What did bread cost

A bread for 105 billion Reichsmarks

It is a trauma that has had an impact to this day. Images that have engraved themselves in the collective memory of the Germans. In the crisis year of 1923, inflation reached unimaginable proportions. The printing press runs day and night. Prices are exploding. People carry almost worthless bills into the shops in laundry baskets. A bread costs 105 billion Reichsmarks, a tram ticket 150 billion marks, and a US dollar 4.2 trillion marks. The unemployment rate is almost 25 percent, social misery is increasing. Germany is facing economic collapse. But then comes a currency reform that historians call the “miracle of the Rentenmark”.

The background: After the First World War, the young Weimar Republic had enormous financial problems. In order to finance the war, Germany had taken on massive debts. In addition, there were immense reparations payments in the post-war years from 1918/19. Politicians shy away from a radical austerity program in view of the unstable political and social situation. The way out: Always new national debt. The printing press is started. The money supply is increasing and the risk of inflation that is practically barely controllable is steadily increasing.

Then comes the crisis year 1923. The situation worsens: At the beginning of the year French and Belgian troops occupy the Ruhr area because Germany is behind with reparations deliveries. The coal and coke production in the district is to be secured as a "pledge", so to speak. The workers then enter into a "passive resistance", the government continues to pay them their wages - the money comes straight from the printing press. The economic situation is getting worse and worse. Political unrest shook the republic, there were communist uprisings, in Munich the Hitler putsch failed on November 8th. The young republic is threatened with civil war.

The currency's decline continues unchecked. The wages are paid out daily, the companies bring the money with trucks. Only hours after receiving the wage packet, its value is often halved. “The mark slipped, fell, rushed, got lost in the bottomlessness”, writes the writer Max Krell: “Cities, factories, trading companies (...) let billions of flakes snow on the streets.” Prices are rising to astronomical heights. In mid-November 1923, one kilo of rye bread cost 233 billion marks, one kilo of beef 4.8 trillion.

Wages cannot keep up with the rise in the price of goods. Savings are destroyed overnight. More and more farmers refuse to sell their products for money. Food is becoming scarce. Artists like Käthe Kollwitz and George Grosz paint starving people.

When the US dollar finally stands at just under 4.2 trillion marks, German politics takes action. On October 15, 1923, Reich Chancellor Gustav Stresemann and Reich Food Minister Hans Luther signed the ordinance on the establishment of a German Rentenbank. The property of agriculture, industry and trade is encumbered with a mortgage of 3.2 billion Rentenmarks. The issue of the Rentenmark begins on November 15th - as a temporary solution and with an exchange rate from one Rentenmark to one trillion marks.

At the same time, the printing press is shut down. The Rentenbank no longer gives the Reich any loans. There are drastic cuts in spending and tax increases. Tens of thousands of civil servants are laid off. The exchange rate is stabilizing, hyperinflation is stopped. The population accepted the Rentenmark.

Experts see one thing as the main reason: trust. Because the Rentenmark was not really materially backed, says the economic historian Prof. Werner Abelshauser from the University of Bielefeld. The land ownership of the economy on which it is based could ultimately not be mobilized: "It owes its stability solely to the willingness of everyone involved to consider it stable."

The success of the Rentenmark was mainly due to the fact that direct loans from the Reichsbank to the Reich were prevented, says Prof. Ulrich Pfister from the Institute for Economic and Social History at the University of Münster: "The state was allowed to spend less." The transition period lasted eight months . In 1924, a Reichsmark backed by gold and foreign currency was reintroduced. The Roaring Twenties begin.

But the trauma of inflation was born. The experience of the hyperinflation of the 1920s and the inflation after the Second World War was a major factor in the founding of the Bundesbank. Stability of monetary value becomes the primary task of the central bank founded in 1957 - important cornerstones will later be incorporated into the European Monetary Union.

With exceptions in the early 1970s and early 1990s, inflation rates in Germany have remained moderate. But: The hyperinflation of 1923 has "engraved itself deeply in the collective memory of the Germans", says the economist Prof. Max Otte from the University of Applied Sciences in Worms. "After all, you were deprived of your savings several times: with the currency reform in 1948, then in the former GDR in 1989." Abelshauser speaks of an "inflation phobia" among Germans. A “hard currency” is therefore part of German economic culture.

“The fear of inflation is part of the German DNA,” wrote the director of the Hamburg Institute of World Economics (HWWI), Professor Thomas Straubhaar, recently in “Welt”. Inflation is currently not an issue in Germany - given the current inflation rate of 1.2 percent.