Did you know that the period of time in American history known as the Roaring 20s had its counterpart in Germany and was known as the Golden 20s?
This period in history holds a special interest for me. My name is Harald Seiz, and I am the founder and CEO of Karatbars International. We are located in Stuttgart, Germany and dedicated to the goal of allowing individuals to secure their future through capital formation.
A Bad Start
Capital formation was impossible in Germany at the start of the 1920s. The nation was suffering from inflation caused by World War I reparations. In January 1923, France and Belgium occupied the industrial heart of Germany in response to German unwillingness, or inability, to make the necessary payments.
This occupation stopped industrial production and pushed massive numbers of workers on public aid. The German government printed money to pay the benefits, even though the drop in production meant a drop in tax revenues. This ignited one of the worst episodes of hyperinflation in the history of the world. By October of 1923, inflation was roughly 23 percent every day!
An Abrupt Change
Yet by August of 1924, the rate of inflation had fallen to almost zero. This sudden reversal happened because both small merchants and the national government implemented the same solution.
Shopkeepers across Germany stopped accepting money in payment for goods and services. Paper money accepted at the start of the day was worth less by the time it was deposited with the bank at the end of the day, so merchants only accepted payment in gold.
The national government took this same approach and issued new notes called the Rentenmark. There was not enough of the precious metal in Germany to support this new currency, so the notes were loans against German land. They were a step in the return to the gold standard that was completed when the national currency became the Reichsmark in August of 1924.
Harald Seiz: “Lessons Learned”
This return to this currency standard provided a foundation for solid economic growth. The rest of the 1920s in Germany are called the Golden 20s because the money in circulation held its value.
At Karatbars International, we remember the lessons of history. I hope no individual anywhere ever experiences the terrible impact of hyperinflation again, and that, if they do, they have some personal precious metal resources to protect themselves.