It could be argued that the cause of the hyperinflation of Germany in 1923 was due to both the internal causes such as Germany’s government policies and the external causes such as the Treaty of Versailles, demanding Germany to pay reparations.
The internal causes including Germany’s government policies quickly became quite unpleasant with the German population. Policies such as the war bonds and taxes being reused obviously stirred up public anxiety in Germany throughout the early 1920s.
These sudden changes to Germany’s way of life critically damaged Germany’s economy. As well as policies like these, the German government decided to call a general strike in an attempt to passively oppose the French occupation of the Ruhr, however, this meant the German government had to pay the workers who had taken part in the strike, also a crippling blow to Germany’s economy.
However, on the other hand, it could be said that the external causes that were involved with the hyperinflation were as important or in fact more important than Germany’s internal causes.
A good example illustrating this statement is the occupation of the Ruhr, the once German region, rich with industry was taken by France after a default on annual repayments.
Germany also lost 12% more of land too, due to the Treaty of Versailles; this land included industrial areas such as the Saar and Allsaice-Lorraine.
Another example being the Treaty of Versailles; both Britain and France forcing Germany to pay an enormous figure set at £6.6 billion, seen by many as an impossible sum to pay. Not only this, but annual repayments were set at 2% GDP, a staggeringly low figure compared to the reparations, but with the occupation of the Ruhr and other events, Germany could do with every little piece of income left.
The hyperinflation in Germany of 1923 could be divided into two causes, internal and external. Both of these causes each had their own definitive effect on Germany and its economy but the external causes such as the Treaty of Versailles proved to cause a greater effect on Germany’s industry, carving industrial territory out of the Fatherland.
In conclusion, the external causes had a greater effect on Germany’s economy than the inside policies did, proving that hyperinflation was largely due to the outside causes of Germany, with the internal causes having a mild effect on inflation.
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