2. The USSR would have send support for the governemnt. The position of France and England would not have been that stright. France would propably have occupied the Ruhr, but that would have caused a lot of unrest at home, because many French would have supported the German left. Britain would have been waiting. They would have been too tirerd of war to engage in an internal conflict. However, there would have benn some international brigades of mainly British and American volunteers fighting for the German government.
3. After a bloody civil war, left is finally getting upper hand. At this time there are also communist riots at France, which destabilize the ountry. The French establish an extremme right-wing nationalistic government under Petain. Petain makes new laws to weaken the left, to control the papers and he sends the army to end the unrest. The British finally realize that a communist victory in Germany means a communist block from the Rhine to Pacific. The British government now openly supports the German nationalsts. The British trade runions respond with strikes. At the next elections conservatives and Labor present more radical programs. The conservatives win with a very small advantage. Immediately they install a national reform program, limiting the power of the unions. Those respond with a General Strike, the British government sends soldiers to end these strikes. At the so called Bloody Wednesday soldiers fire into a group of unarmed demonstrants. 34 men and women are killed, about 200 are wounded. This is the signal for a national riot.
4. The lasting struggle between left and right weakens worldwide economy. In the US there are more unemployeds, the wages go down. The company owners are still getting richer. They build company brigades to protect their properties against unions and communists.
5. Finally the unrest at Europe is over, or at least there is a break. Germany has ended the riot and there is a communist government now. At France and England, the conservative have won the struggle due to the support of the armies. Most of the union leaders are under arrest, the unions are forbidden. Both countires have a more or less fascistic government. In Italy Fascism is gaining power, while at Spain there is still a revolution going on.
6. The victory of the communists at Germany is the signal for the revolution at America.
7. ...

[Husar]

When you throw in the Navy of the US, they could probably hold for a long time simply due to the amount of experience, not to mention the reputation, which would almost certainly scare whoever they are up against.

We sunk the Hood anyway.