The Downfall of Money

Frederick Taylor, a historian of Germany, wrote this narrative account of the hyperinflation of 1922 and 1923 for a general readership. He traces the currency's destruction from the financing of the First World War through the reparations dispute to the stabilisation of November 1923.

The economic argument is conventional and correct: Germany financed the war by borrowing rather than by taxation, expecting to recover the cost from defeated enemies; the defeat left the debt and added reparations; the postwar governments could not raise taxes sufficiently because the political coalitions would not agree who should pay; and the Reichsbank monetised the deficit. The French occupation of the Ruhr in January 1923 and the German policy of passive resistance, which required the government to pay wages to workers producing nothing, converted a severe inflation into a hyperinflation.

Taylor's contribution is the social detail: what happened to people at each stage, drawn from diaries, letters and newspapers. He documents who lost, principally holders of fixed claims including bondholders, pensioners and savers, and who gained, principally debtors, holders of real assets and businesses with foreign currency earnings. He also examines the political consequences and is careful not to draw too direct a line from the inflation to 1933, since the Nazi vote collapsed after stabilisation and rose again during the deflation of 1930 to 1932. The book is narrative history rather than economic analysis, and readers wanting the latter should go to Holtfrerich or Webb.