June 3, 1933 - Article - Printing Press Money, by F. Britten Austin

The only non-German in the group, I glanced curiously around the small sitting room. It was the antithesis of the ultra-modernistic apartment, fitted with every imaginable electrical contrivance, cubistically mass-built by the municipality with benevolent American loans and rented at an equally benevolent figure, characteristic of the contemporary German cityscape. My host did not belong to that favored proletariat which, if out of work, at any rate has the privilege of "starving in palaces." He was, conspicuously, of the old-fashioned middle class.

"H'm!" This was a novel viewpoint. "To the foreigner it has always been incomprehensible how the German people managed to live at all."

Frau Schmidt's face went more serious.

"Certainly it was bad. Then my mother was alive, but ill. It was I who did the housekeeping. The moment one had any money, one rushed out to spend it before it depreciated. People who were paid on the first of the month bought a whole month's provisions in advance. If one waited a day or two, one could, perhaps, buy nothing." She laughed. "I remember once I bought a jar of marmalade, and at the end of the week I took the empty jar back to the shop and sold it for more marks than the full jar had cost!"

The youngish business man nodded.

"Strange how far off it all seems now," he said. "One has almost forgotten it. Phantastisch es war! I remember once going with some friends for a trip in the mountains. For three days we stayed at a sort of rest house, high up. When we came down, the keeper of the rest house came down with us to the nearest village. We had eaten all his provisions. With all the money we had paid him for three days' stay, he could not so much as buy one egg!" He laughed at the memory. "Poor devil!"

The old professor put in a word:

"In September, 1923, I took some students for a scientific excursion in East Prussia. We had twenty or thirty million marks, and, in addition, I had three American dollars. We were away a fortnight. After a few days our marks were spent. I changed one dollar and got 50 million marks for it. On the twelfth day, I changed another dollar and got 100 million marks for it. On the last day, when I reached home, I changed my last dollar and got 190 million marks for it - much more than I started with." He chuckled. "The next day, the dollar had gone down and was worth only about 100 millions, so I bought my dollar back again on the Black exchange. And a week later the dollar was worth 500 millions! Everybody speculated in those days - even I!" He laughed wheezily. (pg. 8)

"It was verboten (forbidden) also to buy provisions direct from peasants ," said Frau Schmidt. "Do you remember how the police used to search people at the railroad station when returning from the country? But, of course, one got off the train a few miles out and came into the city across the fields, laden with all the stuff one had managed to wheedle out of the peasants." She laughed also. To these younger people it all seemed to be a joke in the retrospect.

"I suppose the peasants did well?" I ventured.

At first they all felt they were millionaires," said the businessman. "They bought every imaginable thing. I knew one peasant who had three young daughters, all under ten. He bought a piano for each of them! While we poor townsfolk hardly ever saw an egg, could only with difficulty get a milk permit for the children, and drank only Ersatz (roasted beans) coffee or thin beer, the tables of the peasants were loaded with great jugs of milk and cream and huge loaves and joints of meat. It was quite common to see them drinking champagne at Mittagsessen (midday meal). They were on top of the world. But toward the end, when a postage stamp cost millions, they found their treasure chests were stuffed with worthless paper - and then they refused to sell. The hoarded their produce, and even fed the cattle on breadstuffs."

"It is all bewildering to me," I said. "I still cannot understand how the German people came through that period. Presumably all wages and salaries were proportionately increased - or more or less so - as the mark devaluated. But I cannot see clearly just what happened, say, to a middle-class person who had retired on the savings of a life time."

Herr Rosegger looked at me with his sunken, sad eyes. "I can tell you, mein Herr. I am one of that class myself. It was not so comic as it now appears to the younger generation. We were robbed of everything. Ruined."

"Yes," I objected. "But you have, after all, survived. It is the details I would like to know. Exactly what happened to the small property owner in the inflation period? How did you come through?"

He pondered a moment.

"It is a long story," he said. "I must recall it to myself. Perhaps, if you care to stay a little time after my other friends have gone -----"

I assented willingly. The conversation turned to other topics. We drank much beer, talked of the Hitler movement, which was in the act of effecting a practically unopposed revolution all over Germany.

"My case is typical of hundreds of thousands of others," Herr Rosegger continued. "My profession was that of a lawyer, successful in a modest way. I remained in business throughout the war. Then I decided to retire. I was over sixty. At the beginning of 1919, I sold my practice for 60,000 marks, one-third paid down, the remainder payable in five annual installments, with interest at 6%. The mark was then already depreciated to almost half its prewar value, but since the war was over, everyone imagined that it would soon recover to normal. When I retired, I had 20,000 marks on deposit in the bank. I therefore had 40,000 marks immediately available. I invested the amount in a part mortgage on an office building at 6%. Already, I held two prewar mortgages, one for 25,000 marks on an apartment house, the other for 20,000 marks on a farm, both at 6%. In addition, I had 40,000 marks in Government 3 per cents, which I had saved and invested before the war, and 40,000 marks in various war loans.

"Like most conservative Germans of my type, I avoided industrial shares, but I had 45,000 marks invested in various first-class industrial debentures. I owned, free of debt, a dwelling house which had cost me 20,000 marks and which was rented on a long lease for 1400 marks a year. I owned, also free of debt, the small villa in which I lived, which had also cost me 20,000 marks. Finally, I held an endowment insurance policy, maturing in June, 1923, for 40,000 marks, on which I had been paying premiums since 1893. So that I could reckon I was retiring on a fortune of 330,000 marks - nearly $80,000 American dollars before the war - which it had taken me forty years of work to accumulate. It was not, perhaps, a great sum of money, but I could be reasonably satisfied with it. It was a typical middle-class fortune, and was as safely invested as I could devise. My son had been killed in the war. I had only my wife, my daughter and myself to provide for. So far as one could foresee, we could all live comfortably until the end of our lives."

He sat back and puffed his pipe with half-closed eyes, summoning up memories.

"One must remember that the inflation came gradually, almost imperceptibly at first. At the beginning, no one heeded it. At the beginning, no one heeded it. Prices came down a little from the wartime level. Only a very small minority of people was concerned with foreign exchange. Everybody believed, as I said, that the mark would always be the mark. In fact, a fundamental and strictly enforced law, promulgated on the fourth of August, 1914, decreed that it should be so. By the terms of that law, Mark ist Mark, and it was forbidden to reckon the value of the mark in terms of foreign currency. Doubtless, that was a necessary wartime measure. Mark was mark, and all obligations, no matter when entered into, had to be settled in precisely the number of marks stipulated, no matter what their current purchasing power might be. From that law, which was rigidly maintained until almost the end of the inflation, came most of the misfortunes of Germany. It was that law which ruined the middle class, and, in fact, dissipated almost the entire capital of the country."

Again he was silent. The old professor out in a word, blinking behind his bulbous spectacles.

"Herr Rosegger speaks the truth, mein Herr. One wonders sometimes how far it was deliberately contrived, or who were the men who contrived it. Certainly, the great industrialists benefitted scandalously, while the German people was ruined. Die ganze Inflation war ein ungeheuer Schwindel!" (The whole inflation was a monster swindle) (pp. 9, 59)

"As I (Herr Rosegger) said, no one really noticed the external fall of the mark, despite the fact that the newspapers had begun to print the Dollarstand (Dollar conditions) in heavy black type, with occasional scare headlines. It was a temporary condition which would right itself. But throughout the year the mark was, in fact, falling alarmingly." He rose from his seat, went to a cabinet, returned with a little notebook. "I kept a record of its decline. At the beginning of January, 1919, the dollar stood at 7.95. (That meant that $1 equaled 7.95 marks) In July it was 13.75. At the end of December it was 48.43.

"That fall continued until February, 1920, when it went to 100. Then, in March, it was brought back to 72. The foreign speculator rushed in once more. In April the quotation was 57, and in May it was only 37. We breathed again. The mark was now on the road to revalorization. But in September, 1920, it fell abruptly to 62.25; in October to 76.50.

"1921 opened with the mark at 74.50. The foreign speculators were buying heavily. By the end of January it had been brought back to 60.50, and thence onward until at the end of May it was fairly steady at an average of about 63.

"No one believed that things could get worse, and everybody believed they must get better. Nevertheless, at the end of 1021 the mark stood at 184 to the dollar.

"It was in 1922 that terror - genuine terror - began to creep into our souls. Where would this end? By that time everybody was acutely conscious of valuta - of the Dollarstand. And day by day the mark slipped downward. At the end of January" - he glanced at his little book - "it was 201.25. At the end of February it was 227.50. At the end of March it was 305. Then again it was pulled up, and hopes revived. At the end of April it was 282.64, at the end of May, 276.65. But at the end of June it was 374, at the end of July it was 670, and at the end of August, 1725. The next day it was brought abruptly back to 1298.37, but at the end of September it stood startlingly at 1647.43. Thenceforward, it dived appallingly headlong. By the end of October it was 4500, and by the end of November it was 7650, being brought back to 7350 at the end of December. It was fantastic, incredible. In the year 1921 the mark had depreciated about two and a half times. In the year 1922 it had depreciated on a coefficient of forty. The real inflation had commenced.

"Prices mounting day by day, though always far below what it would cost the retailer to replenish his stock - on account of the law which compelled him to calculate only, at a reasonable profit, on the original cost in marks. The hotels, the restaurants, the dance floors, crammed with foreigners who bought for a dollar or a Czechoslovak crown what would have cost ten times as much at home. The peasants, well fed, joyously dancing in their villages, not knowing what to do with their flood of money, besieging the telephone lines to the Berlin Bourse (Stock Exchange).

"Everywhere banks, banks, banks, new branches, new mushroom concerns, with splendid marble facades, with boards giving the latest quotations of foreign Devisen (foreign exchange), of industrial stocks - for everyone was speculation, everyone was rushing around giving and getting tips, buying today and selling tomorrow and buying again, desperately trying to snatch a profit out of the disaster. It was if everyone had gone mad.

"And then, as a background, the great mass of the German middle class reduced to sudden poverty, selling their treasures, pinching, starving, eating meat rarely as often as once a week, queuing up to the Milchamt (milk office) for a permit that would give a child a small glass of milk a day, queuing up to the Kohlamt (coal office) for a permit entitling a family to an allowance of 330 pounds of coal a month and not knowing how they would buy the coal if they got the permit. It was no consolation to see the coal dealer's wife in new and expensive furs and all the wartime Schieber making bigger profits that ever." (pg. 59)

He consulted his little book again.

"When I received my June, 1922, interest of 300 marks on my government 3 per cents, I received actually in dollar reckoning about ninety cents. When I received the December interest I actually had about forty cents. My 40,000 marks in war loans averaged out 4.5% - in other words, a total revenue of $1.41 in American money. My industrial debentures paid 5% in June - 2250 marks. At the exchange, that was $6.

"At the same time, all the companies in which I was interested elected to pay off their debentures. I had 25,000 marks paid off on June first, and 20,000 marks paid off on the seventh of July.

"Very many companies, of course, had paid off their debentures in 1921 for ridiculously small amounts. In 1922, the unfortunate holders got even less. I received approximately $130, against $10,700 originally invested. I had to spend that money, plus the 8000 marks installment on the purchase price of my business, in order to live. On my industrial shares, bought in 1920 and 1921, I received practically 20% on my investment - 3200 marks in all. Taking the September average, that was $2.13. The interest on the unpaid balance of the price for my business - 1440 marks - was equal to twenty cents, when I received it in December.

"I had a part mortgage on an office building of 40,000 marks. In March, my debtor paid off the mortgage - for a real value of $133 against the $5000 I had invested in 1919. I also received the March interest - 600 marks - then equal to $2. That return of capital, also, we had to eat. I had another mortgage of 25,000 marks on an apartment house. In the beginning of June, that borrower likewise insisted on redeeming his debt. The dollar rate was a little better than in March. In real value, he repaid a loan of $5000 with $92. The interest came to $2. At the end of December, my peasant elected to pay off his mortgage of 20,000 marks. The rate was then 7350. He redeemed a real loan of $4760 for $2.72. The interest on that mortgage was $1.60 in June, and 8 cents in December.

"I owned also a dwelling house rented at 1400 marks a year on a long lease. Mark bleibt Mark! (mark remains mark) For each of the first three quarters of the year, I received, therefore, 350 marks. But in October a law passed permitting the raising of rents to ten times the prewar rate. For the last quarter, therefore, I received 3500 marks. Actually, at the differing valuta for the year, I received in all $2.77, against which I had property taxes which completely wiped it out.

"It was delirium where one ceases to have any sense of realities," he said.

"By the end of 1922, a 100 mark note was small change, and all the millions of notes of lesser value were waste paper. One thought in thousands and twenty thousands. Twenty thousand was less than $3. The madness of 1922 was nothing to the frantic insanity of 1923.

He referred again to his little book. "On the second of January, 1923, the mark opened at 7260. On the 31st of January, the rate was 49,000. The foreign speculator rushed to average his losses. By the 16th of February the rate had been brought back to 18,900. It remained at little more than 20,000 until nearly the end of April. On the second of May, it was 31,700. At the beginning of June, it was 74,750. At the beginning of July, it was 160,000. On the 23rd of July, it was 760,000. On the 30th of July, it was 1,100,000. On the 9th of August, it was 4,860,000. On the 15th of August, the mark was restored to almost double value - 2,700,000. Five days later it had fallen again to 5,500,000. On the 29th of August, it went to 7,500,000. The next day it was 11,000,000. Then came the rush over the precipice. On the 7th of September, it was 53,000,000. On the 12th, 96,000,000. On the 18th, 150,000,000. On the 1st of October, it was 242,000,000. On the 5th, it was 600,000,000. On the 9th, 1,200,000,000. On the 10th, 2,975,000,000. On the 19th, 12,000,000,000. On the 31st of October, 72,500,000,000. From that time one counts in milliards (billions). On the 1st of November it was 130 milliards. On the 7th, 630 milliards. On the 14th, 1260 milliards. From the 15th to the 19th it was 2520 milliards. On the 20th it was 4200 milliards - more than four million million marks to a dollar!

"And suddenly that was the end of inflation.... When you think that to the ordinary German prior to the inflation a million marks was a colossal fortune, you can imagine what it was to hear the market woman haggling over milliards. At the beginning of November, one could still but a trifle with a milliard. Long before the end of the month, you could not give it away to a beggar."

What exactly happened?" I asked. "How did it affect you?"

"There were three principle laws," he replied. "The first was in February, 1924, which aroused a storm of protest. Then came the elections, with all parties competing in promises of a higher revalorization (restore value). The two laws of the 16th of July, 1925, finally shattered our hopes.

"The fundamental was that one billion [in German reckoning. By American reckoning, one trillion] - one million million - paper marks equaled one old gold mark, or new Rentenmark, or Reichsmark. Up to a certain date, paper marks could be exchanged at this rate; after that, they were simply demonetized. This, of course, completely eliminated the millions of people who had huge stacks of the old paper currency. Every note less than those in the hundreds of milliards, issued in the last months of the inflation, became automatically worthless. So did all the bank balances of less than a hundred milliards.

"So that at the end of the inflation my original capital of 330,000 marks - nearly $80,000 - had been reduced to approximately 32,000 marks, plus a non interest-bearing government bond for 2000 marks." He glanced around the poorly furnished room. "I count myself among the lucky ones. There were many far wealthier than myself who lost everything, who now have only a pittance from the state or the municipality, granted on the grounds that they were sufferers from the world's object lesson in what inflation can mean."

The old professor nodded sagely. "Ja, es war ein Wahnsinn! (Yes, it was an insanity) The older German people have a painful memory of what war means - but when you say inflation, they shudder." (pg. 59-61)

Comment: After studying this article, there is little doubt in my mind that the German inflation was a deliberate design by a few people that had the power to destroy the German monetary system so that it could be replaced by a new one that they desired, and at the same time rob millions in the process.

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