1. Hyperinflation as a result of war (German example) BY MICHAL TOMÁNEK

2. What will I talk about What actually is a hyperinflation The situation in Germany after the war Hyperinflation in Germany

3. Defining hyperinflation What is an inflation? ◦Sustain increase in the price level of goods ◦Is it a positive or negative proces? Hyperinflation = extreme type of inflation ◦Caused by money creation ◦political decision

4. Inflation rate „Healthy“ inflation rate oscillates between 2-5%(per year)

5. In Czech Republic and most of Europe is nowadays lower than 2% (per year) ◦Low inflation can also cause some economical problems Phillip Cagan described hyperinflation as a state when an inflation rate exceeds 50% per month Hyperinflation causes huge socioeconomic problems ◦Devaluation of savings, fast changes in prices Hyperinflations are usually associated with war

6. Situation in Germany after the WWI Borrowed money to fight the war (with aim to win it) Country destructed by war Lost a significant part of its territory Forced to pay reparations

7. Germany after the WWI Destructed towns, factories

8. Territory losses

9. Hyperinflation in Germany (1921- 1924) After the war the value of German Mark started to decline from approx. 4 to 9 Marks per dollar The Treaty of Versailles => 32 marks per dollar in 1919 In November 1921 the repartions were set to 132 billion Goldmarks ◦Paper Mark were losing value Raparations started a rapid devaluation of Mark

11. Moving from a high inflation to a hyperinflation In 1921 Germany began to buy foreign currency with Marks->faster devaluation of Mark Germany unable to pay reparations in time -> French and Belgium troops started an occupation of Ruhr Valley in January 1923 Germany lost a significant part of its industrial territory By November 1923 the dollar was worth 4,210,500,000,000,000 marks Situation was stabilized by establishing a new currency – Rentenmark

13. Summary Hyperinflation is an extreme type of inflation Is usually caused by a decision of government to finance its deficits by money creation Devaluates savings Is associated with wars