Currency Wars_ The Making of the Next Global Crisis - James Rickards [31]
Of course, not everyone had a government or union job, stock portfolio, hard assets or foreign operations to insulate them. Those most devastated were middle-class pensioners who no longer qualified for raises and savers who kept their funds in banks rather than stocks. These Germans were completely financially ruined. Many were forced to sell their furniture to raise a few marks to pay for food and keep going. Pianos were particularly in demand and became a form of currency on their own. Some elderly couples whose savings had been destroyed would go into the kitchen, hold hands, place their heads in the oven and turn on the gas in a poignant form of suicide. Property crime became rampant and, in the later stages, riots and looting were common.
In 1922, the inflation turned to hyperinflation as the Reichsbank gave up trying to control the situation and printed money frantically to meet the demands of union and government workers. A single U.S. dollar became so valuable thatAmerican visitors could not spend it because merchants could not locate the millions of marks needed to make change. Diners offered to pay for meals in advance because the price would be vastly higher by the time they finished eating. The demand for banknotes was so great that the Reichsbank engaged numerous private printing firms and used special logistics teams in order to obtain enough paper and ink to keep the printing presses rolling. By 1923, the notes were being printed on one side only to conserve ink.
With economic chaos reigning, France and Belgium invaded the German industrial region of the Ruhr Valley in 1923 in order to secure their interests in reparations. The invasion enabled the occupiers to obtain payment in kind through shipments of manufactured goods and coal. The German workers in the Ruhr responded with work slowdowns, strikes and sabotage. The Reichsbank rewarded the workers and encouraged their resistance by printing more money for higher wages and unemployment benefits.
Germany finally attempted to halt the hyperinflation in November 1923 by creating an alternate currency, the rentenmark, which initially circulated side by side with the paper mark. The rentenmark was backed by mortgages and by the ability to tax the underlying properties. Their issuance and circulation were carefully managed by the newly appointed currency commissioner, Hjalmar Schacht, a seasoned private banker who would soon replace von Havenstein as head of the Reichsbank. When the final collapse of the mark came shortly after the rentenmark was introduced, one rentenmark was roughly equal to one trillion marks. The rentenmark was a temporary fix and was soon replaced by a new reichsmark backed directly by gold. By 1924, the old hyperinflated paper marks were literally being swept away into dustbins, drains and sewers.
Economic historians customarily treat the 1921–1924 hyperinflation of the Weimar Republic separately from the worldwide beggar-thy-neighbor competitive devaluations of 1931–1936, but this ignores the continuity of competitive devaluations in the interwar period. The Weimar hyperinflation actually achieved a number of important political goals, a fact that had repercussions throughout the 1920s and 1930s. Hyperinflation unified the German people in opposition to “foreign speculators” and it forced France to show its hand in the Ruhr Valley, thus creating a case for German rearmament. Hyperinflation also evoked some sympathy from England and the United States for alleviation of the harshest demands for reparations emanating from the Versailles Treaty. While the collapse of the mark was not directly linked to the value of reparations payments, Germany could at least argue that its economy had collapsed because of hyperinflation, justifying some form of reparations relief. The currency