Main causes of Hyperinflation

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  • What were the main causes of hyperinflation crisis of 1923
    • Treaty of Versailles War Reparations
      • Germany were forced to pay £6.6 billion in reparations to the allied countries (FR and GB)
      • The amount was considered too high for the German people
      • Eventually, they were unable to continue making payments
      • Payments could be made in raw materials - made difficult by other terms of the treaty
        • territorial loses (including industrial lands)
          • this meant that they were limited in terms of payment methods
      • When Germany stopped payments, French and Belgium forces occupied the industrial area of the Ruhr
        • their way of trying to force payments
    • Classical Gold Standard System
      • Before the war, the German mark was backed with gold reserves
      • Very little change of inflation
      • Restraint on printing money
      • System was scrapped at the outbreak of the First World War
      • Currency had to backed by physical gold
      • To fund the war, the government incurred a 150 billion mark debt
        • began mass printing money
          • After the war, the Weimar Republic continued mass printing
    • French and Belgium Occupation of the Ruhr
      • 1923, French and Belgium troops occupied the industrial area of the Ruhr
        • In an attempt to pressure Germany into restarting the reparations payments
      • Ebert called for a General strike
        • promised that all those on strike would continue to be paid
      • French and Belgium workers were sent to the Ruhr instead
      • In order to continue paying the striking workers, the government began mass printing money
        • eventually, the money became worthless

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