After the First World War Germany suffered from inflation. In January, 1921, there were 64 marks to the dollar. By November, 1923 this had changed to 4,200,000,000,000 marks to the dollar.
Some politicians in the United States and Britain began to realize that the terms of the Versailles Treaty had been too harsh and in April 1924 Charles Dawes presented a report on German economic problems to the Allied Reparations Committee. The report proposed a plan for regulating annual payments of reparations and the reorganizing the German State Bank so as to stabilize the currency. Promises were also made to provide Germany with foreign loans.
These policies were successful and by the end of 1924 inflation had been brought under control and the economy began to improve. By 1928 unemployment had fallen to 8.4 per cent of the workforce. The German people gradually gained a new faith in their democratic system and began to find the extremist solutions proposed by people such as Adolf Hitler unattractive.
(1) Frieda Wunderlich, interview (1960)
As soon as I received my salary I rushed out to buy the daily necessities. My daily salary, as editor of the periodical Soziale Praxis, was just enough to buy one loaf of bread and a small piece of cheese or some oatmeal. An acquaintance of mine, a clergyman, came to Berlin from a suburb with his monthly salary to buy a pair of shoes for his baby; he could only buy a cup of coffee.
(2) Agnes Smedley, letter to Florence Lennon (31st December 1921)
Germany is in terrible condition this year. This is particularly true of the working masses, who are so undernourished that tuberculosis is having a rich harvest, particularly of adolescent children. Gambling in the mark has been the great indoor sport of the capitalists for months, and consequently food has increased by 25 to 100 per cent. I have lived in the homes of workers; they live on boiled potatoes, black bread with lard spread on it instead of butter, and rotten beer. In one hotel, the maid who built the fire fainted in our room. Exhaustion was the cause. We talked with her later and learned that she worked 17 hours a day and makes 95 marks a month - about 50 cents. She lives in the hotel, sleeping in one room with all the other maids - a tiny, dirty little place. They receive their food also - clothing they buy themselves - out of the 95 marks a month! This means they all become prostitutes and haunt the streets whenever they have time. Or they pick up "clients" in the hotel.
A Berlin couple who were about to celebrate their golden wedding received an official letter advising them that the mayor, in accordance with Prussian custom, would call and present them with a donation of money. Next morning the mayor, accompanied by several aldermen in picturesque robes, arrived at the aged couple's house, and solemnly handed over in the name of the Prussian State, 1,000,000,000,000 marks or one halfpenny.