French Invasion of the Ruhr and Hyperinflation 1923

1923 – A Bad Year

When the reparations total was announced in the Treaty of Versailles at £6,600 million and to be paid back at £100 million per year, the German government (the Weimar Republic) claimed they could not afford to pay it. They were not lying, they had nothing left to be able to pay and with the loss of industrial areas also due to the Treaty, they didn’t have much hope of generating enough wealth to meet the repayments in the near future.

French Occupation of the Ruhr

  • In 1919 Germany’s war debt was 144,000 million marks
  • Reparations made matters worse, and by December 1922 the national debt had reached 469,000 million marks
  • The government asked the Allies for permission to suspend reparation payments, but the Allies refused.
  • It made no difference, as Germany simply did not have the money to pay. The Allies, particularly France and Belgium, demanded goods and supplies in place of the money
  • The French were angry because they owed the US money that had been loaned to them during the war
  • By the end of 1922, the Reparations Commission declared that Germany had failed to deliver the promised coal and timber to the Allies
  • In response, French engineers were sent in to the Ruhr on 11 January 1923 to secure coal production and to get ‘payment in kind’ (goods and products to make up for not getting money)
  • 60,000 French and Belgian soldiers backed them
  • The German government couldn’t resist –because the Treaty of Versailles had stripped them of their military
  • Wilhelm Cuno, who led the centre-right government from November 1922, encouraged the workers of the Ruhr to offer ‘passive resistance
  • Cuno also ordered the immediate suspension of reparations payments
  • German workers used passive resistance to begin with, they went on strike and refused to work, so no goods were made for the French to take away
  • Eventually some workers did more than passively resist and carried out acts of industrial sabotage such as setting fire to factories and flooding mines
  • In response, the French and Belgium soldiers arrested mine owners and took over the mines and railways.
  • Some strikers were shot and killed by French troops
  • The funerals of these workers prompted demonstrations against the French

Effects of French Occupation

  • United German people in their hatred for France and Belgium
  • The strikers became national heroes to the German people
  • The Weimar government became more popular because it had supported the strikers
  • The German government had to pay millions of marks in compensation to miners who had lost their income
  • The German government had printed off more money to pay strikers which increased inflation, plus the strike meant fewer goods produced so inflation got worse

Hyperinflation and its Impact

  • By August 1923 there were 663 billion marks in circulation, which led to hyperinflation.
  • There were not enough gold reserves to back up the amount of marks in circulation. Printed money’s value is supported by gold reserves, £1mill notes = £1mill worth of gold, if £2mill of notes printed they’re only worth half the value
  • Hyperinflation = RAPID price rises
  • Price of bread: February 1923 = 3,465 marks, November 1923 = 201,000,000,000 marks
  • By Nov 1923 the German mark was worthless
DATE Value of mark
July 1914 £1 = 20 marks
Jan 1919 £1 = 35 marks
Jan 1921 £1 = 256 marks
Jan 1923 £1 = 71,888 marks
Sept 1923 £1 = 3,954,408,000
Nov 1923 £1 = 1,680,800,000,000,000 marks

Negative Results

  • People’s savings were worth nothing
  • People’s pensions were worth nothing
  • People starved
  • People lost their trust in the Weimar government again

Who benefited?

  • Farmers were pleased as the price of food went up (though in the end nobody could afford it)
  • Businessmen were happy as their loans could be paid off easily
  • People who had mortgages could pay them off
  • Foreigners could exchange a few dollars for millions of marks
  • Entrepreneurs could access cheap credit
  • Rich people who owned land were protected as it retained its value