Wednesday, January 11, 2006

The Hyperinflation

As the world sees Germany: A nation that caused two most disastrous and economy ruining wars.The Germans have a very strong drive in them to make their country a superpower . Although, their nation does deserve to become one. But , the over enthusiasm in the people results in failures and ultimately leading them into a forlorn position.After the First World War, Germany was forced to sign ‘The Treaty of Versailles’ which marked its defeat. The treaty was of a great humiliation for Germans and finally they had to pay huge amount to the US ,et al. This lead to the most turbulent inflation world has ever seen.
As the Richard Evans says in his book “ The coming of the Third Reach”, the value of Deutsch Mark (German currency) declined at an unthinkable rate.In December 1918, the value of U.S. dollar was just above 4 marks on the exchange in Berlin.But, it became 12 marks in April 1919. And then it reclined at such a bedazzling rate that the value of a dollar became 17,000 marks in Jan 1923; 4,621,000 in Aug and finally crashed to 4,200,000,000,000 marks in December. An unbelievable figure! I know these figures seemed to be cooked up, but the harsh reality is that they are not! Definitely the inflation was terrifying.
Money lost its meaning completely, only things which were left important were the food, shelter and some of the vital needs. Employees, after collecting the their salary,that too in sacks , used to run to the departmental stores for buying out things, fearing that they will become unaffordable in the next few seconds. A small incident will be enough to explain you the abhorrent effects of the hyperinflation: A lady ordered a dish worth marks 5,000 for her meal in a restaurant. After an hour when she finished eating the dish, it was worth 8000 marks. Isn’t that making you insecure? Suppose you happen to have only a small amount in your pocket that can get you a meager meal to fill your stomach and you happily order that small quantity. After eating just a bite of it you realize that now you don’t even have enough money to pay for that bite which you took in your mouth a second before.Exactly, that was the condition of germans at that time.A correspondent of a newspaper reported in 1923 :'In the shops the prices are writen and posted hourly . A gramaphone at 10 a.m. was 5,000,000 marks but at 3 a.m. it was 12,000,000 marks . A copy of Daily mail was sold at 35,000 marks yesterday but at 60,000 marks today.'Whole Reich was in total chaos until a new currency was not issued ,not depending on the global trnsactions but on gold.
It was definitely one of the worst inflations that world has ever seen .

P.S. If you are interested in European history this book is worth reading“ Coming of Third Reich “ by Richard J. Evans.
Thanks Jaya, for introducing me to this book.


Blogger Kunal said...

Lend me a copy of the book whenever you come to Hyderabad. I'd like to read this book.

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