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What is hyperinflation? Why did this situation occur in Germany in 1923?
What is hyperinflation? Why did this situation occur in Germany in 1923?
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Hyperinflation is a situation when prices rise phenomenally high. This situation occurred in Germany in 1923 due to several reasons:
(i) Germany had fought the First World War largely on loans and had to pay the war compensation in gold. This depleted gold reserves at a time resources were scarce.
(ii) When Germany refused to pay the war compensation, France occupied its leading industrial area, Ruhr, to claim their coal.
(iii) Germany retaliated with passive resistance and printed paper currency recklessly. With too much printed money in circulation, the value of the German Mark fell. As a result, prices of goods soared. The image of Germans carrying cartloads of currency notes to buy a loaf of bread was widely publicised. This crisis came to be known as hyperinflation.
(i) Germany had fought the First World War largely on loans and had to pay the war compensation in gold. This depleted gold reserves at a time resources were scarce.
(ii) When Germany refused to pay the war compensation, France occupied its leading industrial area, Ruhr, to claim their coal.
(iii) Germany retaliated with passive resistance and printed paper currency recklessly. With too much printed money in circulation, the value of the German Mark fell. As a result, prices of goods soared. The image of Germans carrying cartloads of currency notes to buy a loaf of bread was widely publicised. This crisis came to be known as hyperinflation.
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