Question

What is hyperinflation? Why did this situation occur in Germany in 1923?

Answer 1

Hint:
The birth of the Weimar Republic coincided with the revolutionary uprising of the Spartacist League on the pattern of the Bolshevik Revolution in Russia. In many cities, the soviets of workers and sailors were established.

Complete Answer:
There were demands being made for Soviet-style governance. People, such as the socialists, Catholics, and Democrats, who opposed this met in Weimar to give shape to the democratic republic. With the help of a war veteran’s organization called Free Corps, the Weimar Republic crushed the uprising. The angered Spartacists later founded the Communist Party of Germany. Both Socialists and Communists then became irreconcilable enemies and could not make a common cause against Hitler. Both revolutionaries and militant nationalists craved radical solutions.
With the economic crisis of 1923, Political radicalization heightened. Germany had to pay war reparations in gold as it had fought the war largely on loans. This depleted the gold reserves at a time when resources were scarce. In 1923, French-occupied Germany’s leading industrial area, Ruhr, to claim their coal as Germany refused to pay. Germany printed paper currency recklessly and retaliated with passive resistance. The value of the German mark fell with too much-printed money in circulation. In April the US dollar was equal to 24,000 marks, in July 353,000 marks, in August it had reached 4,621,000 marks, and at 98,860,000 marks by December, the figure had run into trillions. The prices of goods started soaring as the value of the mark collapsed. This situation of crisis came to be known as hyperinflation, wherein prices rise phenomenally high. Eventually, by introducing the Dawes Plan, which reworked the terms of reparation to ease the financial burden on Germans, the Americans bailed Germany out of the crisis.

Note:
The years from 1929 to 1930s were the years of depression, the Great Economic Depression and the German economy was the worst hit by this global crisis.