Hyperinflation in the Weimar Republic
Hyperinflation affected the German Papiermark, the currency of the Weimar Republic, between 1921 and 1923, primarily in 1923. The German currency had seen significant inflation during the First World War due to the way in which the German government funded its war effort through borrowing, with debts of 156 billion marks by 1918. This national debt was substantially increased by 50 billion marks of reparations payable in cash and in-kind under the May 1921 London Schedule of Payments agreed after the Versailles treaty.
Piles of new Notgeld banknotes awaiting distribution at the Reichsbank during the hyperinflation
50,000 marks, Aachen, 1923
500,000 marks, Leipzig, 1923
A 5 Million Mark coin, Westphalia, 1923
In economics, hyperinflation is a very high and typically accelerating inflation. It quickly erodes the real value of the local currency, as the prices of all goods increase. This causes people to minimize their holdings in that currency as they usually switch to more stable foreign currencies. When measured in stable foreign currencies, prices typically remain stable. Effective capital controls and currency substitution (“dollarization”) are the orthodox solutions to ending short-term hyperinflation; however there are significant social and economic costs to these policies. Ineffective implementations of these solutions often exacerbate the situation. Many governments choose to attempt to solve structural issues without resorting to those solutions, with the goal of bringing inflation down slowly while minimizing social costs of further economic shocks.
100 quintillion (1020) pengő, the largest denomination bill ever issued, Hungary, 1946. 1 sextillion pengő notes were printed, but never issued.
The price of gold in Germany, 1 January 1918 – 30 November 1923. (The vertical scale is logarithmic.)
Germany, 1923: banknotes had lost so much value that they were used as wallpaper.
5 million marks would have been worth $714.29 in January 1923, but was only worth about one-thousandth of one cent by October 1923.