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Friday, February 22, 2013

Starving Trillionairs of Germany

The Starving Trillionaires of Germany

By Darryl LeBeau
Mech 3460
Engineering Economics
April 22,2010

Introduction
Imagine you had trillions of dollars but were so poor you could not afford to eat? That is exactly what happened to Germany in the early 1920s. In less than five years Germanys form of cash known as the Papiermark depreciated to one one-trillionth the value. This great tragedy was caused by a phenomenon known as hyper largeness. This essay will explain some of the main causes and do of the worst case of hyperinflation that a modern industrialized rescue has ever experienced.

Background
Before the outbreak of World War One, Germany was atomic number 63s dominating economic power and the worlds second largest exporter after the British Empire (Streb, 2006). Germany was at the question of science and technology having more Nobel Prizes than all other nations unite (Nobelprize.com). Germany was so prosperous it was able to develop the worlds first social insurance program. At the time the currency was known as the Goldmark and its value was tied directly to the tip of gold. 2790 Goldmarks equaled 1 kilogram of gold (Wikipedia). The German Mark at this time was worth one quarter of a US dollar.

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Germanys economy seemed unstoppable, what could go wrong?
As contend broke out across Europe Germany had to find a way to pay for it. Unlike France which simply created its first income tax, the German establishment decided to borrow. They believed that Germany would be victorious and assumed they could solve the Western Allies pay back their loans at wars end. The government decided to loan itself the money by simply opinion more money. The only way they could do this was by natural the link of their currency to gold. They suspended the Goldmark and created the Papiermark, which was printed in enormous excess. This caused inflation and by wars end the Papiermark was worth only half of its first value (Fergusson, 1975).
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