Reparation payments by Germany were included in the terms of the Treaty of Versailles. They required Germany to pay for the cost of the damage done by the war. Figures set after the Treaty of Versailles initially set out a figure of 132 Billion German Gold Marks. This amount was later reduced. The amount in British Pounds equates to £6.6 Billion. Some reparations were paid via goods taken, and across the period 1919-1933 the German economy paid some 21 Billion German Marks: often using foreign loans. German Reparation payments were a consequence of the ‘War Guilt’ clause of the Treaty of Versailles. Once in power, Adolf Hitler and the Nazi Party halted German payments of reparations.
Reparations payments and the German Economy
Reparations repayments contributed to the German economy becoming devalued. Having to pay such large sums to the Allies resulted in the German economy having a rapidly reduced capacity to purchase goods, as they were compelled to give much of their accumulated wealth and produce to the Allies in part payment towards the Reparations bill. The level of reparations Germany had to pay was set out in the Treaty of Versailles.
Consequences of Reparation Payments for Germany
This had several consequences. First, it resulted in the value of the German currency falling. Second, it resulted in the cost of items within Germany rising as the relative cost of importation rose as the value of the currency declined. This is inflationary in nature and has several consequences. In situations such as this people make use of their savings, as they cannot afford to make purchases using only their weekly or monthly income. In Germany billions of dollars worth of hoarded and saved marks re-entered the economy in the period after the war. Again, this results in inflation rising and the value of the currency falling when compared to other currencies. Combined, these factors lead to a cycle of devaluation and inflation that can, and did, become hyperinflation.
It is not however the case that the economy within Germany continued to decline throughout the whole of the period 1919 – 1923. In 1920 the currency stabilised for a period of some 6 months. The price index remained almost constant and the value of the German mark remained at approximately 1US$ to 69 German marks. The Weimar Government, it has been argued, could have introduced a stable currency at this point. Instead they continued to increase the amount of money in circulation – which is inflationary. The result was hyperinflation in 1923. This had massive consequences for the economy and society in general.
http://www.usagold.com/GermanNightmare.html
This link includes an outline of how peoples investments were affected during this era. It notes that in general people would have lost the value of their investments – with one or two areas that proved to be the exception: Investment in Capital (Land and Buildings) and Investment in Foreign currency.
Germany 1919 – 1945 Links
The Second Reich
Unification of Germany – Political systems within the Second Reich – German Society during the Second Reich – Collapse of the Second Reich
Weimar Republic
Interim Government – Founding of the Weimar Republic – Impact of the First World War on Germany – The Treaty of Versailles and its impact on Germany – Weimar Constitution – 1919-1923: Years of Crisis? – Spartacist Uprising – Kapp Putsch – Reichsbanner Schwarz-Rot-Gold – Reparations – Hyperinflation in Germany, 1923 – 1924-1928: A Golden Era? – 1925 Presidential Election – Gustav Stresemann – German Foreign Relations 1919-1932 – Germany in the Great Depression – Failings of the Weimar Republic – Dada Movement
Rise of the Nazi Party
The Munich Putsch – Did the Economic Crisis of 1923 help the Nazi’s? – Origins of the Nazi Party – Rise of the Nazi Party
Nazi Germany
Totalitarian Regime in Nazi Germany – How did Hitler consolidate power? – Mein Kampf – Nazi methods of control – Opposition to the Nazi Regime – Organisation of the Nazi Party – Fuhrerprinzip – Kristallnacht – Youth and Education – Goering and the 2nd 4 Year Plan – Anti-Jewish Boycott, 1933 – Nazi Anti-Semitism – DAF (The German Labour Front) – Propaganda in Germany 1919-39 – Economic Policy of the Nazi Party – Kreisau Circle – The Confessing Church – Catholic Church – Edelweiss Pirates
Biographies
Ludwig Beck – Dietrich Bonhoeffer – Bishop Clemens von Galen – Carl Goerdeler – Robert Ley – Helmuth von Moltke – Martin Niemoller – Erwin Rommel – Hjalmar Schacht – Sophie Scholl – Albert Speer – Claus von Stauffenberg – Fritz Todt