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

railway system that had been adapted and extended with precisely such military needs in mind.
    Every German knew these things. What most did not realise was that she also suffered from weaknesses, weaknesses that her enemies were either spared, or shared only in part. First, Germany was tied to the moribund Austro-Hungarian Empire, whose gilded façade concealed a snake-pit of warring nationalities, and whose frantic attempts to hold on to its recently acquired Balkan territories had caused the war in the first place. In her alliance with Austria-Hungary, Germany was, as the saying in Berlin went, ‘shackled to a corpse’. Second, despite frantic attempts to build a German navy to rival Britain’s, the Reich and her allies, known collectively as ‘the Central Powers’, were essentially landlocked, susceptible to a British sea blockade that would gradually reduce their populations to a state of semi-starvation. And third, for all her confidence and martial excellence, in the final analysis Imperial Germany was short of the money she would need to fight this war, and more lacking still in ways of acquiring it.
    Those who controlled the Reich’s finances were well aware of the problems that would arise if the country undertook a major war against the ‘Triple Entente’ of France, Russia and Britain. So far as such a conflict’s military side was concerned, the Imperial General Staff had a scheme to deal with this by means of a massive, no-holds-barred attack through neutral Belgium against France, delivering a swift knockout blow that would enable Germany to turn its full strength quickly against the ‘Russian steamroller’ to the east. The original plan had been developed almost ten years earlier under the late Chief of the Prussian General Staff, Field Marshal Count Alfred von Schlieffen, and though it had been modified since, in the history books it still bears his name. Likewise, the financial mandarins at the Reichsbank in Berlin – founded after German reunification in 1871 to manage the value and volume of the new nation’s currency – had reacted to the increasingly unsettled international scene by developing a secret blueprint that would enable the country to rise above its financial limitations for the duration.
    Of course, like all the major powers that went to war in the summer of 1914, Germany believed that, if she had to fight, she would win quickly. So, any radical measures taken to secure the financial sinews of war would, it was thought, be pretty short term in nature.
    The planners’ way of thinking seemed justified by past events. During the hundred years since the twenty-year struggle against Napoleon had been decided at the Battle of Waterloo, Prussia and its German allies had needed to fight no war longer than a few months in duration. Two out of the three wars that Otto von Bismarck, Chancellor of German unification, had won during the forced march to nationhood (against Denmark and against Austria) lasted a matter of weeks. Even the third, the defeat of France, though dragged out to six months, from the outbreak of war on 19 July 1870 to the formal surrender of Paris on 28 January 1871, had been all but decided from a military point of view by the second week of September.
    Just as the Schlieffen Plan was put into action by the Imperial General Staff (in an arguably fatally modified form) during the last days of July and first days of August 1914, so the men who ran the Reichsbank set in motion the modifications of the banking and currency system that would make it possible, they hoped, for Germany to survive the breakdown of the hitherto extremely open global economy for long enough to win the war.
    The first part of this financial plan of campaign involved abandoning the gold standard.
     
    For decades, the routine convertibility of Germany’s paper currency – two-thirds of the money in circulation by July 1914 – into solid gold (or silver) coinage had meant that notes were not money