<P> The government believed that it would be able to pay off the debt by winning the war, and it would be able to annex resource - rich industrial territory in the west and east . Also, it would be able to impose massive reparations on the defeated Allies . The exchange rate of the mark against the US dollar thus steadily devalued from 4.2 to 7.9 marks per dollar, a preliminary to the extreme postwar inflation . </P> <P> The strategy failed when Germany lost the war . The new Weimar Republic was saddled with a massive war debt that it could not afford . That was worsened by the fact that it was printing money without economic resources to back it . The Treaty of Versailles further accelerated the decline in the value of the mark, so that 48 paper marks were required to buy a US dollar by late 1919 . </P> <P> German currency was relatively stable at about 90 marks per dollar during the first half of 1921 . Because the Western Front was mostly in France and Belgium, Germany came out of the war with most of its industrial infrastructure intact . It was in a better position to become the dominant economic force on the European continent . </P> <P> The London Ultimatum in May 1921, demanded World War I reparations in gold or foreign currency to be paid in annual installments of 2 billion gold marks, plus 26% of the value of Germany's exports . </P>

Did german real gdp increase during the hyperinflation in 1923