Weimar Germany

In 1921, a loaf of bread in Germany cost around 160 marks.

By November 1923, that same loaf cost 200 billion marks.

This wasn’t a gradual rise. It was a collapse. Workers were paid twice a day because prices rose faster than they could spend their wages. Families burned banknotes for heat — the notes were worth less than the firewood they could buy. People carried cash in wheelbarrows. Some gave up on wheelbarrows and left the cash in the street.

How did this happen? Germany had lost World War I and faced impossible reparations payments. Unable to raise enough through taxes, the government printed. And printed. And printed. The money supply exploded. Prices followed. As prices rose, the government printed more to pay its bills — which drove prices higher. The cycle fed itself until the currency was functionally worthless.

At the peak of hyperinflation, the Reichsbank was printing notes with denominations of 100 trillion marks. Children used stacks of banknotes as building blocks because they were more plentiful than toys.

Middle-class families who had saved their entire lives were wiped out overnight. Everything they had stored in bank accounts or bonds — gone. The only people who survived financially were those who held real assets: land, gold, foreign currency.

Weimar Germany is not a curiosity. Venezuela went through it in 2018. Zimbabwe in 2008. Argentina has lived through multiple episodes. Turkey has been fighting one for years.

Fiat currency, mismanaged, doesn’t bend. It breaks.

Tomorrow: week two in review — and what you now understand about the paper money system.

— The Daily Bit