The economic collapse in Weimar Germany following World War I from 1913, when Germany went off the gold standard, to 1923, when they got inflation under control. This decade in German economic history remains one of the most extreme examples of hyperinflation in modern history. As the currency became worthless, people’s savings disappeared, and society began to unravel. Yet some groups managed this turbulent period, while others suffered greatly.
There are important lessons from this historical case study that may prove valuable should similar inflationary forces take hold in the future in a different country. By examining certain occupations, assets, and societal dynamics that fared relatively better than most in Weimar Germany, strategies can be uncovered to help position oneself to survive financially should hyperinflation strike again in another country.
This article summarizes critical takeaways across food production, skills development, taxation, precious metals, property, imports and exports, and government overreach.
By learning from this historical example and making proactive adaptations, individuals can build resilience against the potential shocks of runaway inflation. The remainder of this article will detail lessons from Weimar’s hyperinflationary spiral and how they might be applied to protect livelihoods today.
Lessons To Get Through Hyperinflation
Here are some critical lessons about surviving hyperinflation based on the historical experience people had in Weimar Germany from 1921-1923:
- Farmers did well because they could sell their goods for increasing prices and pay off debts with what was quickly becoming worthless currency. Being able to produce tangible assets and goods is advantageous.
- Union workers did well because they could threaten to strike and demand raises to match inflation. Having bargaining power and hard skills is helpful.
- The middle class suffered – their savings and fixed incomes became worth less and less daily. Cash, savings, and fixed payments lose value.
- Real estate did alright if mortgages could be paid off before revaluation. Hard assets hold value better than cash.
- Export businesses did well, but importers struggled as costs increased. Producing goods locally is better than relying on imports due to the currency conversion.
- The wealthy avoided taxes as currency devalued before payments were due. Inflation erodes the tax and debt obligations of the rich.
- Precious metals held value while stocks lost ground compared to inflation. Hard assets like gold fare better than paper investments during hyperinflation.
- Barter, theft, and crime increased as the currency collapsed. Society and morals fray as people struggle to survive.
- The government seized more power and control as the crisis continued. Freedom and constitutional rights were threatened.
The lesson is to be self-reliant, have complex assets and skills, avoid holding cash, and be prepared for social chaos if hyperinflation hits. The situation is unpredictable, and adaptations are required to survive economic collapse.[1]
Keep reading for a deeper dive into each lesson and more detailed advice on how to prepare and survive hyperinflation.
Leverage Agriculture and Food Production
During the hyperinflation in Weimar, Germany, farmers could thrive by selling their goods at constantly increasing prices. They could quickly convert the near-worthless currency they received into tangible assets like equipment, real estate, or to pay off debts. Having access to land and the ability to produce essential goods like food can provide stability and leverage in hyperinflationary times. Consider investing in agriculture and farmland if you anticipate rapid inflation.
Utilize Skills and Collective Bargaining
In Weimar Germany, union workers leveraged their skills and collective bargaining power to demand raises and keep pace with inflation. Workers in critical industries like manufacturing and transportation were able to strike for better wages frequently during the crisis. Developing a unique skill set and joining a union can provide options and negotiating power. Having alternatives and being hard to replace gives you stability when financial systems break down.
Avoid Savings and Fixed Incomes
The middle class and professionals were hit hard in Weimar Germany as their cash savings and fixed incomes became worthless. Doctors, government officials, and other salaried professionals saw their purchasing power rapidly depleted. Avoid keeping excess cash in the bank, and you can’t depend on fixed pension payments if you expect hyperinflation.
Invest in Real Estate and Hard Assets
Real estate and other hard assets maintained value better than cash during the Weimar hyperinflation. Property owners could pay off mortgages with devalued currency and retain the tangible asset. Gold, silver, art, and antiques also held value. Shift some funds from cash and paper assets into inflation-resistant real estate and physical commodities if you foresee currency devaluation.
Focus on Local Production Over Imports
German businesses exporting locally produced goods abroad thrived, while companies dependent on imported materials struggled. With a collapsing domestic currency, imports become prohibitively expensive. Choose local and domestic production over-relying on imports and global supply chains. Be prepared to adapt as access to foreign goods decreases.
Erosion of Taxes on The Wealthy
The wealthy in Weimar Germany could avoid taxes easily as their tax payments were deferred, giving time for currency devaluation. Inflation erodes tax obligations denominated in nominal currency over time. Expect the tax burden to shift away from the rich if hyperinflation occurs. The debt of the wealthy is also inflated away with the collapse of currency value.
Hold Gold and Silver Over Stocks and Bonds
In Weimar Germany, precious metals far outperformed stocks and bonds when priced inflation-adjusted. However, a diversified basket of foreign stocks and bonds would have maintained value. Favor allocation to physical gold and silver over domestic paper assets, and don’t abandon foreign stocks and bonds.
Prepare For Social Breakdown and Crime
As financial systems collapsed in Weimar, Germany, lawlessness and criminal activity increased. Barter and theft became more common as people became desperate. Be prepared for supply chain breakdowns and increased crime. Get to know your neighbors and consider extra security measures.
Expect Government Overreach and Control
History shows governments tend to seize more power during crises like hyperinflation. In Weimar, constitutional rights were suspended, and authoritarian policies prevailed. Expect restrictions on economic freedoms. Anticipate shortages, capital controls, price controls, wage caps, confiscating precious metals, and even rationing.
Key Takeaways
- Leverage food cultivation and agricultural assets to survive amid rapid inflation.
- Develop in-demand skills and collective bargaining power as a hedge
- Minimize non-productive cash and predictable income streams vulnerable to currency devaluation
- Allocate holdings to real estate and tangible commodities that resist inflation
- Prioritize locally-sourced goods and services to avoid reliance on costly imports
- Prepare for possible tax advantages and debt devaluation for the affluent as inflation escalates
- Invest more in precious metals over domestic equities and Treasury Inflation-Protected Securities (TIPS) bonds to preserve purchasing power
- Be ready for instability, crime, and disrupted supply chains as society destabilizes
- Prepare yourself for expanded government intervention as they try to solve the problem of hyperinflation
Conclusion
It’s very educational to examine the hardships and strategies during Germany’s battle with hyperinflation to get lessons and ideas on how to navigate future monetary breakdowns—by favoring tangible assets over nominal paper ones, maximizing the self-production of essential goods and services, building valuable skills and relationships, and disentangling from reliance on local currency systems. Individuals can endure and economically survive through inflationary collapses with the right strategies. Staying agile and resilient allows one to find opportunities amid the challenges of radical currency devaluation.
Those were some potential lessons from the Weimar Germany hyperinflation that could help guide preparations and adaptations should it occur again in a future crisis. Stay nimble and not depend on any fixed system or institution for stability.