Germany's+Economic+Problems

=Germany's Economic Problems =

Before we begin, your job is to find out what the term INFLATION means in relation to the economy.

As you discovered in Unit 1, the Treaty of Versailles ended World War I. The punishing terms of the treaty were designed to ensure that Germany could not pose a threat to other countries for decades.

After the war, every country in Europe was in terrible shape, economically, socially, and politically. With the added burden imposed by the Treaty of Versailles, Germany was in ruins. It was exhausted by the effort of fighting the war, and now it was saddled with an impossible debt to its enemies.

Germany was given a new constitution in 1919. It was known as the Weimar constitution. Everyone hoped that it would create a stable and democratic country. But it did not. Because so many parties got elected to the German Parliament, it was very divided. No one could agree on a plan to rebuild Germany's economy.

A series of weak governments followed. They tried to pay the reparations that the Treaty of Versailles demanded. When they did not have enough money to make the payments, they did two things that had dramatic results.

- They borrowed money, mainly from the United States, with a promise to pay back the loans in the future.

- They printed more German marks and used them to buy U.S. dollars to pay off the loans and reparations.

As more marks went into circulation, each one became worth less. Businesses demanded more marks for their products. Workers demanded more marks for their labour. Prices rose, slowly at first, then at an alarming rate.

As the value of the mark went down, Germans could no longer afford to buy imports. Many companies went bankrupt and laid off all their workers. The situation became so bad that people needed shopping bags full of marks to buy basic groceries. Prices rising out of all control like this is called hyperinflation.

Maggiacomo Fact
During the period of hyperinflation, criminals were more likely to steal your clothes than your money, because money had so little value.

Price of a Loaf of Bread, Germany, 1919-1923. Which year saw the most rapid rise in prices?

Year: 1919 Price: 0.26

<span style="font-family: 'Arial Black',Gadget,sans-serif; font-size: 150%;">Year: 1920 <span style="font-family: 'Arial Black',Gadget,sans-serif; font-size: 150%;">Price: 1.20

<span style="font-family: 'Arial Black',Gadget,sans-serif; font-size: 150%;">Year: 1921 <span style="font-family: 'Arial Black',Gadget,sans-serif; font-size: 150%;">Price: 1.35

<span style="font-family: 'Arial Black',Gadget,sans-serif; font-size: 150%;">Year: 1922 <span style="font-family: 'Arial Black',Gadget,sans-serif; font-size: 150%;">Price: 3.50

<span style="font-family: 'Arial Black',Gadget,sans-serif; font-size: 150%;">Year: 1923 (Jan.) <span style="font-family: 'Arial Black',Gadget,sans-serif; font-size: 150%;">Price: 700.00

<span style="font-family: 'Arial Black',Gadget,sans-serif; font-size: 150%;">Year: 1923 (May) <span style="font-family: 'Arial Black',Gadget,sans-serif; font-size: 150%;">Price: 1200.00

<span style="font-family: 'Arial Black',Gadget,sans-serif; font-size: 150%;">Year: 1923 (Sept.) <span style="font-family: 'Arial Black',Gadget,sans-serif; font-size: 150%;">Price: 2 000 000.00

<span style="font-family: 'Arial Black',Gadget,sans-serif; font-size: 150%;">Year: 1923 (Nov.) <span style="font-family: 'Arial Black',Gadget,sans-serif; font-size: 150%;">Price: 80 000 000 000.00 <span style="font-family: 'Arial Black',Gadget,sans-serif; font-size: 150%;">Source: Joel Anderson, "A Look at German Inflation, 1914-1924," www.joelscoins.com/exhibger2.htm, 1999, accessed February 15, 2005.

<span style="font-family: 'Arial Black',Gadget,sans-serif; font-size: 150%;">Although a new version of the mark was introduced in 1924, and prices stabilized, the damage had been done. People had no confidence in German money or the German economy. Unemployment rose to very high levels.

===<span style="font-family: 'Arial Black',Gadget,sans-serif; font-size: 150%;">Check out this video to learn a little more before you do the question below... === <span style="font-family: 'Arial Black',Gadget,sans-serif; font-size: 150%;">media type="youtube" key="MCU6Fcnc2H0" height="390" width="640"

<span style="font-family: 'Arial Black',Gadget,sans-serif; font-size: 150%;">Questions
<span style="background-color: #dbd6d6; font-family: 'Arial Black',Gadget,sans-serif; font-size: 150%;">1. a) Based on your experience, do prices of things you buy tend to rise quickly, or stay relatively stable these days?

<span style="background-color: #dbd6d6; font-family: 'Arial Black',Gadget,sans-serif; font-size: 150%;">b) Do some research to find out the actual inflation rate in Canada today. Does what you found out correspond with your own experience as a consumer? Explain.

<span style="font-family: 'Arial Black',Gadget,sans-serif; font-size: 150%;">This hyperinflation was devastating and made the problems of a country destroyed by war even worse. Combine this with the unemployment of the depression and the social upheaval after World War 2 and you had a recipe for negative political forces to take control.

<span style="font-family: 'Arial Black',Gadget,sans-serif; font-size: 150%;">Now, it's time to delve a little deeper with some primary resources that deal with German hyperinflation during the Wiemar period.