The Downfall of Money: Germany’s Hyperinflation and the Destruction of the Middle Class (42 page)

The pattern was quickly established and became a routine through Germany’s year of currency insanity. Wages would arrive from the bank – there are photographs of the large carts and hampers used to transport them – and would be doled out to the employees, each receiving, as the year progressed, ever larger bundles in ever larger denominations. Then, with the employers’ permission, the worker would hurry off – often joined by the spouse, who had been waiting outside for this moment – to spend the money on whatever provisions could be found. And then, once the money had been handed over to the retailer, it was up to the latter to haul it back to the bank, where – if humanly possible – he or she would change the mass of paper into dollars, pounds, Swiss francs or whatever ‘hard’ currency could be had.

The speed with which money could be paid into or taken out of the bank was vital. To handle the vast increase in the sheer quantity and complexity of financial transactions necessitated by inflationary distortions, the number of banks rose, as did the numbers of branches. The Deutsche Bank, which had a mere 15 branches in 1923, ten years later had 242. The
Commerz- und Privatbank’s network grew from 8 to 246 in the same period.
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The number of staff employed in the sector almost quadrupled compared with pre-war levels, from 100,000 in 1913 to 375,000 in 1923, with the number of bank accounts serviced leaping from 552,599 in 1913 to an estimated 2.5 million in 1923. Sixty-seven new banks had been founded in 1921, and ninety-two in 1922. In 1923–4 the total was 401.
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The increase in banking business was not the consequence of a more intense economic activity. The work was increased because the banks were overloaded with orders for buying and selling shares and foreign exchange, proceeding from the public which, in increasing numbers, took part in speculations on the Bourse. The banks did not help in the production of new wealth; they merely managed the same claims to wealth, continually passed from hand to hand.
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Job advertisements in newspapers such as the
Vossische Zeitung
included those for bank workers, but also for retail clerks, where banking experience was specifically indicated. Such was the complexity of the financial transactions required to keep even a relatively straightforward buying and selling operation going in the conditions of the hyperinflation. Meanwhile, by August 1923 the
Vossische Zeitung
was down to one edition a day, often of just five or six pages. The perfect example of what was happening in the media and entertainment industries as a result of the hyperinflation was the fact that Kurt Tucholsky, the era’s most amazingly prolific writer of poems, articles, songs, skits and sketches for magazines, newspapers and cabarets, found himself so financially straitened in the middle months of 1923 that he was forced to take work as a clerk . . . in a bank.
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Almost everything, even when transactions were conducted purely in German paper marks, depended on the exchange rate. The crucial time of day was three o’clock in the afternoon, when the dollar/mark rate was published. This was the signal, if – as was most often the case during the summer of 1923 – there had been a further overnight fall in the value of the mark against the greenback, for prices to go up in the wholesale and retail sectors. So, at the Junkers aircraft plant in Dessau, the company would give each worker a paper-mark sum equivalent to the price of three and a half loaves of bread. The men’s wives, waiting outside the factory gates, would then rush off to the food shops, anxious to get there before the new dollar rate became known, since after that, in all likelihood, the money would no longer buy the bread ration it was supposed to cover.
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Above all, in that summer of 1923 in Germany, the only certain way to enjoy a decent standard of living was to have foreign currency. Acquiring it, by any means possible, became a national obsession. A postal inspector who raided the mail stole $1,717, plus 1,102 Swiss francs, and 114 French francs – sufficient to buy two houses, set up his mistress in a flat (with a piano!), and make a substantial, conscience-easing donation to his church.
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Meanwhile, as the inflation rocketed, Curt Riess, student son of the tailor who now accepted only dollars, was sent on a rest cure by his father:

I can still remember how grotesque conditions had become, because I got to experience it all on my own person. I had fallen ill, and I was sent off to convalesce on the ‘Weißer Hirsch’, the still-feudal spa resort in the hills above Dresden. For the fourteen days of the cure, my father had given me fourteen dollars, in bills that could be changed into marks. He had drilled it into me to wait every day until the new dollar exchange rate was announced. That would be around three p.m.

So, at three o’clock I changed a dollar and for it I got a corresponding sum in marks. With this I could pay the daily bill at the boarding house where I was staying, as well as the tram ride into Dresden, a ticket for the opera or the theatre, and the return trip. And all that for one dollar – if, in fact, I could manage to spend the whole dollar, or rather the vast sums of marks it bought, within the twenty-four hours.

And then I waited again until three o’clock in the afternoon, changed another dollar bill, and received a pile of money. Of course, the boarding house regularly raised its charges, and the tram company its fares, and of course over the period of two weeks one had to pay more and more for a seat at the opera house. But the authorities couldn’t raise their prices fast enough to keep up with the plunging value of the mark.

Admittedly, I was in a privileged position. How many others could live off dollar bills?

Only the most privileged, of course. This class did not include an elderly Berlin literary man, Maximilian Bern, who in that year withdrew all his savings – 100,000 marks, formerly sufficient t
o
support a modestly comfortable retirement – and purchased all it would buy by that time: a subway ticket. The old gentleman took a last ride around his city, then went back to his apartment and locked himself
in.
There he died of
hunger.
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This could not go on. By August 1923, it was clear that Chancellor Cuno had, in fact, no solutions to the problems that his brilliant business brain had supposedly been perfectly attuned to master. A wave of Communist-influenced strikes in protest at the rapid depreciation in workers’ standards of living and food shortages was spreading through the industrial areas of the economy, and the Social Democratic trade unions, keen to keep control, were forced to participate. The Communists are thought to have been responsible for the one-day strike that hit the Reich Printing Office on 10 August, despite the efforts of the moderate Social Democrats in the printers’ union, halting production of currency for twenty-four hours. Even such a short pause in the manufacture of Germany’s most vital product of the time – paper money – caused a discernible hiccup in the economy.
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After suffering a no-confidence vote in the Reichstag, Cuno resigned on 12 August 1923.

President Ebert’s choice for the new Chancellor was the German People’s Party leader, Dr Gustav Stresemann. He headed a so-called ‘Grand Coalition’ of all the democratic parties, including the Social Democrats. There was no way of knowing it at the time, but with the appointment of this man, whose journey from extreme nationalist to apostle of European cooperation would mark him as one of the great German politicians of the twentieth century, President Ebert had opened up the possibility, at last, that the inflation could be confronted and defeated.

At a price, of course. After all, on 13 August 1923, when Gustav Stresemann took office as Chancellor and Foreign Minister of Germany, the mark stood at 3,700,000 to the dollar.

The German state was still haemorrhaging paper money on an unimaginable scale to keep the ‘passive resistance’ in the Ruhr going, though this was clearly long since a lost cause. The raptors of the right and left were gathering around the stricken form of the young German Republic. Communists were mobilising in central Germany, where their leaders had acquired a share of power, and the Nazis and their ultra-nationalist allies were raising citizen armies in the south, turning Bavaria into an armed camp. Adolf Hitler had great hopes of his ‘starving billionaires’, who would rise and sweep him to the position of absolute power that he craved.

The next three months – Stresemann’s first months as Weimar Germany’s most powerful and ultimately most respected leader – were going to be a roller-coaster ride, and everyone in the crisis-ridden country knew it.

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Desperate Measures

Gustav Stresemann took power as the only chancellor the mainstream Weimar parties could agree to support in this latest, possibly fatal, time of crisis. A founder member of the German People’s Party, he was the most right wing of the possible candidates.

It was on the face of things surprising that the Social Democrats, in particular, were prepared to hand the supreme power in the land to Stresemann. Earlier in his political career, he had been a fervent nationalist and a strong monarchist, while during the war he had favoured annexing large parts of the surrounding countries. Perhaps worst of all, from the left’s point of view, for more than twenty years Stresemann had worked as a professional representative of big industry.

Since the left was not prepared to take on the responsibility of the chancellorship, however, the new leader had to come from one of the ‘bourgeois’ parties, and Stresemann was recognised as highly competent, a skilled political negotiator and a convincing, even inspiring, orator. And, after all, other powerful and capable figures on the business-orientated nationalist centre-right had veered towards an extreme, sometimes violently, anti-republican position during the post-war years (Karl Helfferich being perhaps the most spectacular example), but Stresemann had gone in the other direction. When forced to choose, the tavern-keeper’s son from Berlin had moved steadily in the direction of acceptance of the Republic as an accomplished fact and of the parliamentary system as the one most capable of uniting the majority of Germans.

The fact that Stresemann’s wife, Käthe (née Kleefeld), was the daughter of a Jewish industrialist who had, along with his wife, converted to Protestant Christianity, may also have formed part of the reason why the new Chancellor could never again feel comfortable with the nationalist right. After 1918, racial anti-Semitism (as opposed to the old-fashioned religiously based kind) had spread like a virus through its ranks. In his address to the Reichstag, on the day after his appointment to the chancellorship, Stresemann declared that, as befitted the seriousness of the situation, his government amounted to a ‘coalition of all forces that support the constitutional idea of the state’.
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Both the nationalists and Communists, who for their different reasons blamed the inflation as well as the political chaos on the mainstream parties, now sharpened their attacks. Cuno, whose government had been supposedly ‘above parties’, had represented, for the nationalists, the hope that things might be moving back in the direction of an authoritarian state of the old pre-war style. The new administration, which included Social Democrats, resembled earlier Weimar governments and to that extent, for the far right, was a retrograde step. On the other hand, a big advantage for the nationalists was that if Stresemann and his fellow ministers were forced to call off the passive resistance in the Ruhr, they could be accused of ‘betrayal’ and lumped together with the so-called ‘November criminals’, who had, so far as the right was concerned, sold out Germany in November 1918. The fact that the crucial post of Finance Minister in the Stresemann cabinet had been awarded to the Social Democrat Rudolf Hilferding, an Austrian-born Jew, added further fuel to the right’s propaganda fire.

That the plight of Germany had become desperate was clear to everyone. Drastic action to save the mark was clearly inevitable. In earlier years, though constantly wringing their hands and affirming the need to balance the budget, ministers had failed to take the difficult and predictably unpopular measures required. Given the underlying weakness of the Weimar political system during the immediate post-war period, this was to some extent understandable. Now, however, there was no choice but to act. For almost five years, inflation had severely affected some, but by no means all, Germans. On balance, given the alternatives, it had arguably acted to the advantage of stability. By the summer of 1923, however, the spiralling devaluation of the mark was killing the economy, threatening to cause food shortages and mass distress of the most extreme kind, and bringing the Reich itself to the brink of disintegration.

It was a measure of the anxiety felt by ministers that on 18 August, four days after the government had been officially formed, the socialist Hilferding invited no less a figure than the arch-conservative and sworn enemy of the Republic, Karl Helfferich, to address the cabinet. Helfferich duly presented his suggested solution to the collapse of the mark.

The former Imperial Secretary of the Treasury, who had done so much to promote the war loans that had helped feed the initial stages of the inflation, proposed that instead of gold being re-established as the new standard, the backing for the reform would be the country’s reserves of rye. Helfferich’s idea for a so-called ‘Rye Bank’, bizarre as it sounds to our current thinking, represented an attempt to do something that had become vitally necessary, at least at this stage in Germany’s crisis: to decouple the worth of the mark from the credibility of the Reich government. The state’s deficit was now so enormous and, particularly so long as the Ruhr crisis continued, so intractable, that no one had any faith in any fiat currency over which the government – or, for that matter, the Reichsbank, which was widely seen as its instrument – presided.