A Comparison of Inflation in 1920s Germany to 1970s United States

The inflation that swept Germany in the 1920s looked much like the economic situation in 1970s United States.

| May/June 1976

  • inflation 2
    Inflation and over-printing of currency in the 1970s eerily resembled Germany's economic woes of the 1920s.

  • inflation 2

Most adults in this country are at least dimly aware of the catastrophic inflation which swept over Germany in the early 1920's. (We've all seen the old newsreels of people buying a loaf of bread with a wheelbarrow load of nearly worthless paper currency.)

Few, however, know the cause of that inflation. (it was actually created by the German government so that the country could pay off its World War I debts more easily . . . which is to say with "cheaper" marks.)

And fewer still have studied the manner in which that destruction of the mark ran its course. (The inflation—once started—did not constantly accelerate, as we usually suppose. Right up until its final weeks—and despite its generally skyrocketing nature—that inflation was interspersed with short periods of deflation. Of business contractions and layoffs. And this, of course, really scared the hell out of everyone. It's bad enough to watch the value of your savings and the money in your pocket steadily decrease when you have a job and are still earning a paycheck . . . but it's absolutely terrifying to see that same erosion take place when you're unemployed. And so the politicians immediately "solved" the problem by printing even more worthless marks. "People are out of work and business is running well below capacity," they said, long after Germany was awash with floods of paper currency. "It's obvious that we have a capital shortage. We must stimulate the economy.")

And so they ran the printing presses faster . . . until, in late 1923, it took almost 1,000,000,000,000 marks to buy what two marks had bought in early 1919. And thus did the German economy collapse, dragging down the country's social and political structure behind it. And thus were the German people made desperate to believe and blindly support the first demagogue who promised them stability and prosperity and self confidence once again. And thus was the way paved for Hitler's rise to power. The rest, as we say, is history.

And the most recent part of that history (the early 1970's) sometimes seems to bear an uncomfortable resemblance to the Germany of the early 1920's . . . only on a much larger scale.  

Because this time we have the United States devaluing its currency not once, but twice, and "closing the gold window" (have you forgotten?) so that it can pay off its Vietnam War and other debts with "cheaper" dollars. Which, since the U.S. dollar is the planet's "standard" medium of exchange, immediately throws a kink into economic circles all over the earth. And that wave of turbulence ripples back and forth between nations and trade blocs . . . from industrialized northern Europe to the oil fields of the Middle East to Japan and southeast Asia to the mines and fields of Africa, South America, Australia, and New Zealand. And it's amplified by some significant crop failures in all parts of the world, and the final death throes of the British Empire, and a power struggle within the Communist bloc, and the rising expectations of most of the earth's citizens, and mushrooming populations in almost every nation, and the sudden realization by tens of millions of people that the planet's natural resources really are exhaustible.


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