$1.77 Every Year For Life: What Inflation Can Do To Your Finances: Lessons from Germany and its neighbors during the post-World War I inflation.This series of articles is not intended to imply that the U.S. is likely to encounter a hyperinflationary crisis. However, America has experienced bouts of serious inflation in the past and could easily do so again. The extreme conditions that occurred in Germany help to illustrate the mechanisms of inflation better than a more benign course of currency devaluation could do.
Austria and Germany had stumbled into inflationary crisis at about the same time, but Austria began to recover about a year sooner than Germany, in late 1922. Both countries needed financial assistance from the rest of the world in order to stabilize their economies. Austria was an easier case to deal with since its economy was smaller and there were fewer political objections to helping the Austrians. The transition to stable prices was rough for both countries, but necessary. Lack of food was the biggest reason why inflation had to end. Farmers were simply unwilling to work hard to feed a population that showered them with increasingly worthless money and insulted them to boot. Stabilization of the currency meant that high-flying businesses that depended on cheap loans would go broke, and they did. The misleading appearance of lavish investment in new factories in the face of weak demand adjusted to reality. Unemployment went up, business conditions were poor, but food prices went down and the supply of food in the market went up.