The Weimar Republic Hyperinflation and Precious Metals
The Weimar Republic was the German State between 1918 and 1933. One of the events that the Republic is best known for is the hyperinflation during the period that wrecked the economy and set in motion events that are commonly thought to have laid the groundwork for the rise of Hitler and WW2. Bullion TP examines what the hyperinflation during the periods of 1921 and 1923 was, what its causes were, and how precious metals like gold and silver did over the time period.
The Weimar Republic was the regime that took over as WW1 ended and The People of Germany rebelled against Kaiser Wilhelm II. The new Republic had high hopes but it was plagued with the legacy problems of the past economic and financial blunders of the former government. Germany’s answer to finance WW1 was to suspend the gold standard and to then finance the war via borrowing. The German government believed and was betting that it would win the war and be able to repay the debt with reparations extracted from the losing parties. The opposite occurred and Germany found itself owing absurd amounts of reparations ($26.3 billion) to the Allied powers through the Treaty of Versailles.
The Weimar’s answer to paying the reparations was the purchasing of foreign currency with their printed paper marks as the Allies would not accept the rapidly devaluing German currency. This started in motion the hyperinflation that was witnessed by the devaluation of the German Mark value from 320 marks to the U.S. dollar in early 1922 to 7,400 German marks to the U.S. dollar by December 1922. This hyperinflation wreaked havoc on the average German citizen and made the cost of everyday items nearly impossible to afford. As the German mark was effectively worthless by late 1922 and the Weimar Republic was incapable of buying foreign currency, France and Belgium seized the Ruhr valley industrial area and were intent on taking their reparations in physical goods. The hyperinflation got so bad that a loaf of bread in 1923 cost 200,000,000,000 German marks compared to 160 marks at the end of 1922.
How did Gold and Silver fair during this time period? They maintained their purchasing power and it actually increased during the time period. An ounce of gold traded for 170 marks at the beginning in early 1919, but by November 1923 one ounce of gold sold for 87 trillion marks. Over the five-year period that included hyperinflation, the gold price increased 1.8x faster than the inflation rate. Silver went from 12 marks in 1919 to 544 billion marks by 1923. While profiting from gold and silver investing by the relative increase in purchasing power was very possible during the Weimar Republic, survival was of greater importance to the people living through it. Gold and silver wealth savings allowed those who held these precious metals to afford the rapidly rising cost of their everyday items as they simply held their value better as not susceptible to manipulation through creation out of thin air as fiat currency is. As we approach our own potential hyperinflation time period, with inflation rising rapidly and an incompetent and deeply corrupted federal government passing a $1.2 trillion infrastructure bill and a $3.5 trillion budget incoming, it is no surprise that investors are increasingly turning to precious metals with a focus on physical possession. The dirty little secret that history continues to tell is that governments are typically the manifestations of Oligarchic greed, power, corruption, and incompetence as their money buys them and their bureaucrats out (at cheap prices). In short, governments do not care about their people unless The People control them and force them to do so. The People desperately need to regain control of the United States and throw off the chains of the Deep State Oligarchy and their corrupt monetary system but until the will to do that is sufficiently mustered, investing in gold and silver along with other precious metals acts as a hedge against the same reckless insanity of the incompetent, unethical, and immoral “elite” class that led to the Weimar Republic’s hyperinflation.
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