Germany Launched a Propaganda Campaign (‘Gold for the Fatherland!’) to Persuade Citizens to Exchange Gold for Paper

Paper currency — fiat money, it has often been called — now rapidly became the only currency in circulation. Gold coins, from now on, were either hoarded by individuals, therefore being removed from circulation, or became the property of the government, which was from the start keen to persuade an often reluctant populace to hand over whatever gold it still had, whether in the form of money or valuables. Gold represented, to the German government, something they could trade internationally, for precious militarily important minerals and products that had to be purchased abroad. Most important of all, under the Loan Bureau Law (Darlehenskassengesetz) that had also been included among the 4 August measures, the more gold the government had in its vaults, the more paper money it could issue while still maintaining the all-important appearance of a gold-backed currency.

The problem was that, although the Reichsbank knew that 5 billion gold marks were in circulation at the outbreak of war, even by the end of 1914, after several months of an intensive propaganda campaign to persuade citizens to exchange gold for paper (‘gold for the Fatherland!’), it held only 2 billion of that total. Although all over the country patriots had obediently given up their gold and silver coins, many other Germans — especially in rural areas — proved immune to patriotic blandishments. They held on to the value they knew they could rely on, whatever the outcome of the developing European catastrophe. Somewhere, a lot of gold and silver was being hoarded.

—Frederick Taylor, The Downfall of Money: Germany’s Hyperinflation and the Destruction of the Middle Class (London: Bloomsbury Publishing, 2013), e-book.