Weimar Hyperinflation: When Bread Cost 200 Billion Marks

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In late 1922 a loaf of bread in Berlin cost about 160 marks. Less than a year later the same loaf cost 200 billion. This episode traces how an advanced industrial nation destroyed its own money, beginning in 1914, when Germany suspended the gold standard and chose to pay for the First World War with borrowing instead of taxes, betting that a quick victory would let it bill the losers. Defeat left 156 billion marks of debt, and the 1921 London Schedule of Payments added a reparations bill of 132 billion gold marks.

Central bank president Rudolf Havenstein bought foreign currency with freshly printed marks, and the slide became a collapse in January 1923, when French and Belgian troops occupied the Ruhr and Berlin printed money to pay striking workers. By November one dollar bought 4.2 trillion marks. The episode explains the Rentenmark reset engineered by Hans Luther and Hjalmar Schacht, and the creditors and savers it left ruined.

• Only 50 billion of the reparations total, the A and B bonds, was realistically expected to be paid. The remaining 82 billion in C bonds was largely for show.
• Paying Ruhr workers to produce nothing while factories sat idle flooded the country with cash as goods vanished, the main accelerant of the crisis.
• Banknotes became cheaper than wallpaper, children stacked bundles of cash like blocks, and cigarettes took over as the money people trusted.
• Schacht stopped the central bank from discounting treasury bills, and the Rentenmark, tied to German land and industry, replaced the old mark at one to one trillion.
• A 1925 decree revived old mortgages at 25 percent of face value and government bonds at 2.5 percent, and a Supreme Court ruling that year set the first precedent for judicial review in Germany.