World War One officially ended when Germany signed the Treaty of Versailles on June 28th, 1919. Fighting had essentially ended with the Armistice of November 11th, 1918. One of the main provisions of the treaty forced “Germany to accept the responsibility of Germany and her allies for causing all the loss and damage.” Article 231, later called the “War Guilt Clause” required Germany to disarm, give up territory, and pay reparations amounting to 132 billion marks, equivalent to $442 billion US dollars in 2018. Because Germany could not pay with gold or currency backed by reserves, they ended up printing more paper money causing massive inflation.
The price of one gold mark in German paper currency at the end of 1918 was two paper mark, but by the end of 1919 a gold mark cost 10 paper mark. This inflation worsened between 1920 and 1922, the devaluation of the paper mark rose from 15 to 1,282 paper mark. In 1923 the value of the paper mark had its worst decline. By July, the cost of a gold mark had risen to 101,112 paper mark, and in September was already at 13 million. On 30 Nov 1923 it cost 1 trillion paper mark to buy a single gold mark. In the month of October 1923 alone, Germany experienced 29,000% hyperinflation, a mark that has only been surpassed three times in history.
Because of the speed and amount of inflation, the Reichsbank created larger and larger currency denominations. The largest pre-war denomination was 1000 Mark and was worth about $238 US Dollars. 10,000 Mark notes were created in early 1922. 100,000 and 1 million Mark followed in 1923. At the peak of inflation in October of that year, a 100 trillion mark was introduced, and it was only worth approximately $24 US Dollars. At the time it was said that Germans would carry their cash in wheelbarrows just to pay for groceries because they needed so much of it to purchase anything and kids would play with it, using stacks as large building blocks and using it to make kites.
Germany began rebuilding their economy under Gustav Stresemann, leader of the German Peoples’ Party, through international diplomacy and investment. The reparations repayment schedule would be modified and the US would loan Germany large sums of money that helped stabilize their economy. This is when the new Rentenmark was introduced as a replacement currency. One Rentenmark was equivalent to 1 trillion papiermarks. By limiting the amount of credit and the amount of the new money in circulation, the economy and inflation was brought under control throughout the late 20’s, only to be faced with new challenges with the crash of the US Stock market that effected all of Europe, and then the rise of Hitler leading into WWII.