The spectre of inflation strikes fear into the hearts of people everywhere, as the rise in the price of goods and services that inflation represents threatens an individual's ability to pay for the basic needs of life. As prices rise, the value of savings and investments decrease because what has been put away for a rainy day no longer goes as far as it once did. Inflation often occurs as the result of an overprinting of currency, because businesses and individuals, seeing that there is much more money in circulation, raise prices to maintain their standard of living, which leads to an inflationary spiral. As it is with any other commodity, the more currency there is, the less it is worth, and the more one must own to amass a stake that is actually worth holding onto. Historically, the effects of inflation have been mitigated through increases in income, better investment returns, and even greater interest rates paid on savings. There have been periods, however, when inflation has been so high that currency has basically become worthless. When inflation continues to rapidly increase with no end in sight, an economy enters into a period of hyperinflation and much chaos can result. One of the most notable periods of hyperinflation occurred in Germany under the Weimar Republic from 1921â1923.
During that period, German hyperinflation had several causes, one of which was the severe reparations that Germany had to pay as a result of the Treaty of Versailles that ended World War I. The payments demanded by the victors were vastly higher in many cases than what the country could afford, and so to help meet them the nation began to increase drastically the amount of currency that they printed. When more currency goes into circulation, each piece ends up being worth less, and the effects of the German hyperinflation soon spread throughout the society. It was not uncommon to find citizens taking wheelbarrows full of German marks to the market in order to buy one loaf of bread, since a pound of bread cost 3 billion marks at the height of this period of high German inflation. The severe currency devaluation continued until 1923 when a new currency was introduced, but the lasting damage to the society had been done. Foreign troops at different points during this period occupied some of the industrial parts of the German republic in order to get paid their reparations in goods and services, not the worthless currency. In time the economic hardship and loss of national pride would help spark a new German nationalism that quickly became perverted when Adolf Hitler came to power.
Although the Germany hyperinflation of 1921â1923 is not the worst inflation a country has ever faced, its lasting impact on world politics has certainly made it among the most famous hyperinflationary episodes in history. Knowing the horrible effects of inflation, governments and citizens alike are wise to make sure that currency is not overprinted. This will mean a stricter oversight of central banks the world over, for it is always tempting for governments to pay their debts simply through printing new money.