The non-fiat money that stopped Hitler (almost)

William Freedman
Sep 20, 2018 · 9 min read

Your Humble Correspondent has often opined that bitcoin was conceived as a utility token and became a cryptocurrency largely by accident.

(You don’t have to believe me about that, but consider this: On August 21 I wrote, “Could it be we should stop all this financial engineering as we try to create a ‘stablecoin?’ Seems that bitcoin, if ignored long enough, becomes one on its own.” BTC traded that day at $6,289. Today it was at $6,264. So maybe I’m capable of some insight here.)

But clearly, bitcoin not only became the world’s first cryptocurrency, it spawned a slew of tokens that never intended to have any utility beyond being a medium of exchange: litecoin, ripple, dash, monero, stellar, zcash and cardano being the most liquid.

But there’s nothing new about the function these digital coins perform, just the form. The only thing new is the digital part. And they might even prevent the next Hitler.

Let me tell you a story.

Apply Prussia to the wound

You know how it begins. Germany loses the Great War and the Allies exact a huge price in reparations, which Germany can’t pay from its gold reserves. From that point, we tend to skip past the boring, numbers story and go straight to the Robert Mitchum movies. But the numbers are important.

German hyperinflation didn’t start as soon as the Versailles Treaty was signed. That just accelerated the inflation which had existed since 1914. As the war began, the Kaiser’s government took the preemptive action of taking the mark off the gold standard, so then inflation first took root. The imperial court declined to fund the war by raising taxes — much as the Johnson administration failed to do during the Vietnam era. The economic result of the inevitable wave of massive debt was the same, although more pronounced in the 1920s vintage. The military result was likewise the same in result and degree. The political result, in one case, was abdication of the imperial throne, a lifetime of exile, and the rise of an ineffectual government which acceded to a brutish totalitarian regime that plunged the world into another generation of total war. In the other, Richard Nixon. So pick your poison.

Still, inflation was merely bad, not Hieronymus Bosch apocalyptic. Germany didn’t so much lose the war as tire of it. The western front was always in France and the low countries, so Germany came out of it with its industries and infrastructure in place. In other words, it was poised to grow itself out of any short-term economic woes.

Hieronymus Bosch (disputed), ‘The Last Judgment’ fragment, 1530s

The real story of German hyperinflation took years to shape up. It wasn’t until late 1922 that it became unmanageable — by that I mean, when the imperial treasury missed its first payment. That’s when the Allies did what any lien holder would do: They foreclosed. French and Belgian troops marched into the Ruhr valley and took over Germany’s most productive manufacturing region. Even then, hyperinflation wasn’t inevitable. The French and Belgians figured that the factories would be cash cows and, just by operating them, the occupiers would reap all the monies they were owed. The Ruhr valley Germans, however, didn’t much like the arrangement and refused to work. That means the Allies didn’t make a dime on it and kept pressing the new, feckless Weimar Republic for payments.

That’s when it all fell apart. By late 1923, the mark was worth one-trillionth of its value from 10 years before.

That led to some pretty surreal denominations being printed, up to and including a 100 trillion mark note (at the time, the word “billion” was used when today we’d mean “trillion,” and “milliard” was used when we’d mean “billion”). I’m not sure that having your face on that cheaper-than-toilet-paper currency is an honor but, if it is, it went to renowned patriotic figure from Germany’s glorious past, Willibald Pirckheimer.

This was worth a little less than a U.S. quarter.

I never heard of him either.

Turns out he was Erasmus’s lawyer and led a volunteer force in the Swabian War of 1499.

Nor have I ever heard of that.

Turns out, Pirckheimer’s side lost. I know Germans today live with the stereotype of having no sense of humor, but surely somebody in 1923 must have at least read about irony somewhere.

Skipping ahead? Here’s the part with Hitler

Which brings us to the founding myth of the Third Reich, that is, the Beer Hall Putsch.

The short version is, on November 9, 1923, Adolf Hitler led 2,000 supporters of his Nazi Party in an uprising against the Bavarian state government. The mob massed at the Burgerbraukeller in Munich and marched toward the defense ministry, but were intercepted by a detachment of 130 state police officers. At the cost of four officers, 16 insurgents were killed. Hitler sustained injury when the man he was marching arm-in-arm with died of a chest wound, dislocating Hitler’s shoulder as he collapsed.

Hitler managed to escape but was arrested for treason two days later. Pardoned by an appeals court, he was released in December 1924.

Time served in Landsberg Prison wasn’t exactly a hardship. Hitler wore civilian clothes, stayed in a suite that looked nothing like a typical cell, met with whatever visitors he wanted and was jailed along with many of the same people he’d be spending day and night with anyway. What happened outside during his year at the Heil Hilton, though, was making his entire political brand irrelevant.

In that time, the Nazis went from holding 32 Reichstag seats to 14, a number which continued to drop during the remainder of the 1920s. What was happening in Germany to turn the populace away from fascism?

The Germans have a word for it

It was the month of the Beer Hall Putsch that the Weimar Republic’s hyperinflation was at its worst. The only real limit to how high hyperinflation can go is the nation’s capacity for printing money. The Reichsbank ran its presses 24/7, and even stopped printing the backs so they could churn out twice as much. Finally, it accepted what was obvious to everyone — that the paper mark was worthless — and stopped the presses. That, not 2,000 brownshirts tangling with police in Munich’s Odeonplatz, was the big news.

And you’ve heard stories about Germans taking wheelbarrows full of marks to the grocer to buy a loaf of bread. But have you actually seen a photo of that happening? You might find something similar on Google Images if you looked, but it’s not exactly about shopping for staples.

He’s a banker. It’s going in the vault. (Wash. Post)

These photos are generally about bankers moving money between the vault and the teller windows, or people withdrawing from or depositing to the bank. Please, if you find a photo of a wheelbarrow full of marks, dated 1923 or 1924, in an actual store, please let me know.

This meme had to start somewhere, and I was pleased to find that someone has already dug up this particular parcel of earth. I’m indebted to blogger Keri Peardon, who usually writes about vampires, but really nailed this. The Tennessee-based history buff, short fiction author and medieval re-creator reports that there were contemporaneous cartoons depicting wheelbarrows full of cash, but it might have been just a metaphor.

And Germans, who might not get humor, do get metaphor. There are so many concepts that are best rendered in German because no other language can express them so precisely. Schadenfreude. Zeitgeist. Realpolitik. And here’s another blog post with even better examples.

But the money that saved Germany was what came to be called Notgeld. It roughly translates as “emergency money” or “necessity money”. Sometimes it was issued by local banks, rather than the central Reichsbank. Sometimes it was backed by the full faith and credit of a municipal government, rather than Weimar. And sometimes it was simply IOUs from the merchant — which is how paper money started in the first place. When merchants and chambers of commerce are involved in anything, you can bet it’s going to be played for its marketing value. Notgeld issuances became commercial art, like this one promoting Hamelin tourism, leveraging the famed Pied Piper legend.

Serienscheine Notgeld didn’t just look like postcards. They were postcards. (

Many of the Notgeld issuers were scrupulous about not being perceived as mere subcontractors to the Reichbank’s printing division. They wanted their currency to be backed by something real so it would have fixed value, Wertbeständige. Sometimes the underlying asset was gold. Rye grain was also a popular commodity backing Wertbeständige Notgeld. Some utility companies offered notes backed by cubic meters of methane gas. I found one that was backed by schmalz, or pig fat.

Cholesterol-based currency (

Ultimately, a new and more competent administration came into office and the Weimar treasury developed its own Notgeld, one that was backed by the land the government owned and planned to develop for agricultural or commercial purposes. Essentially, anyone holding one of these notes owned a piece of the mortgage on these properties, which had inherent value — unlike the central bank’s long-empty gold vaults.

Stopped Hitler — almost (Richard C. Schonberg)

Suspending Reichsbank operations, they treasury chartered the quasi-governmental Rentenbank, which issued the rentenmark at the pre-war exchange rate of 4.2 to the dollar. Then — and this was the key part — they didn’t print up any more rentenmark notes than the property was actually worth. The German people did their part by trusting in this new currency. This gave the Reichsbank the breathing room it needed to acquire gold reserves and, within the year, gold-backed marks were once again available and the ogre of hyperinflation was slain.

More about Hitler

Four months later, Adolf Hitler checks out of Landsberg, gets himself a book deal and, like the rest of Germany, starts to prosper. His following, though fanatical, had dropped to fewer than a million voters. That’s a lot of book sales, but only 3% of the electorate.

There was still plenty of resentment about the Versailles Treaty. And if you looked objectively at what communism was doing to Russia, what ineptitude was being displayed by the western democracies, and how effectively Italy’s new fascist regime was running Italy, you might conclude that this could be a good model for your own Fatherland. And of course, there was still rampant anti-Semitism, racism and xenophobia of all expressions.

But there was this huge sigh of relief that, economically, Germany was starting to come back. You could get a job and make money — and that money would actually be worth something by the time you got to the butcher shop. All the unhinged speeches and street thuggery turned off all but the most intransigent goons. And, as Hitler started to enjoy the good life that came from being a bestselling author and rubbing elbows with Germany’s rich and famous, the goons themselves began to feel slighted. By 1928, the Nazi Party lost another 100,000 voters and two Reichstag seats. It was fading into irrelevance.

If only.

What saved the Nazis? The Great Depression. In the 1930 elections, they rebounded strongly, seating 107 Reichstag members, and Hitler was named chancellor three years later. Hollywood tells the story better than I can from there.

But here’s my takeaway: With cryptocurrency, we now have an effective tool to work around hyperinflation wherever in the world it erupts. But, as we create this entirely new asset class, we need to ask ourselves how we can craft it so that it addresses irrational exuberance, unhedged speculation, artificial constraints on demand and any other externality that can sink the global economy.

The rentenmark was in part responsible for delaying the rise of Nazism by almost a decade. Maybe crypto can prevent the next rabble-rousing megalomaniac from climbing down off his barstool.

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