As the curtains fell on the ill-fated Kapp Putsch, economists were struggling with the inflation problem. Minister of Finance Matthias Erzberger’s tax reform system attempted to solve it by nationalizing the taxation system, instituting a 30% income tax, property tax of up to 65%, and the Reichsnotopfer (Emergency Capital Levy), which would, in addition, impose 10% of income for 10,000 marks or less and 50% for 3 million marks or more. The incorrigible optimist exhorted “great sacrifices on the part of the propertied classes”¹⁷ to clear Germany of her debt. He succeeded in achieving administrative and practical reforms on preliminary parts of his program by August 19, 1919, but they failed to have much effect in the deteriorating financial climate. As a result of his membership in the Center Party, his stance to sign the Versailles Treaty, and his advocacy of exorbitant taxation, he was assassinated by the leftist terrorist group Organization Consul on August 26, 1921.

Between March 1920 and May 1921, the mark stabilized, even improving its value by 60.5% at its peak exchange rate of 39.13 marks to the dollar in June of 1920. The recovery was due in part to a deceleration of increases in monetary circulation and the augmented use of non-cash methods. It was largely also a consequence of large-scale foreign speculation and investment, which totaled 27.9 billion gold marks between 1919 and 1921. Merchandise sold easily, the devaluation of the mark led to cheaper export prices, and the stock market became incredibly active. Industries profited from inflation, regarding it as a veil with which to hide the true state of affairs and thus increase foreign consumer confidence. However, the German government still made no attempt to establish a balanced budget, and effectually lost its last opportunity to save the mark.

In political circles, the June 1920 election heralded a power shift to the right. The new Chancellor Konstantin Fehrenbach was a Catholic and the leader of the Center Party. The new government marked a resurgence of national pride as citizens realized that a democratic persuasion would not earn them more lenient peace terms:

The softness of the Weimar Coalition saddled us with this shameful peace. We have chased the rascals out and now we shall see that a firm stand will lead us to success.¹⁸

Footnotes
17     Speech by Erzberger on July 8, 1919, Verhandlungen der verfassunggebenden Nationalversammlung. (Berlin, 1919-1920), vol. 327, pp. 1376-83, p. 1383, cited in Richard M. Watt, The King’s Depart; The Tragedy of Germany: Versailles and the German Revolution, p. 161
18     Erich Eyck, A History of the Weimar Republic: From the Collapse of the Empire to Hindenburg's Election, Harvard University Press, Cambridge, MA � 1967, p. 164.

       

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