Just like the Reichbanknotes (issued by the state), notgeld issues began to be affected by
the runaway inflation that Germany experienced during this period. By late 1923, notes
were being issued in Billion Mark denominations. In Germany this was equal to
1,000,000,000,000! There were many issues, (see table above) and many were from private
companies, as can be seen by the note above. It appears to be
similar to a 'cheque' and even has the word scheck on it. Before World War I Germany
was a prosperous country, with a gold-backed currency, expanding industry, and world
leadership in optics, chemicals, and machinery. The German Mark, the British shilling, the
French franc, and the Italian lira all had about equal value, and all were exchanged four
or five to the dollar. That was in 1914. In 1923, at the most fevered moment of the German
hyperinflation, the exchange rate between the dollar and the Mark was one trillion Marks
to one dollar, and it took a wheelbarrow full of money to buy a loaf of bread! When the
1,000-billion Mark note came out, few bothered to collect the change when they
spent it. By November 1923, with one dollar equal to one trillion Marks, the breakdown was
complete. The currency had lost meaning. The tornado of the Mark inflation was succeeded
by the "miracle of the Rentenmark". Nine zeros were struck from the currency; that is, one
Rentenmark was equal to one billion old Marks. Thomas Mann wrote: "The market woman who
without batting an eyelash demanded 100 million for an egg lost the capacity for surprise.
And nothing that has happened since has been insane or cruel enough to surprise her."
In the Hungarian hyperinflation after World War II, bills issued by the Nemzeti Bank for
one hundred million trillion pengos were issued (the pengo was the Hungarian currency
unit) and bills for one billion trillion pengos were printed but never issued.
In Germany, people would rush out to spend the day's wages as fast as possible, knowing
that only a few hours' inflation would deprive today's wages of most of their purchasing
power. One source says that people might buy a bottle of wine in the expectation that on
the following morning, the empty bottle could be sold for more than it had cost when full!
Fantastic!!
However, the German economy, never very sound, was further disrupted by the conflict
surrounding 'Kapp's putsch' and by the strike against it and production fell and prices
rose. The rise in prices destroyed the purchasing power of wages and government revenues
and the government responded to this by printing money to replace the lost revenues.
This was the beginning of a vicious circle. Each increase in the quantity of money in
circulation brought about a further inflation of prices, reducing the purchasing power
of incomes and revenues, and leading to more printing of money. In the extreme,
the monetary system, simply collapses. This is the way that hyperinflations happen:
by a self-reinforcing vicious cycle of printing money, leading to inflation, leading to
printing money, and so on and so on.
(Pre 1914; 1$ = 4M : Nov.19th 1923; 1$ = 4,200,000,000,000M)!!!!!