Ib 20th Century History Internal Assessment: Weimar Hyperinflation

Topics: Weimar Republic, Germany, Treaty of Versailles Pages: 8 (2303 words) Published: March 10, 2013
Part A:

How did Gustav Stresemann’s policies during the Weimar Republic bring hyperinflation under control in 1923?

This investigation evaluates the impact of the economic policies during Gustav Stresemann’s short period as the German chancellor and his influence as Foreign Minister. In order to address the question of how Stresemann’s economic policies brought hyperinflation under control in 1923, this study will analyze the significance of the occupation of the Ruhr, the financial demands of the Treaty of Versailles, the development of a new currency and the creation of the Dawes Committee. The investigation will draw from a wide array of scholarly articles, textbooks and monographs by reputable historians and economists. The topic investigated is significant in understanding the economic, social and political consequences of the 1923 hyperinflationary period, as well as in evaluating the economic policies and diplomatic strategies of Gustav Stresemann.

Part B:

The Weimar Republic under the leadership of Wilhelm Cuno faced numerous economic problems. Germany entered a period of hyperinflation from 1921 to 1923; caused by factors such as the conditions of The Treaty of Versailles, the financing of the war, the reparation payments from 1921 and the occupation of the Ruhr (Layton 48). The Treaty of Versailles signed in June 28, 1919 had economic implications on the Weimar Republic. This document defined the German loss of territories, including Alsace-Lorraine, coalmines in the Saar Area and the main part of Western Prussia. The Treaty of Versailles as well declared the confiscation of all German Property on foreign countries along with the ceding of large sums of machinery and fuel (Treaty of Versailles).

During The First World War military demands were not addressed through taxation. Instead of increasing taxation, Imperial Germany “borrowed massive sums by selling war bonds” (Layton 49). When paying off the debt to those holding bonds, the Weimar Republic printed substantial amounts of money. Along with the national debt, the Inter-allied Reparations Commission pressured the Weimar Republic by setting the quantity to be paid at sixty-six thousand million British Pounds in 1921. Germany postponed the reparation payments until 1922. That same year the Inter- allied Reparations Commission declared Germany to be in default and France under the management of Raymond Poincaré ordered the French and Belgian occupation of the Ruhr, the industrial center of Germany (Layton 50). In response, Wilhelm Cunno advocated for a passive resistance. The months that followed were of low production and of increasing currency circulation. Germany was caught in a hyperinflationary spiral by the end of 1922. Such continued until Chancellor Gustav Stresemann took over the Weimar Republic.

Gustav Stresemann was the Chancellor of the Weimar Republic from 13 of August 1923 to 23 of November 1923 and later became the Minister of Foreign Affairs until his death in 1929 (Gatzke 1). During his period as Chancellor, Stresemann introduced economic policies to fight hyperinflation. In September of 1923, he ended the passive resistance in the Ruhr and assured the allies that Germany would pay the reparations. With the help of the Finance Minister Hans Luther he lessened the deficit inherited from Imperial Germany and from Wilhelm Cuno through a cut in government’s expenditure and through firing over 700,000 public employees (Layton 57). Stresemann introduced the “Rentenmark”. The “Rentenmark” substituted the “Deutsche Mark”. The latter currency had lost all its value, as there was no gold to back it up. The “Rentenmark” was valued at one trillion “Deutsche Marks” and could be used to buy land and industrial bonds. With the help of the financial expert Hjalmart Schacht, Stresemann made the new currency convertible in every private bank (Gatzke 30). The German population quickly adopted the “Rentenmark”. In August 1924...
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