The Downfall of Money: Germany’s Hyperinflation and the Destruction of the Middle Class Read Online Free Page A

the ceiling was regularly raised. By the end of 1918, loan bureau notes with face value of a little over 15.5 billion marks were in circulation. More than a third of these were held by the Reichsbank, which could therefore legally print 15.7 billion fully legally valid marks on the base of this ‘security’, while still keeping up the façade of ‘sound’ money. Several German economists realised this and tried to protest. At least one had his article suppressed (written for publication in January 1915, it was not published until the war was over in order to ‘protect the public’), while another was told by the Reichsbank’s grandees that if he did not desist, they would be forced to ‘seek the assistance of the military authorities’. 6
    Herr Lehmann was therefore right in his first arguments, and wrong to have let those pesky kids persuade him to change his mind and exchange his gold for paper. Although a fictional character created for propaganda purposes by a writer doing the bidding of a government desperate for the wherewithal to wage war, the irascible old grain merchant represented millions of real Germans. They, too, would succumb to the blandishments of the official pamphleteers, the tub-thumping politicians and the patriotic press, not to mention the sellers of war bonds. They would give away their solid wealth in exchange for a mess of paper, so that Germany might triumph.
    Within a few years, they would feel betrayed. Their patriotic pride would turn to anger; a slow-release anger that would fertilise a post-war harvest of intolerance and totalitarianism.
    Footnotes
    * Roughly a billion and a half euros at 2011 values.

2

Loser Pays All
    The civilian populations of all the countries involved in the First World War experienced hardship. There were shortages and anxieties, even for those not occupied by the enemy or living close to the fighting zones. All the millions of men who fought – and in huge numbers died – in the war had friends, families, relatives, many of whose waking (and perhaps also their dreaming) hours were filled with apprehension on their behalf. However, especially in Germany and Austria-Hungary, the physical conditions under which civilians lived on the home front while their menfolk fought and died in the trenches and battlefields far away were not merely difficult or austere; hunger stalked Europe from the Rhine to the Vistula, from the Skagerrak to the Danube.
    On 1 August 1914, when Britain’s entry into the war was not yet certain, the German shipping journal Hansa had predicted that if she did join in on the side of Serbia, France and Russia, ‘economic life [would] suffer a collapse unprecedented in history’. 1 The author of that judgement was proved right within a matter of months. Despite the huge sums that Germany had spent on building up its naval strength, the Reich did not have the surface ships to challenge the Royal Navy and thus to make the trading routes safe for German imports and exports during wartime.
    During the first months of the war, the British slowly tightened the screws on German trade by a series of restrictive measures, though these stopped short of a total, indiscriminate blockade. When, however, it became clear that the war was not going to be decided on the battlefield any time soon, the cabinet in London decided to step beyond the accepted rules of conflict. Exploiting the Germans’ declared intention in February 1915 to wage unrestricted submarine warfare against Entente shipping in the North Sea, the British initiated a total ban on imports and exports of all kinds, to and from the territories of the Central Powers, including food and other goods entering via neutral territories such as Holland and the Scandinavian countries. The measures were to be rigorously enforced by the Entente’s navies. On 1 March 1915, a British Order in Council declared ‘the British and French governments will hold themselves free to detain and take into port