The Downfall of Money: Germany’s Hyperinflation and the Destruction of the Middle Class (47 page)

Moreover, easily forgotten among the drama of the confrontations with far left and far right, the central issue of the currency remained as yet unresolved. Until the mark could be stabilised, almost anything the government in Berlin might do offered little prospect of restoring a real measure of order to the country.

24
Breaking the Fever

Stresemann had accepted the post of Chancellor on 13 August 1923, and he had also, following a habit of overwork that was probably to shorten his life, simultaneously become Foreign Minister. Hilferding’s jest that the best financial policy was a good foreign policy had been even more pointed than it seemed.

Two months after gaining office, Stresemann found himself in a distinctly improving international situation. On 12 October, the British decided to take up the ten-month-old offer by Hughes, the American Secretary of State, to convene a new conference, which would re-examine the reparations problem within an economic context. Two weeks later, Poincaré, though still holding on tight to the Ruhr and Rhine, agreed, under certain conditions and subject to a thorough investigation of Germany’s actual foreign exchange and investment holdings, to a reassessment of the Reich’s treaty liabilities. The fact that Poincaré was losing political clout at home – the Ruhr occupation was not universally popular, and becoming less so – was an important factor. However, so was the Americans’ promise to link the reparations question with the still-stalemated problem of repayment of inter-Allied loans. For the last five years, Washington had stubbornly insisted on full repayment of the billions she was owed by her erstwhile allies. Now, for the first time, the implication from Washington to Paris was: if you go easier on the Germans, maybe we’ll go easy on you.
1

The Rentenbank had finally been established on 17 October 1923, though the formal document recording this was dated the fifteenth of the month. The head of its administrative council was a deputy of the nationalist German National People’s Party and former Prussian Finance Minister, August Lentze. Other members were also representative of the conservative elements in society, from landowners to industrialists and bankers. As one Finance Ministry official said at the time, ‘they belong to that class whom the policy of inflation has enriched and whom the ineptitude of Division III of the Treasury (Tax Revenue) has allowed to escape the payment of their just dues to the state’.
2

Nonetheless, since the world was being asked to accept that the holders of Germany’s true national wealth were behind the scheme, it was understandable that the Rentenbank’s upper echelons were stuffed with such worthies. The existence of the Rentenbank, and its ability to issue currency notes, was then approved by the Reichstag on 27 October.

The currency would be issued on 15 November in strictly limited quantities. The limited amount of the money to be put into circulation was to act as a straitjacket on inflation. Where for five years the Reichsbank had been printing money as needed for industry, the central government, states and municipalities, thus increasing the amount in circulation to a dizzying degree, all these bodies would now have to cut their cloth according to the amount of money available, which would not be much. In effect, it was also a tool in the process of reducing government spending.

The plan was that, beginning in November, a good proportion of the salaries of state and municipal employees would be paid in Rentenmarks. On the other hand, half of the pool of Rentenmarks would be going automatically to industry and commerce. With the printing of the old paper marks ceasing on 15 November at the same time as the new currency was introduced, the states and municipalities were going to have to cut their expenditure and their payrolls in order to ensure they could cover salaries with the limited amounts of Rentenmarks available.
3

By the beginning of November, the issuing of the new currency was just over two weeks away. On the second day of the month, the Reichsbank issued a 100-trillion mark note. Everyone round the cabinet table agreed that after fifteen years at the helm it was time for Reichsbank Director Havenstein, now sixty-six, to go. Havenstein refused, pointing to the bank autonomy law. The Chancellor and his Finance Minister, Hans Luther, began casting around for someone they planned to call a ‘Currency Commissioner’, with ministerial rank, who, given the stand-off with Havenstein, could run the reform process and also, incidentally, be used to bypass the Reichsbank where necessary during the transition period. A youngish banker of some brilliance, Director of the Darmstädter and National Bank, with good relations to the British and the Americans, came under consideration. He did not think much of Helfferich’s suggested solution to the currency crisis, but was ambitious and patriotic, and a member of the German Democratic Party. That ambition would take him a long way, in some cases to places he would regret having gone, but for now it seemed a wholly positive influence. His name was Horace Greeley Hjalmar Schacht.

In everyday dealings, preference was meanwhile being given, everywhere, to those with foreign currency, or face-value certificates based on the domestic dollar loan. Yet another exchange law, passed on 23 October, firmly stated that foreign currency was to be exchanged only at the officially published rate, on pain of up to three years’ imprisonment and a fine up to ten times the value of the sum involved.
4

Industry was vocal in its protests at the new fixed-exchange-rate law, which in practice deliberately overvalued the paper mark. It was claimed that this would seriously affect the cost of doing business, and would also – because in recent weeks almost all everyday transactions were conducted in gold values translated according to a daily rate into paper marks – raise prices for consumers. In practice, the millions of ordinary people who had become used to these calculations simply ignored the new law.

How much (or, rather, how little) attention ordinary Germans paid to such government regulations was clear to all but the blindest bureaucrat. An Englishwoman long resident in Germany, and married into a German family, described shopping in an unnamed provincial city in November 1923 for a basic piece of household equipment (a smoothing iron). Having been lent a dollar note by her nephew, and bearing a bundle of high-denomination paper marks on her own account, she described visiting an ironmonger whose ‘windows are covered with a stout iron grating as a protection against a possible rush of Communists attracted by aluminium saucepans in the window’:

I have a friend at the ironmonger’s to whom I was very kind during the war. What ages ago! I brought her pears and tomatoes from my garden. Once I gave her a fresh egg. She is the head shop assistant. It is quite early and she is at liberty. She says she ought not to do it, but she will chance it and let me have the iron at yesterday’s price. It is really 150 billions.
*
Because of the pears and the tomatoes I am to have it at 80. Discreetly, in a corner behind the counter, I produce the dollar bill, and mention with an air of finality that it is worth 55 billions today. Bank rate. She replies without a moment’s hesitation that dollars are only to be accepted as representing 40 billions today . . . I make up the 80 billions and flee away with my iron. But I feel convinced that the dollar note will be changed for at least 75 billions tomorrow.
5

In this no-man’s-land between the extreme hyperinflation and the currency reform, ‘articles in shops are now often ticketed with “gold prices” . . . [which] require fresh calculation every day’. The Englishwoman described another occasion when she bought a small packet of black dye:

The youth at the
Drogerie
. . . says it costs 15 pfennig. I stare at him, and he stares back abstractedly. He makes calculations on a paper bag. They seem to worry him. He begins them all over again on the other side of the paper bag. There are several weary customers in the shop. (Shopping takes time nowadays.) At last he looks up and says, ‘375 millions’. I recover my breath and turn out my market basket, in which million mark scheins [notes]are done up in bales.

At home, she pays a seamstress for some repair work on the family’s clothes. The bill is 24 billion marks. Her payment method is typically shrewd:

I offered her lard at 12 billion to the pound, and she jumped at it. I found out afterwards that lard had gone up that afternoon from 12 to 16½ billions. But I had bought a quantity of lard at 8 billions some time ago. That is my latest ‘device’. When I have marks that I want to dispose of quickly, I invest them in edibles of a durable nature. This is the most stable form of circulating medium. I can pay my library subscriptions in rice or dried plums, and my dentist’s bill in condensed milk. Eggs, too, are greedily accepted. But for ordinary shopping this kind of specie has its drawbacks, even when you take the perambulator with you as your purse.

It all seems light-hearted enough, even absurdly comical in its way. But our lady reporter from 1923 has a garden with pears and tomatoes, and by the sound of it, hens that lay eggs. She is not about to take part in a food riot, of the kind that is becoming increasingly common in German towns and cities. Nor would she, a correspondent of the
Manchester Guardian
, have had anything to do with other, even uglier disturbances that were taking place, in the first week of November 1923, in Berlin.

In the Scheunenviertel, the slum area in east-central Berlin, near the Alexanderplatz, significant numbers of Polish Jews had settled in recent years. Many scratched a living as pedlars and traders. On Monday, 5 November, these immigrants, predominantly Orthodox and therefore easily identifiable, dubbed by the often hostile natives
Galizier
, were subjected to an attack by a mob. The attackers, however, were not Nazis but unemployed working-class Berliners, of the type who probably mostly voted Social Democrat or Communist.

As in Paris at the time of the French Revolution, the trouble started with the price of bread. On that Monday in the first week of November, it was announced by the local price authorities in Berlin that a loaf would henceforth cost 140 billion marks. Crowds began besieging bakeries and haranguing the store owners. The increase in the cost of their families’ staple food caused thousands of angry unemployed men to gather in protest around the Alexanderplatz, the heart of working-class eastern Berlin. They called for an increase in their doles, which were paid out in the form of emergency money printed by the municipality. This was not forthcoming and, in any case, they were told that the authorities had run out of money with which to pay them. The crowd started to turn ugly.

All it needed was rumours - fed, so the press at the time asserted, by professional anti-Semitic agitators - that shady unofficial money changers among the
Galizier
had been trading gold loan certificates for this dole money. The activities of these Jews, the story went, had led to the shortage of money, leaving the needy working men of eastern Berlin destitute. A tide of violence, destruction and plunder, directed at businesses and homes identified as belonging to Jews, spread throughout the quarter.

One of the most sinister aspects of the violence was that, according to the
Vossische Zeitung
, the Berlin police initially chose not to intervene, but then, when forced to do so, actually beat up and then arrested, not the attackers but the Jews who were being assaulted. These were scenes which, as the paper pointed out, it would have been impossible to imagine before the war. During the night of 5 November, the attacks continued and spread throughout the working-class parts of the city, including the north and parts of Charlottenburg as well as the east, concentrating on bakeries, grocery stores, tobacco and cigar shops.
6
They did not diminish the next day, when it was announced that the bread price would not be rising so steeply after all. Only when Reichswehr units joined the hard-pressed Berlin police did the crowds finally begin to disperse.
7

As the rioting subsided and order was restored in Berlin, the Social Democratic Trade Unions and their allied white-collar organisations issued a statement. They blamed the violence on nationalist agitators, pointing out that it was in the interests of such people to encourage this kind of disorder, not just to whip up hatred of the Jews, but to fuel the calls for a dictatorship of the right as the only solution to the country’s problems.
8
Whether this was true or not, certainly the Scheunenviertel pogrom found an immediate echo elsewhere in Germany at the end of the first week in November 1923. Anti-Semitic violence followed in Erfurt, Nuremberg, Coburg, Bremen and Oldenburg. Even the banker Max Warburg left his native Hamburg for twenty-four hours when he heard that prominent Jews, himself among them, were being singled out by agitators.
9

The ‘red menace’ in Saxony and Thuringia may have been dealt with, and the end of the hyperinflation may have been in sight, but the far right had not given up its ambition to destroy the Republic. If anything, for the real fanatics, the Berlin government’s successes made action more urgent than ever.

Hitler, once the darling of the Bavarian regime, had become somewhat isolated during the past weeks. Kahr and Lossow had protected his party and his newspaper, the
Völkischer Beobachter
, from the legal restrictions that had made it hard for the Nazis to operate elsewhere in Germany. After the ‘Reich Enforcement’ against Saxony, however, the situation had changed.