It’s the Politics, Stupid!

Abstract

The Weimar hyperinflation is a textbook example of how inflation develops. All the factors usually associated with inflation were present during this period. However, besides the quantifiable factors, such as money supply development, the political factors appear dominant in retrospect. There was an unspoken consensus among the economic elites that inflation was the lesser evil. The Reichsbank president rejected its independence. Industry saw the weakness of the currency as a welcome means to capture export markets. Politicians had other priorities than monetary stability. Eliminating domestic debt and maintaining social peace were more im-portant to them. Only when the political wind changed could inflation also be defeated.