The Downfall of Money: Germany’s Hyperinflation and the Destruction of the Middle Class

By Frederick Taylor

A timely narrative account of the biggest financial crisis in modern history and its human consequences by the author of Dresden and The Berlin Wall.

'Excellent … This is a dramatic story, well told' Wall Street Journal

Many theorists believed a hundred years ago, just as they did at the beginning of our twenty-first century, that the world had reached a state of economic perfection, a never before seen condition of beneficial human interdependence that would lead to universal growth and prosperity. And yet the early years of the Weimar Republic in Germany witnessed the most complete and terrifying unravelling of a major country's financial system to have occurred in modern times.

The story of the Weimar Republic's financial crisis has a clear resonance in the second decade of the twenty-first century, when the world is anxious once more about what money is, what it means and how we can judge if its value is true. The Downfall of Money will tell anew the dramatic story of the hyperinflation that saw the once-solid German mark, worth 4.2 to the dollar in 1914, trading at over four trillion by the autumn of 1923. It is a trajectory of events uncomfortably relevant for today's uncertain world.

The Downfall of Money will reveal the real causes of the crisis, what this collapse meant to ordinary people, and also trace its connection to Germany's subsequent catastrophic political history. By drawing on a wide range of sources and making sense for the general reader of the vast amount of specialist research that has become available in recent decades, it will provide a timely, fresh and surprising look at this chilling period in history.

• Language: English
• Publisher: Bloomsbury Publishing
• Release date: Sep 12, 2013
• ISBN: 9781408839928

Frederick Taylor

Frederick Taylor studied history and modern languages at Oxford University and Sussex University. A Volkswagen Studentship award enabled him to research and travel widely in both parts of divided Germany at the height of the Cold War. Taylor is the author of Dresden and has edited and translated a number of works from German, including The Goebbels Diaries, 1939-1941. He is married with three children and lives in Cornwall, England.

Reviews for The Downfall of Money

[willszal-1 · Rating: 5 out of 5 stars]

Germany didn't have any peacetime between the World Wars. At the end of the Great War, the Allied forces continued blockades for months. Starvation was already an issue for some Germans during the war, and matters only got worse when the war ended. First, the Armistice was signed in 1918, resulting in an event that the Third Reich referred to as the November Criminals. And then a year later, the Treaty of Versailles was finalized and signed. During this period and the years to follow, Germany was going through more than one government a year, assassinations utterly commonplace. "Germany" had signed the Treaty, but there was no unified German nation, and Germany itself had been a relatively recent invention; the region was previously a group of independent countries.

The Treaty of Versailles declared that Germany was responsible for WWI, and that they would need to make financial reparations to the Allied countries, vastly exceeding their ability to repay such debts [a point which brought British economist J. M. Keynes to fame]. Understandably, Germans didn't like the deal.

To make matters worse, in 1923, France invade the German Ruhr, the most industrially consequential region in Europe, and held it for the following two years.

Numerous commentators of the period warned that "punishing" Germany to such an extent would only result in worse things to come. The immediate result was German hyperinflation, which ended at the end of 1923 with Germany minting a new currency called the Rentenmark. But things didn't get easier for Germans then either. Unemployment had skyrocketed, and eventually, the world entered the Great Depression at the end of the 1920s.

Before hyperinflation, 15% of income in Germany was derived from interest rather than paid work. Generally this interest-derived income was thought to support the academic or "middle" class. By the end of hyperinflation, this class was permanently erased, as inflation harms creditors.

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German antisemitism shares some striking similarities to the notion of the 1% as coined by Occupy Wall Street. Jews represented less than 1% of Germans, prior to World War II. Jews had been residing in Germany for many centuries before then, and by no means were immigrants to the area. To many Germans, Jews represented the financial class, and Jews held a grossly disproportionate number of political offices by a per capita basis.

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What's so striking to me about this books is that it demonstrates that the Allied Forces, and in some ways most of all the United States as senior creditor, are at least as responsible for the Holocaust as the Third Reich in their inflexibility in forgiving financial debts.

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There was an intriguing subtext to this book about the equalization [albeit through mass destitution] of the classes. Food and food production became by far the most valuable asset during hyperinflation, and stocks and bonds became utterly worthless. One revealing statistic: before hyperinflation, commercial farms produced around ten times as many eggs as homestead-scale operations. By the end of hyperinflation, small-scale production outproduced industrial-scale by two to one. In other words, small scale production saw a roughly twenty-fold increase in capacity.

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Although this book doesn't focus on the financial fundamentals as much as I would have liked, I still think it's an excellent text that gives the feel of a very important chapter in history.