German Currency In The 1920s Essay

1. Why had German currency become virtually worthless by the early 1920s?

By the early 1920s, German currency had become virtually worthless because the German government continued to print an excessive amount of paper money. The German government printed more paper money because it was a way for them to finance themselves against the French occupation at the Ruhr valley. Furthermore, Germany was already in financial crisis due to the Treaty of Versailles forcing them to pay reparations for about 132 billion marks. However, Germany could not pay 2.5 billion marks in the second year due to increasing financial problems, which led to the French occupation. As a result, the abundance of German paper money led to inflation, which made their currency worthless.

2. How was Germany rescued from its post-war economic disaster?

Germany was rescued from its post-war

One of the long term causes was the rapidly declining prices of agricultural goods around the mid-1920s, because there was an overproduction of certain commodities. In addition, another long term cause was that the demand of coal from the coal industry decreased over the past years due to the increase of using oil and hydroelectricity. These two long term causes affected domestic economics; on the other hand, the international financial crisis that resulted from the American stock market collapse was a short term cause. The collapse of the American stock market happened because the European prosperity depended on American bank loans to Germany, but American investors withdrew money from Germany in order to invest in the New York stock market. Unfortunately, the US stock market crashed, which intensified the American investors to panic and to continue to withdraw money from the European markets. As a consequence, the funds of European banks weakened as industrialists cut back production, trade slowed down, and unemployment