One year later, in the autumn of 1922, Germany was no longer able to afford the price of gold, thus unable to pay their reparations, and the mark had become almost worthless. In spring, France and Belgium sent armed forces to occupy industrial regions of Germany, as it had been decided that reparation would be taken in goods, like coal. By autumn 1923, one US dollar was equal to over 4 trillion German marks. The mark had become so worthless that many, hopelessly unstylish, citizens began using their notes as wallpaper. November saw the introduction of the Rentenmark, to replace paper marks, and twelve zeros were removed from all prices, in an attempt to combat devaluation.
To cut a long story short, the German government began a process of revaluation. They chose a revaluation law to end hyperinflation as soon as possible, after realising they had only two, catastrophic choices. Either they ended inflation, leading to unemployment, bankruptcies and the starvation, violence and revolution that would surely follow, or they let it continue and default on their debts.
In the years since, British and French economists have actually proposed, in bizarre, characteristically cynical fashion, that Germany destroyed its economy on purpose so they wouldn’t have to pay back their war debts. Eventually, Britain wanted to grant Germany a moratorium, giving them the chance to rebuild their economy, whilst France demanded that they continue to pay their debts. Make of that what you will.
The German banks and government, during their conversion calculations, bound their revaluation on the US dollar and exchange rate mark to realise their Goldmark value. Finally, on 16 July 1925, the “Law on the Revaluation of Mortgages and other Claims” was passed.
This whirlwind of economic instability and calamitous decision-making was followed, only two decades later, by Germany’s unfortunate contribution during the Second World War. It’s no wonder they can be hesitant to new ideas and directions after such a destructive history, when this history was the result of radical changes in their economic and political structures. This also helps to clarify why Germany is infused, sometimes trapped, by bureaucracy today.
Any expat knows how frustrating it can be to rent an apartment. Even the poorest landlord is likely to turn down a deposit of three months rent (in cash, Berlin-style), presented in person, in a wallet decorated by a picture of Angela Merkel, if it is not accompanied by your credit score, your last three months of payslips (just to ensure you can pay the money that you are already brandishing in your bratwurst-stained, weather-beaten hands) and a declaration, signed in blood, that they can hold your first-born child as collateral.
With such a distressing history, it is not difficult to understand why Germans would hold so tightly onto a system that appears to be working for them. What, to outsiders, seems like rigidity and resistance to positive change, is to Germans a logical, survival response to a history of economic turbulence. I understand the attitude of “if it ain’t broke, don’t fix it”, but falling back on this unthinkingly can cause long-term stagnation. Sure, the system is stable, but that doesn’t mean digitisation has no place. Adopting digital banking on a larger scale will only serve to improve the convenience and speed of an already strong system.
It is an understatement to say that Germany would benefit from improving the speed and customer convenience of their banks and service providers. Thankfully, we are slowly seeing these improvements. Kontist , another Berlin startup, have become superheroes to Germany’s freelancers. They developed a banking tool designed to empower self-employed business owners with a service that circumvents the tiresome bureaucracy. Their digital banking app provides tracked transactions, zero extra fees, automated accounting and best of all, for those new to the German tax minefield, real-time tax assessment!
As a self-employed digital nomad, already overwhelmed by the notion of completing the ocean of paperwork necessary to move my online business to Berlin, I was relieved by the opportunity to open a business bank account without being asked to fill out a 700-page contract or attend five meetings at a local branch.
In a series of similarly revolutionary moves, all of Germany’s large supermarkets and retailers now accept Visa and Mastercards, including REWE and EDEKA, and a rising percentage of under-30 year olds are paying with their phones. In addition, the EU recently passed regulations to limit card payment fees, which has led to an increase in their use for small and large payments alike.