What was the cause of Hyperinflation

  • Created by: Dan b
  • Created on: 23-01-19 10:23
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  • The causes of hyperinflation.
    • Cause one
      • Pre 1923
        • The centre     party who led many of the first Reichstag coalitions had deliberate inflationary policies
        • Prices quadrupled between 1919-1920.
        • Inflation rediced the value of the national debt.
        • One of the only possitive effects of rising inflation, was it kept unemployment rates low.
          • Centre party was dominated by powerful industrialists who took short term loans to fund their businesses.
            • By the time the loan was ready for payment the value had been reduced to rising inflation.
    • Cause two
      • The Treaty of Versailles
        • The reparations commision in 1921 agreed that Germany should pay 132 million gold marks for the damages caused during the war.
        • In January 1922 Germany was suffering from some economic difficulties so were given permission to postpone reparation payments for two months.
        • Germany were forced to pay the reparations in Gold or Raw materials as manufactured goods competed with British made goods.
        • The treaties harsh terms made it difficult for the Economy to prosper.
    • Cause three
      • Occupation of the Ruhr.
        • The Treaty of Rapallo between Germany and Russia angered the French.
        • A failure to pay reparations meant that in January 1923 60,000 rising to 100,000 Franco-Belgian troops moved in to occupy the Ruhr.
        • The aims of the occupation was to seize huge amounts of raw materials and other goods.
        • Due to the treaties terms Germany was unable to fight back as their arny was extremely small.
        • In retaliation to the invasion the German government encouraed workers to passively resist by going on a paid strike hoewever the French were not happy so shot 132 strikers and removed 150,000 workers from the Ruhr
        • Eventually the French bought in their own workers but struggled to to function whilst the German workers passively resisted.
          • As a result the output of raw goods from the region fell to a third of it's original output.
    • Cause four
      • The governent response to the Ruhr invasion.
        • The government started to run out of money
          • -They were paying workers to strike resulting in more money being printed.
          • -Taxes weren't being taken from businesses as they were closed .
          • The governent had to import the raw materials as Ruhr production had been haulted.
        • The government still refused to to rise taxes to pay for reparations. so they printed more money. Additionally with shortages of raw materials companies were forced to raise prices.
          • The additional printing of money caused its value to further decrease.
        • Workers then wanted higher wages to pay for the inflated products and companies responded by creating an inflationary circle that led to hyper-inflation.

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