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e war and suffered a lot both in material or spirit. He lost his original colonies and the entire country was carved up by the victorious nations, and subjected to varying degrees of damage in thrall to the financial exploitation from the victory countries and the compensation requirement aggravated the stagnating economy. According to the Treaty of Versailles, German had to apologize for his brutal behavior and increasing amount of causalities as well as a myriad of money to other countries. Also he lost 13.5% territory and 12.5% population, all overseas colonies (including German East Africa,German Southwest Africa,Cameroon, andNewGuinea), 16% the coal producing area and half of the iron and steel industry. And the 135 million marks estimated by Moulton and McGuire(Lawrence,2009)put a huge burden on the shoulder of German .

3.1.2.2 The Inflation

Inflation is identified as the phenomenon characteristic of greater money supply than the real needs and greater real purchasing power than the output supply, resulting in devaluation of the currency, and general rising of price over time.

The table 1(Carl-Ludwig ,1986) compares the difference between the wholesale price index and the exchange rate index , from which we can see that both of them are rising from 1914 to 1918 and 1919 to 1923 and the wholesale price index is higher than the exchange rate index on the whole from 1914-1918 and lower than the exchange rate index from 1919-1923 although the opposite fact that in 1914 the whole price index is lower than the exchange rate index and in 1919 is higher than the exchange rate. Also both the wholesale price index and the exchange rate increased year by year with the former more changeable than the latter from 1914 to 1918 and a big gap from 1919 to 1923. Figures of the wholesale price index from 1914 to 1918 shows that it was reasonable that the rising wholesale price had to meet the military needs and basic necessities provided for war and the gap between the wholesale price and the exchange rate was not large enough to be a sign of inflation. The higher prices lead to increased government spending,

However, from 1919 to 1923 it is lucid that there was a surplus of production for that the skyrocketing price is beyond the public’s real purchasing ability so German had to keep depend on the overseas. Undoubtedly the big gap between them marked the inflation that led to the soaring commodity prices exceeding economic development and then the national property is devalued, which in turn causes the fixed capital goods, such as rent prices rise and have devastating effects on the production .So the enterprise staffs is unemployed, then the society expends drops, the industry enters the drop circulation, the economy falls into the decline.

3.1.2.3The Foreign Indebtedness

German has been racked with material and spiritual torment since the war in that the massive belts pulls him in a financial predicament. Although the Dwes Pan eased the problem with 800.000.000 gold marks as the external loan(Charles Reginald ,1979)，adverse export trade fails to make up for it . Reichsbank slightly broadened the range of fluctuation for the RMagainst the dollar in order to introduce an element of exchange rate risk that might dampen demand for foreign loans.

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