The Downfall of Money: Germany’s Hyperinflation and the Destruction of the Middle Class

by Taylor, Frederick

  The price of tram rides and beef, theatre tickets and school, newspapers and haircuts, sugar and bacon, is going up every week. As a result, no one knows how long their money will last, and people are living in constant fear, thinking of nothing but eating and drinking, buying and selling. There is only one topic on everyone’s lips in Berlin: the dollar, the mark, and prices . . . Have you seen this? For heaven’s sake, stop! I’ve just bought a six-week supply of sausages, ham and cheese.8

  Almost everyone in a position to do so demanded to be paid on moveable values, or in food. Doctors and dentists had for some time since demanded cash rather than cheques or payment on account, and now in rural areas demanded payment in food from farmers who came to them for treatment.9

  Painters and other artists, like writers, also suffered from large depreciations in sums contracted, the gap between invoice and payment alone involving a ruinous loss for the artist, particularly after the autumn of 1922. Even before that, in May 1922, there had been a case where a sculptor offered a piece for 20,000 marks and found himself, in September of that same year, when it went on the market, required to keep to the price, so taking a 100,000 mark loss on the cost of materials alone. In the mean time, the dealer or gallery might well have set a new, inflation-adjusted selling price, which they received from the buyer and from which they alone benefited.10 This was the brutal equation of the inflation.

  Even quite well known artists of the avant-garde, such as George Grosz, young master of the grotesque, saw their fortunes take a downturn when the mark began to suffer its definitive breakdown. A Communist during the early years after the German revolution (though he left the party in late 1922 after witnessing the Soviet regime’s oppressive authoritarianism during an extended trip to Russia, summarising its brand of ‘Superman politics’ as ‘not for the likes of me’11) and an inveterate traducer of the old elite, Grosz was nonetheless supported by progressive establishment figures such as Harry Kessler. The resolutely liberal, trend-aware Count regularly visited Grosz’s studio in Berlin-Wilmersdorf, and put together a small collection of his work, clearly accepting Grosz’s own self-estimate as ‘the German Hogarth’.12

  All the same, Grosz and his friends seem to have found themselves in deep trouble as the inflation began to soar out of control. In his autobiography he describes their being condemned to a diet involving the likes of turnip coffee and muscle pudding. A brief upturn came about only when Grosz was befriended by a chef at a Berlin restaurant. The man had exploited his connections to build up a hoard of fine foods, which gave him a lucrative sideline as a black marketeer. One night, after midnight and more than one double Kirsch, they left the restaurant and got into a taxi, hailed by a uniformed doorman in exchange for a million-mark tip.

  Grosz recalled the scene after the cab dropped them at a ‘faceless house in Berlin’s new west’. On the top floor, behind steel-reinforced and triple-bolted doors, was a wonderland:

  We picked our way through the Berlin room. On either side there were crates, pots of jam, huge jars of tomatoes, gherkins and various delicacies, blue tins of Russian caviar, all piled as high as the ceiling – that is, as much as one could see of the ceiling, because from it dangled all kinds of wurst . . . spiced Italian salamis, tongue bolognas . . . countless slabs of bacon, lean and fat . . .

  Then there was every type of ham, from smooth rolled Lachsschinken [smoked salmon] to oversized smoked Westphalian. A sight for sore eyes and grumbling bellies, and I had to pinch my nose, to see if I was dreaming.13

  ‘I simply don’t know where to put it all,’ the chef confessed cheerfully. ‘Money isn’t worth a damn these days, so even the passage is bursting with the stuff . . .’ He sat the incredulous Grosz down with a ham sandwich and a tumbler of gin – fabulous luxuries – and toasted the inflation: ‘Cheers, my dear fellow. Long live this fool’s paradise!’

  Unlike George Grosz, most Germans, in Berlin or elsewhere, had no access to black-marketeer arts groupies. Chroniclers since have written gloatingly, and so far as it goes accurately, of the availability of bought flesh to those who possessed foreign exchange or other forms of ‘material assets’ in the Germany of the hyperinflation. The collapse of money and the collapse of morals become identical. At times, such description has come close to turning the history of hope, despair and humiliation that was the early Weimar Republic into a form of pornography. In the case of Berlin, in particular, accounts relentlessly reference the colourful world of the (1960s) musical Cabaret in their view of a world where all manner of nudity was constantly on display, and where both the traditional prostitute class (which had long been an infamous feature of the city) and the newly dispossessed daughters (and sons) of the educated middle class, who had now also taken to the sex trade, were endlessly available at a price - preferably in cigarettes, precious metals or hard currency rather than paper marks.

  Berlin in the 1920s was not only, or mainly, a nest of vice but also an earnest, workaday town. What truth was contained in the popular image had more to do with desperation than a desire to titillate.The Russian writer Ilya Ehrenburg, who lived in Berlin between 1921 and 1923, described one particular night out in inflationary Berlin in the company of friends from Berlin’s foreign colony. It started at the Café Josty on the Potsdamer Platz and got wilder as the night went on:

  We . . . ended up in a thoroughly respectable bourgeois apartment. The walls were hung with portraits of the male family members in officers’ uniforms, and there was a picture of a sunset. We were handed champagne, that is: Lemonade with a little alcohol in it. Then the two daughters of the house entered, in an unclothed state, and began to dance. The mother looked hopefully at the foreign guests: Perhaps her daughters would please them and would pay well, in dollars, of course. ‘And this is what we call life,’ the mother sighed. ‘Actually it’s purely and simply the end of the world.’14

  A young journalist reporting the proceedings of the Reichstag later recalled walking home at night to the insalubrious area near the Alexanderplatz where he had taken lodgings:

  My nightly walks home from the Reichstag to my working-class district were bad, the half-dark streets lined with women, many of whom were certainly offering themselves only out of sheer necessity, and with red-lit bars for foreigners with hard currency.15

  In fact, the wave of nudity and free expression in the sexual arena that followed the abolition of the old Prussian and Imperial censorship laws after 1918 was already somewhat on the ebb by 1923. The most notorious and profitable of the nude and near-nude shows, starring ‘Celly de Rheidt’ (born Cäcily Funk, wife of a demobilised first lieutenant, Alfred Seweloh, who functioned as the act’s manager and conferencier), was brought to court early in 1922. Despite protesting the ‘artistic’ nature of the undertaking (by this time expanded to include profitable sidelines in postcards and short films), Seweloh was fined and ‘Celly de Rheidt’ and her fellow performers forced to ‘cover up’. Needless to say, thereafter the ‘ballet’s’ public popularity underwent a steep, not to say terminal, decline.16

  In 1923, after the French occupation of the Ruhr, the Prussian authorities used the situation as a pretext to take on emergency powers and as a consequence to ban any public entertainments, in Berlin and elsewhere in the state, that gave rise to ‘concern’ (Bedenken). Just as dancing and similar amusements had been forbidden during the world war, so now cabarets and shows were severely restricted. One of the reasons why the authorities took this step, moral considerations apart, may have been that the nude cabarets were popular among foreign, and especially American, tourists. It was felt that such displays of extravagance and licence would encourage, or for some observers confirm, the belief that Germany’s public declarations of poverty (and therefore inability to pay reparations) concealed a world of private luxury.17

  What was certainly true, by 1923, was that the whole of Germany had become a marketplace. In this world, for those who had neither the resources nor the nerve nor the skills to participate successfully in
the great sell-off, there seemed no place any more. In Berlin and other major cities, members of the newly impoverished middle classes brought heirlooms and precious belongings to impromptu salerooms, where whoever had the money could bid for them. The sell-offs, often sponsored by middle-class housewives’ associations, tended to be held in rooms provided by banks. The organisers made efforts to fix as fair a price as possible under the circumstances, but these were desperate times.

  A walk through the small salesroom with its tables and glass cases is heart-rending. There lie spread out so many lovely things so pleasing to the eye . . . wonderful Turkish and embroidered silk shawls, finely carved figurines, old porcelain, clocks, inlaid pearl, embroidered linens, silver utensils – everything in short that once decorated a house is assembled here . . . There is some old piece, a picture, a porcelain cast, which appears to the loving but unskilled eye of the owner as a true rarity and who, if she must part with it, wants to receive as much as possible. One now has to tell her that it has neither material nor artistic value, and the sick, embittered souls are always inclined to take this as a personal affront and bad will . . . A look out the window – there slides by the restless life of the metropolis, the fine silk stockings and expensive furs, there sit autos with the fat figures of Schieber [profiteers] inside, and here inside, in the quiet room, an impoverished Germany quietly and painfully weeps in its silent misery.18

  What perhaps contributed to the alleged decline of traditional morality, among young women especially, was the fact that in Germany after the First World War, despite the deaths of around 2 million males of military age, among the higher middle class especially, the old dowry system still helped to dictate which young woman could marry which young man. So, if the money were not forthcoming, the young woman stayed unmarried. A woman who had been young at the time recalled many years later:

  The inflation wiped out the savings of the entire middle class, but those are just words. You have to realise what that meant. There was not a single girl in the entire German middle class who could get married without her father paying a dowry. Even the maids – they never spent a penny of their wages. They saved and saved so that they could get married. When the money became worthless, it destroyed the whole system for getting married, and so it destroyed the whole idea of remaining chaste until marriage.

  The rich had never lived up to their own standards, of course, and the poor had different standards anyway, but the middle class, by and large, obeyed the rules. Not every girl was a virgin when she was married, but it was generally accepted that one should be. But what happened from the inflation was that the girls learned that virginity didn’t matter any more. The women were liberated.19

  Erich Maria Remarque (born Erich Paul Remark in the Westphalian town of Osnabrück), became an international literary celebrity with his war novel, All Quiet on the Western Front. In a later piece of fiction, The Black Obelisk, he writes of a young woman, engaged to her sweetheart during the inflation period, whose father invests the money intended for her dowry unwisely and loses it all. When the dowry is not forthcoming, the fiancé breaks off the engagement. She is heartbroken, and the father commits suicide out of shame for his error.

  Even if the money was safely delivered, it could go astray. When the great Weimar politician Gustav Stresemann got married, he received a dowry from his wife’s wealthy family. The sum was invested by being lent out as mortgages. These were wiped out by the inflation, which meant the debts could be repaid at far less than their actual value. As his son Wolfgang reported many years later, Stresemann had to live from his salary as a Reichstag Deputy and, until he became a minister, some company board memberships. Ironically, especially after Stresemann got into government and could no longer take on directorships, the family was a lot less rich than it looked. After Wolfgang Stresemann completed his first year at Heidelberg University in August 1923, having been forced to call on his father for constant increases in his allowance because of the inflation, there was even some doubt that the family would be able to continue to fund his studies.20

  Frau Stresemann’s dowry had dwindled to nothing due to the currency’s dizzying descent. Her and her family’s loss was, of course, someone else’s, perhaps another family’s, gain.

  People grabbed what advantage they could among the ever more bewildering financial chaos. Like the Pörtners in Bad Oeynhausen, who in 1922, confident in the steadiness of their father’s job in a cigar factory, had signed up to buy a house that was being built on the western side of town. The price ran to 800,000 marks (the mark was still at around 2,000 to the dollar). Not so the following spring, when the account became due. ‘When we moved in on 1 April 1923,’ the son of the family wrote more than half a century later, ‘this was a sum of money that even the most sensitive soul would not have managed to worry about. A single dip into one’s wallet was sufficient to dispose of all liabilities, including the mortgage payments.’

  Even the Pörtners’ apparent stroke of luck was, however, double-edged:

  Unfortunately the house was only half-finished when we took possession: half-finished, wretchedly built from old materials that had been botched together. In the meantime the craftsmen would only work in exchange for payment in kind. We could not do this, and the money that father was paid, towards the end twice a day, was only just sufficient for bare survival. Even in old age, he would still tell stories about the defective stove pipe in the kitchen (our living room), and the holes and cracks from which a foul and poisonous smoke would billow. There was nothing we could do to correct this awful situation. The pipe joint we needed was nowhere to be found, and even if it had been, not for the ridiculous million-mark notes that a week after they had been issued were no longer worth the paper they were printed on.21

  This is, in microcosm, an indication of an economy breaking down. The mark was plunging like a stone. However, unlike in 1921-2, neither the economy nor employment were growing as a result. After some improvements in the early spring before the currency ‘dam’ broke, both indicators were now beginning to go into decline. By the autumn unemployment would reach catastrophic levels in many parts of the country. In Prussia the numbers of supported unemployed and dependants grew from 2.7 per cent in January 1923 to 24 per cent in October; in Saxony from 8.4 per cent in January to 61 per cent in October; in Hessen from a remarkably low 0.7 per cent to a dramatic 37.4 per cent; and in Hamburg, laid low by the steep fall in trading activity as the exchange situation became more chaotic, from 11 per cent in January to 64.8 per cent in October. At least 2 million workers are thought to have become unemployed in the Ruhr by the autumn, with half the entire population of Europe’s greatest industrial area on welfare.22

  There were wry stories of the man who went into a café, ordered a coffee for 1,000 marks, then settled in for a leisurely read of the newspaper. Comfortably ensconced, he after a while requested a second cup. When he got the bill, it was not for 2,000 but for 2,500. Apologies, the waiter explained ruefully, but in between the first and second cup the price had gone up by 50 per cent . . .

  Harsh everyday reality was less amusing. More than an extra cup of coffee was at stake. This was the time when employees in factories, offices and businesses, who had once been paid monthly or weekly, started to be paid, first twice or three times a week, and then daily – or even twice daily, like Herr Pörtner.

  The pattern was quickly established and became a routine through Germany’s year of currency insanity. Wages would arrive from the bank – there are photographs of the large carts and hampers used to transport them – and would be doled out to the employees, each receiving, as the year progressed, ever larger bundles in ever larger denominations. Then, with the employers’ permission, the worker would hurry off – often joined by the spouse, who had been waiting outside for this moment – to spend the money on whatever provisions could be found. And then, once the money had been handed over to the retailer, it was up to the latter to haul it back to the bank, where – if humanly possib
le – he or she would change the mass of paper into dollars, pounds, Swiss francs or whatever ‘hard’ currency could be had.

  The speed with which money could be paid into or taken out of the bank was vital. To handle the vast increase in the sheer quantity and complexity of financial transactions necessitated by inflationary distortions, the number of banks rose, as did the numbers of branches. The Deutsche Bank, which had a mere 15 branches in 1923, ten years later had 242. The Commerz- und Privatbank’s network grew from 8 to 246 in the same period.23 The number of staff employed in the sector almost quadrupled compared with pre-war levels, from 100,000 in 1913 to 375,000 in 1923, with the number of bank accounts serviced leaping from 552,599 in 1913 to an estimated 2.5 million in 1923. Sixty-seven new banks had been founded in 1921, and ninety-two in 1922. In 1923–4 the total was 401.24

  The increase in banking business was not the consequence of a more intense economic activity. The work was increased because the banks were overloaded with orders for buying and selling shares and foreign exchange, proceeding from the public which, in increasing numbers, took part in speculations on the Bourse. The banks did not help in the production of new wealth; they merely managed the same claims to wealth, continually passed from hand to hand.25

  Job advertisements in newspapers such as the Vossische Zeitung included those for bank workers, but also for retail clerks, where banking experience was specifically indicated. Such was the complexity of the financial transactions required to keep even a relatively straightforward buying and selling operation going in the conditions of the hyperinflation. Meanwhile, by August 1923 the Vossische Zeitung was down to one edition a day, often of just five or six pages. The perfect example of what was happening in the media and entertainment industries as a result of the hyperinflation was the fact that Kurt Tucholsky, the era’s most amazingly prolific writer of poems, articles, songs, skits and sketches for magazines, newspapers and cabarets, found himself so financially straitened in the middle months of 1923 that he was forced to take work as a clerk . . . in a bank.26