Chapter 38 The real cause of hyperinflation in Germany

After Rathenau was killed, as confidence in Germany's political stability fell to its lowest point since the Versailles Peace Conference, by July 1922, the ratio of the gold mark to the dollar fell to 493 marks per dollar on the international market.The Reichsbank began massively increasing the money supply to meet the reparations outstanding to Britain in an almost frenzied manner, while at the same time maintaining employment and strengthening the domestic export industry to meet reparations.By December of that year, the mark had dropped to an alarming level of 7,592 marks per dollar. On January 9, 1923, the Reparations Commission passed a resolution with 31 votes (in the official record, the United Kingdom opposed, and the newly established Mussolini government in France, Belgium and Italy) believed that Germany had not fulfilled its reparation obligations, 1 On April 11, Poincaré ordered the French army to march into Essen and other cities in the Ruhr industrial area of ​​Germany and forcibly occupied the area.Armies from Belgium and Italy also took part in the operation symbolically.Britain hypocritically condemned the occupation, even though she had threatened to do the same in 1921.

In response to the act of aggression, the German government called for general passive resistance by all citizens.The German government ordered all officials, including Reichsbank employees, not to carry out any orders issued by the occupation authorities, and workers not to go to work in the factories and steel works in the Ruhr.To help striking miners and other working families, the government had no choice but to expand currency printing.The occupied area is only 100 kilometers long and about 50 kilometers wide, and the population only accounts for 10% of Germany's population, but the production of coal, iron and steel in this area accounts for 80% of Germany's total output, and the freight volume accounts for 100% of all German freight. 70%, French occupation caused a stagnation of German industrial activity.This situation continued until the end of 1923. Despite the best efforts of the French army and engineers, the production of the entire Ruhr area was only one-third of the 1922 average.During this period, more than 150,000 Germans were forced to leave the occupied Ruhr industrial area, about 400 were killed and more than 2,000 were injured.

German resistance put an immeasurable strain on the economy.The French occupying forces cut off the economic links of the industrial Ruhr area with the rest of Germany.The funds of German banks and branches of the Reichsbank, the stocks of factories and mines, were all controlled by the occupying forces.During the resistance, Germany stopped all reparation payments to France, Belgium, and Italy, while reparations to Great Britain were delivered in full. As a result, the German monetary system was completely destroyed.As we have already noted, by the end of 1922, when the intention of the Poincaré government in France to impose a military occupation became apparent, the value of the mark began to decline.After the occupation of the Ruhr area in January, the mark had fallen to 180,001 against the dollar. By May, the Reichsbank had taken all possible measures to maintain the currency at its original level at all costs.By May, the economic damage to the Ruhr was so great that Berlin had to abandon efforts to save the currency.

From then on, the situation got completely out of control.By July, the mark had fallen exponentially to 353,000:1 against the dollar; by August it had reached an incredible 4,620,000:1.This decline continued until November 15, and the price index against the US dollar reached 4.2 trillion: 1.This phenomenon has never happened before in the economic history of all countries in the world. After a lag of several months, wholesale prices in Germany are also starting to reflect the currency's collapse.Taking the price index level of 100 shortly after Rathenau was assassinated in July 1922, by the end of January 1923, when the Ruhr area was occupied, the price index rose nearly 30 times to 2785. In July, the price index rose to An unbelievable 74787, and only 100 a year ago! In September, it reached a high of 23949000, and finally reached 750000000000 in November.Everyone's deposits have all become waste paper.Living standards fell sharply.There were a few very rich at the beginning, but the vast majority fell into complete poverty.Government bonds, mortgages, bank deposits—all of them became worthless.The middle class on which the country depended for stability has become the pauper.

By September 1923, the coalition government led by Gustav Stresemann ordered an end to passive resistance. In November 1923, the German government signed a formal agreement with France and other occupying forces.At this point hyperinflation has reached its peak.The signing of this agreement was only a delaying measure by Germany to obtain some hope of aid. In October 1923, U.S. Secretary of State Charles Evans Hughes (who was the chief lawyer of the Rockefeller Standard Oil Company) submitted a new plan to President Calvin Coolidge, suggesting that the huge reparation payments should be maintained. Reparations have fluctuated since the Rapallo crisis in April 1922.Hughes persuaded the president to win an appointment to General Charles Dawes, a Morgan-linked banker with a history of taking bribes from the Illinois Republican Party.

Dawes, who later became chairman of the Dawes Commission, presented a plan to the Allied Reparations Commission on April 9, 1924.The plan immediately attracted attention from all sides, including the exhausted German government. In May, France's Poincaré lost the election, and Herriot's cabinet immediately agreed to Dawes' compensation plan. On September 1, the Dawes Compensation Plan officially began.The Dawes Project showed for the first time that in the later period of Versailles, the Anglo-Americans were increasingly inclined to adopt a consistent approach to strengthen cooperation.The British shrewdly decided that it was better to let the Americans take the lead, while at the same time retaining a strong influence over American policy.

The Dawes Plan was another strengthening of the Anglo-American Banking Group's overall control over Germany's finances and finances.It was far more effective than Poincaré's soldiers, but its implementation could only be guaranteed on the condition of military intervention and the ensuing hyperinflationary crisis. In November 1923, German banker Halmar Schacht was appointed Director of the Currency Bureau.During this period, Schacht communicated frequently with Bank of England Governor Montague Norman, and Schacht implemented the real estate mortgage mark, which was an attempt to promote the stability of the mark based on fictitious declared real estate. The death of Reichsbank President Rudolph Haverston (who had been head of the Reichsbank since 1908) on November 20th, the day the estate mortgage mark stabilization plan was announced, was just a series of such major events the beginning.Chancellor Streisemann and Chancellor Rudolf Hilferding made several attempts to remove Haverston from his post.The reasons for this soon became apparent.

On December 4, 1923, the Reichsbank's meeting of governors voted overwhelmingly to elect Karl Helfrich as Reichsbank president, succeeding the deceased Halveston.Helfrich was a former director of Deutsche Bank and chief architect of the pre-war Baghdad railway project.Stresemann and his government had better candidates.On December 18, 1923, Schacht, Stresemann's favorite and friend of the Anglo-American Morgan interests, was appointed Reichsbank president.The obstacles to the implementation of the Dawes plan have been cleared.A few months later, Helfrich was killed in a suspicious train accident.

According to the Dawes Plan, Germany had to pay reparations within five years to 1929.But by the end of 1929, Germany owed more than when the reparations began.This is the organized robbery conspiracy of the international banking syndicate led by London and New York.A special fund was also set up in Germany as a guarantee for the payment of reparations.In Berlin, the Anglo-American Bank also arranged for a general compensation agent to collect compensation for them. This person was Parker Gilbert, a partner of Morgan and a protégé of Owen Young.Because there is no risk, the banks in London and New York began to provide huge loans to Germany, so the funds flowed back to the banks in London and New York in the form of indemnities, plus commissions and interest. This is really a good deal.This created a huge international credit pyramid, with banks first in London and later in New York at the top.

From 1924 to 1931, Germany paid a total of 10.5 billion marks in war reparations, but borrowed 18.6 billion marks from overseas. After 1923, under the command of Montague Norman and his counterpart Schachter at the Reichsbank, Germany's post-war recovery was entirely dominated by Anglo-American borrowing.At this time Anglo-American fears that the Rapallo Treaty would disrupt the Anglo-American order disappeared, but in 1929, when the continuous flow of credit flowing into Germany from banks in New York and London to maintain reparations suddenly stopped, the entire pyramid collapsed.