Stresemann and the Solution

 

Stresemann’s 102-day stint as Chancellor from August to November 1923 is regarded as the turning point in the crisis. He has been given credit as an extraordinary German statesman, akin to Bismarck, but is his role in ending Hyperinflation overstated?

                                                                     

                                              Chancellor and Foreign Minister Gustav Stresemannn

  

Stresemann’s bold decision to send the Ruhr strikers back to work, while promising to resume reparations payments, was pivotal in restoring German industrial output. It also relived the government of paying the strikers, reducing the need to devalue the currency further.

However, as Pfleiderer explains, the stabilisation of the currency, can be credited to the ideas of economist Helfferich, finance minister Luther’s implementation of these ideas and Reichsbank President Schacht’s clever monetary policy. It involved issuing a new Rentenmark, backed by mortgage bonds indexed to the price of gold. This perfectly converted the new mark to be 4.2 to the dollar, as opposed to the old 4.2 trillion!

Stresemann’s tenure as Chancellor ended prematurely, with the SPD withdrawing support for him. However, in his new role as Foreign Minister, he had success in finalising the 1924 Dawes Plan. Which resumed reparations payments, but in smaller instalments for the near term, while securing a loan of 800 million marks from the US.

                                                                        

                                        Diagram showing the reasoning behind the Dawes Plan

Both Stresemann and the financial experts contributed significantly to ending the inflation crisis. Although, in many ways they paved the way for Germany to be adversely impacted by the Great Depression. Stresemann pursued closer economic relations to the US, and the German economy became heavily dependent on US capital, which was withdrawn in the wake of the Wall Street Crash. While the return to the Gold Standard helped to stabilise an out-of-control currency, it also led to the much worse deflationary crisis Germany would experience in the early 1930’s, which along with Brunings austerity policies, brought Hitler to power in 1933.

Stresemann had many great achievements as a diplomat, including gaining admission to the League of Nations and winning a Nobel Prize, however his economic policies and excessive use of Article 48 created greater problems that wouldn’t materialise until after his premature death in 1929.

                                                                      

                               Hjalmar Schacht with Hitler in his later role as Minister for Economics