Topic 1 Economic Instability Flashcards Preview

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Flashcards in Topic 1 Economic Instability Deck (10)
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0
Q

Financial collapse

A

By dec 1922 national debt was at 469 000m marks
At the end of 1922 reparations commission announced Germany had failed to deliver payment
The response was France was going to occupy the Ruhr with Belgian support

1
Q

Economic inheritance

A
General lack of capital investment
Large trade deficit
Cost of war
Inflation 1920 mark 10% of 1914 value 
Reparations loss of industrial areas
2
Q

The Ruhr crisis

A

On 11 jan 1923 French occupied Ruhr with intention of securing coal production this involved 60 000 fr and Belgian soldiers
Germany was outraged so there was great support when govt called for policy of passive resistance
Tjis worked in the way France was limited in the amount of coal they could take
However it was hugely demanding on german economy because they still had to those on strike and because of loss of revenue this was done by printing banknotes without financial backing

3
Q

The start of inflation

A

Bu aug 1923 there were 663 billion marks in circulation leading the economy from bad inflation to hyperinflation
Nov 1923 exchange rate stood at 4.2 billion marks to the dollar
Currency had collapsed and all confidence in financial system and govt

4
Q

What were the under lying causes of inflation

A

It didn’t start in 1923 it was initiated by the onset of war in 1914 as Germany had made no provision for a long drawn out conflict
Massive sums of money were borrowed through war bonds and after 1916 when even more money was needed the govt just allowed the national debt to grow
Therefore there was full employment and high demand it was all geared towards war effort

5
Q

There was an assumption Germany would win

A

so be able to charge high reparations
Therefore the govt finances were In a total mess which could only be tacked by either increased taxation or cutting expenditure
Neither was attractive because it would alienate support for the republic
Instead they chose policy of deficit financing
Therefore reparations must be seen as a contributory not a primary cause

6
Q

Effects

A

Savers those living on fixed incomes or welfare and some with mortgages lost out as they could not keep pave with inflation
Winners were guise with debts and loans who could pay them off with worthless money
Middle classes hot very hard and faith in democracy was severely shaken
However this does not exactly follow middle class would support hitler with this alone and that only they were affected

7
Q

Deficit financing

A

When the government spends more money than it receives in order to expand its economy
It result should then improve govts tax revenues which would restore the govts financing

8
Q

Did hyperinflation cause the collapse of the republic

A

Deficit financing maintained economic growth and increased production
German economy compared favourably with other economies eg GB
USA invested a lot of money in Germany
Govt had no alternative however it ignores the social and psychological aspects
Therefore was not the main reason but left deep and lasting psychological scar from which it couldn’t recover

9
Q

How did the republic survive

A
Stresseman appointed
Passive resistance called off
Promised to resume reparations repayments 
Reduced govt expenditure
Created rentenmark