5 million marks to mail a letter in Germany, 1923

World War I upset the economies of all European states. Neutrals got rich supplying the belligerents and they had to adapt their economies accordingly. The countries that suffered most were those born out of the ashes of the great empires.

With the old imperial markets gone, these countries had to build new national markets, improvise new commercial networks, create new economic administration and new currencies, and design new fiscal systems. Building this economic framework required a period during which the normal functioning of the economy was suspended. Money lost its value and old practices such as barter reappeared.

The situation of Germany was especially grave. The victors imposed severe indemnifications on the newly created Weimar Republic and the bankrupt German economy could not generate sufficient resources to pay them.  The answer was to issue vast quantities of money. The amount of money in circulation grew without limit and after 1922 hyperinflation dislocated the economy. In January 1923, one US dollar was worth 18,000 marks; in May it was 50,000; the following month 150,000; in August 4 million, and in September 160 million. By October 1923, as the envelope shown here illustrates, it cost 5 million marks to mail a letter locally. It was only late in 1924 that the German authorities were able to bring the situation under control.

In the second half of the 1920s, Europe’s economies appeared to have stabilized and returned to growth. However, on 24 October 1929, the crash of the New York stock market unleashed a crisis that spread across the globe in the following decade. Across Europe, Banks failed, industries closed down, unemployment increased, food process skyrocketed, all of it provoking a social malaise that exacerbated political instability, weakened democracies, and favoured populist and authoritarian regimes. 

Spain was not immune to these developments. Capital that had entered the country during World War I now travelled in the other direction. The value of the peseta fell. Imports declined and external investment decreased. With capital harder to come by, industrial and agricultural activity stalled. Urban and rural unemployment both increased, and all this generated the intense social conflict that would accompany the Second Republic from its beginnings until the outbreak of the Civil War.

MML