The chief cause was the Reichsbank’s policy of simply printing more money to counter the country’s debt in view of the cost the First World War and the reparations owing. The mark plummeted on the international money markets and inflation soared.
The inflation peaked in 1923 where for the last 5 months it was a staggering 300 million percent. When the inflation was finally stopped by the introduction of the Rentenmark on 16th November 1923, the exchange rate was 4.2 trillion marks to the US dollar - ie 4,200,000,000,000 marks.
People who did not convert their savings into tangible assets (or Sachwerte) lost them. Pensions became worthless, the middle class was by and large reduced to poverty. Many starved to death. Conditions were so harsh that people even ate dog meat: around 20,000 dogs were slaughtered for human consumption in 1923 alone.
Typical is the case of a bank which, unwilling to keep open an account with 68,000 Marks, informed the customer that it was to be closed. "Since we have no banknotes in small enough denominations at our disposal, we have rounded up the sum to 1 million marks. Enclosed: one 1 million mark note."
Many municipalities, reacting to the Reichsbank notes which became more drab and dull, took pride by giving their money and attractive look by good design and witty texts - often in verse or the local dialect. Some advertised their local industries by using leather, linen or silk to print on. One town issued money consisting of leather suitable for soling shoes as a truly inflation-proof form of currency, while one private firm promised the bearer "one pound of rye."
Before World War I, the highest denomination note had been the 1,000 mark note, affectionately known as the "brown rag". Being the equivalent of some 250 US dollars, it was rarely seen by most people before the inflation. Today, a note in perfect condition fetches no more than a couple of dollars or so.
Many Notgeld notes were also overprinted as the 50 Milliarden Mark note from Konstanz illustrates.
Source: William Guttman's "The Great Inflation" - a very worthwhile read.
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This page was updated by Richard Holmes on Friday, 27 July 2001