When Money Dies: The Nightmare of Deficit Spending, Devaluation, and Hyperinflation in Weimar Germany by Adam Fergusson

Author:Adam Fergusson [Fergusson, Adam]
Language: eng
Format: epub
Tags: Business & Economics, History, Economic History, Politics, Germany, Social History, Europe
ISBN: 9781586489953
Google: -6I4DgAAQBAJ
Amazon: 1586489941
Publisher: Hachette UK
Published: 2010-10-12T21:03:36.704000+00:00

Hemingway recorded for the Toronto Daily Star that Champagne then cost 38,000 marks a bottle, luncheon 3,500 marks, a sandwich 900 marks, and beer 350 marks a stein.

I remembered that last July I stayed at a de luxe hotel with Mrs Hemingway for 600 marks a day. ‘Sure,’ the waiter went on, ‘I read the French papers. Germany debases her money to cheat the Allies. But what do I get out of it?’

The answer was that the waiter got nothing out of inflation, and - apart from relieving itself of a further minute proportion of the remaining minute fraction of the national debt - nor now did the Exchequer. There were those, however, who were doing better than ever. A currency speculator who borrowed from the Reichsbank on January 1, 1923, enough paper marks (about 1,980 million) to buy 100,000 dollars, and on April 1 sold enough dollars (about 80,000) to repay the bank, and who again borrowed the equivalent of 100,000 dollars and continued thus until the end of May, could have made the equivalent of a quarter of a million dollars at the expense of the acceptors of pure marks. His problem then, of course, was in what form to keep his profits: if they were in marks, they would evaporate before his eyes.

That evaporation was inevitable. In March, April and May the government’s income was a mere 30 per cent of its expenditure; and during May the working classes actually paid more to the Reich in tax than the assessed tax payers of the higher social classes, for the reason that whereas the former could be tapped at source, the others had to fill in returns which were long out of date by the time the administrative machine could deal with them. Between May Day and May 31 the mark fell from 220,000 to 320,000 to the pound. The First of June was celebrated with the issue of the first five-million-mark note.

Speculation in currency was in no way the exclusive domain of the financially informed. Anyone - banker, politician, businessman or workman - who observed that there were easier ways of keeping one’s head above water than the now very problematic one of working for it was ready to indulge as opportunity offered. It was computed that well over a million Germans in early 1923 were engaged in exchange speculation. Their dealings took place mainly through the so-called Winkelbankiers, the back-street operators who had sprung up with inflation and, battening on an unhealthy economy, made a living entirely through taking advantage of the difference in the buying and selling prices of foreign currencies. Although they were not even members of the Bourse, they played a significant part in determining the daily rate of exchange - and, indeed, to the arbitrage machinations of the Winkelbankiers was attributed the fact that Berlin invariably closed at a lower rate than New York.

By the end of May 1923 no single reform, possibly no half dozen measures, would have been enough to avert ultimate disaster.

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