Exactly a century ago, in May 1921, the historic “The London ultimatum”, the summit which established the payment schedule that Germany had to respect for war reparations to the Allies, as ordered by the Treaty of Versailles signed two years earlier, as a Germanic surrender and the end of World War I.
Although the financial problems of the Weimar Republic already stemmed from the expenses the German Empire had incurred in solving what was then called the “Great War”, the London summit marked a milestone. the devaluation of the mark accelerated uncontrollably, and finally go into free fall shortly thereafter.
Surrealist scenes of this hyper were marked by fire in the collective memory of the Germans, which could explain their current obsessive prolixity in the administration of public funds. At the height of the crisis, currency issuance got so crazy that the paper the tickets were printed on cost more than the face value of each.
14 zeros on an invoice
The annual inflation rate peaked at 182 billion percent – one dollar was trading at 4.2 trillion German marks. The state issued its extremely devalued Papiermarks at such a speed that they only printed one side of the invoice. Wads of worthless money were used to fuel stoves, line coins, and even make blocks of paper as children’s games. The last hyper German note had 14 zeros: to get an idea of the seriousness of this devaluation, it suffices to compare it with our famous note issued in 1981, of “barely” a million pesos.
From so many counts and calculations of zeros, a kind of stress was born in the German population that the press of the time called “Heart attack of zeros”. It was not for less: workers and civil servants collected their wages daily so as not to lose by a landslide against inflation. At noon they would run with baskets and even wheelbarrows full of cash to buy any merchandise, which would surely be more expensive at sunset. You couldn’t live like this: the infant mortality rate has skyrocketed and, among adults, the suicide rate.
The annual inflation rate peaked at 182 billion percent – one dollar was trading at 4.2 trillion German marks.
But human creativity in the face of economic adversity never ceases to amaze us. To fill the void left by the monetary authorities of the central government, the idea of creating a parallel means of payment was born, managed by municipalities, chambers of commerce and companies in payment difficulty: this is how born Notgeld (“emergency money”). . , a kind of Germanic patacón mixed with a basket of rudimentary banknotes. Closer to barter than federal legal tender, the Notgeld was exchanged for locally essential goods, as currency for the survival of the frayed social fabric. The peculiarity of the Notgeld was its unexpected quality as a store of value, in the midst of a hyper that was to go down in history.
These coupons were illustrated with a remarkable variety and quality of folk motifs from the Germanic tradition, which quickly made them objects of great interest to collectors and art and numismatic galleries. Unlike depreciated paper stamps, notgelds have become aesthetic objects whose price makes them attractive as a source of collection and even investment for municipalities and private savers. A suggestive precedent to start thinking about the current experience of NFT (Non Fungible Tokens), these new and increasingly expensive digital works, which are integrated into the cryptocurrency blockchain and revolutionize the art market.
Every time it rained, it would stop. At the end of the stormy year 1923, the government erased the strip of zeros that no longer fit on the banknotes, and invented the Rentenmark, a supposedly land-backed transitional currency and other public goods, which miraculously succeeded in regaining the trust of desperate Germans. A controversial figure emerges as the guarantor of this timely monetary recovery: the banker Hjalmar Schacht, appointed head of the Reichsbank (the German central bank at the time) as guardian of the budgetary discipline lost during the years when the Republic of Weimar was monetizing its debts until the Papiermark exploded like confetti.
Schacht’s incredible story synthesizes the tensions and contradictions of Western capitalism between the wars. From an aristocratic financial genius who pulled the republic out of the monetary pit and international discredit, Hjalmar ended up being Adolf Hitler’s economic right-hand man. Although ideologically suspicious of Nazism, the banker entered the Third Reich, first as an advisor and campaign collector, then as head of the Reichsbank and finally as Minister of the Economy.
But internal auctions kept him away from Hitler’s daughters’ table, until he was accused of plotting an assassination attempt against the Führer, so went to one of the concentration camps that his financial mastery helped build. But the ironies of his plight continued: when Hitler fell, the Allies saved him, but to put him on the dock at the Nuremberg trials, where he was one of the few leaders acquitted. His career continued for many years, as star rescuer of emerging economies in emergency.
The causes of German hyperinflation are still debated to this day, which makes sense since Germany finished paying its war reparations barely ten years ago. The context of strong monetary issuance that crosses global finances, affected by the pandemic, has reopened the historic divide. The more heterodox, clinging to John Maynard Keynes’ critique of the Treaty of Versailles, insist that the excessive reparations demanded from defeated Germany were the main cause of hyperinflation.
On the other hand, they point out that new studies by academic historians confirm the guilt of the German government, both in starting the war and in funding it irresponsibly, giving mercilessly or shamelessly to “the little machine”: they even question the usual consensus that the restorative burden imposed on the Weimar Republic outside invaluable.
More absorbed in the short term, the Argentines have fun with the version “for void»From the discussion on the impact – or not – of the issue of spillovers in inflationary acceleration. Fortunately Alberto Fernandez he observes the problem from a historical perspective: “The budget balance no longer exists, the central countries have broken it. All of Europe has a staggering budget deficit. We are repeating these things here because they date from the 90s, ”the president justified himself to CNN, repeating the path of his CFK leader and of General Perón, who in the middle of the last century analyzed the present of a changing world. war and confused him with the long future of the economy and world trade. And it messed up, as shown in the hard-hitting book that economic historian Roberto Cortés Conde has just published (along with other authorities in the field), entitled: La Economía de Perón (1946-1955).
But this is another story. The same.
Silvio Santamarina is the author of Historia de la Guita: The Culture of Money in Argentina.
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