Many people believe that the Germans deliberately inflated the mark to evade payment of reparations, but that is not true. It was forced on them. This means that the international bankers (such as Bernard Baruch) caused the inflation which eventually brought Hitler to power.
Neutral manufacturers during WWI made enormous fortunes trading with the belligerents, which they then lost speculating in the mark, or extending credit in marks.
In 1914, there were 4 marks to 1 dollar. Even in 1920, despite the war, the mark was more of a stable currency than the dollar. During that year, the mark rose from 1 cent to 3 cents, then fell to 1 ˝ cents, but it was the dollar that was rising -- not the mark that was falling.
The German mark was destroyed by the Allies. The Germans offered to pay 40 billion marks in reparations by 1926, but the Allies demanded immediate payment of the costs of occupation without giving the Germans any time in which to raise the money through taxes or borrowing.
This destroyed the value of any reparations received. It destroyed the value of the German taxes which were supposed to pay the reparations. It allowed the Germans to flood the world with goods at absurdly low prices by destroying the foreign exchange value of the mark. It destroyed the value of German war debts owed to foreign countries and expressed in French francs, which rose and fell on the prospect of getting any reparations. It destroyed the value of the pensions owed to French war veterans, which were supposed to be paid out of reparations.
At the same time, the bankers raised interest rates in Britain to 7% and threw 3 million people out of work for 2 years, causing a depression in Britain.
So they destroyed the mark, the franc, British industry, and reparations, all at the same time.
Now, at first glance this seems utterly self-defeating. What did they fight the war for? The Allies kept up the blockade for 9 months after the Armistice, starving hundreds of thousands of Germans to death after the war to force signature of the Versailles Treaty, which was in violation of international law as a violation of the terms of the Armistice (an academic point, since the Allies also had the right to denounce the Armistice and start fighting again, which they threatened to do – in this sense Hitler was absolutely right in calling Versailles "the greatest breach of faith of all time"). Then they destroyed the value of all the money that they demanded in reparations payments. They destroyed the pensions of the French soldiers who fought in the war, and all competition to German trade abroad. What would be the point of that? (Source: 1922 Encyclopaedia Britannica, "Speculation", "Currency", "Peace Treaty", etc.).
But on second thought: it's very obvious who profited: international bankers and speculators. The bankers got rich off the war, then they needed an opportunity to reinvest their war profits. So they drove the prices down in Britain and Germany. They weren't manufacturers; they didn't care about bankruptcies. On the contrary: they wanted to buy up bankrupt companies. They didn't care about pensions allowances and separations allowances for French soldiers. Why should they?
It might be noted that German industrialists didn't suffer much from the inflation; they extended credits to each other in gold marks (on paper) and promised to pay each other when the mark stabilized. The workers suffered.
These policies are being continued today, and are called "the Free Market". It is asset stripping on a world scale.
CARLOS W. PORTER
1991 (revised 2001)
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