Reparations, the Ruhr and the hyperinflation of 1923

Overview

Recall questions on the sum demanded in 1921, the occupation that followed default, passive resistance and how it was paid for, and who gained and lost as the currency collapsed.

What you need to know

Answer each one before you reveal it.

Questions from this subtopic

Each one with the model answer underneath.

1. 1

   How had Germany financed the First World War, and why did that matter afterwards?

   Model answer

   By borrowing and printing money rather than by taxation, on the assumption that a defeated enemy would pay, so the currency was already weak before reparations began.

2. 2

   Why did the French and Belgians occupy the Ruhr in January 1923?

   Model answer

   Germany had fallen behind on deliveries of coal and timber, and Poincaré decided to take the payment in kind by seizing the industrial heart of Germany.

3. 3

   Define passive resistance as practised in the Ruhr in 1923.

   Model answer

   The German government's policy of ordering Ruhr workers not to cooperate with the occupiers while continuing to pay their wages, so production stopped and the state's costs soared.

4. 4

   How did passive resistance produce hyperinflation?

   Model answer

   The government met the wage bill and the loss of Ruhr tax revenue by printing money, so the quantity of currency exploded while the goods it could buy collapsed.

5. 5

   Describe the extent of the currency collapse by late 1923.

   Model answer

   The mark became worthless, with prices doubling in a matter of days, wages paid twice a day and spent at once, and notes eventually cheaper than the fuel they could be burned as.

6. 6

   Which groups suffered most from the hyperinflation?

   Model answer

   Those on fixed incomes and savings, especially pensioners, war widows, rentiers and the professional middle class, whose accumulated capital vanished.

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