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.
- Centre party was dominated by powerful industrialists who took short term loans to fund their businesses.
- Pre 1923
- 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.
- The Treaty of Versailles
- 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.
- Occupation of the Ruhr.
- 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.
- The government started to run out of money
- The governent response to the Ruhr invasion.
- Cause one
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