German 20 Marks Gold Coin

History

The Imperial Eagle and the German gold mark

What really stands out when observing the Wilhelm II 20 mark gold coin is the all-powerful Imperial Eagle that is depicted on the reverse of this coin. Besides being rich in detail and exhibiting impressive craftsmanship, the eagle, or, to be more precise, the coat of arms of the former formidable German Empire, has a fascinating history, one that stretches back several centuries.

Prior to its unification in 1871, Germany’s territories comprised multiple states, kingdoms, duchies and free cities that were ruled by a plethora of different noblemen, royal houses, and monarchs. The most important was the German House of Hohenzollern, a dominant royal dynasty with roots that go back to the 11^th century. This House produced some of the most notable kings that would establish and reign over the Kingdom of Prussia and the subsequent German Empire.

One of these kings was Wilhelm I, grandfather of Wilhelm II (who is depicted on this coin), and ruler of the Kingdom of Prussia from 1861 to 1888. The Kingdom of Prussia was at that time a leading German kingdom and a distinguished military powerhouse that, at its peak in 1876, encompassed parts of present-day Germany, stretching to Russia in the east and Belgium in the west. It was primarily through Prussia’s military might that King Wilhelm I, with the help of his right-hand man, the formidable German Chancellor Otto von Bismarck, managed to establish the German Empire, with Prussia as the nation’s backbone.

Thus, the Imperial Eagle depicted on this coin is actually a slightly altered version of the coat of arms of the Kingdom of Prussia. It can therefore be seen that the one-thousand-year-old Hohenzollern dynasty, which had Wilhelm I and later Wilhelm II at its helm as kings of Prussia, is indirectly represented through the Imperial Eagle depicted on the German mark gold coins. What is of interest is that even after Germany abolished the monarchy in 1918, an eagle analogous to the Imperial Eagle continued to be applied on circulating coinage and on paper marks, and this same eagle is today even depicted on Germany’s euro coinage, albeit considerably modified.  

Gold marks powered German trade

Before its unification, Germany's monetary system was similar in nature to the country's fragmented territories. The nation was divided into several currency areas that used coinage of a different design, name, purity and metal content. Coins containing silver were the currency of choice, while gold coins had lesser monetary significance. These various currencies were exchangeable at fixed exchange rates and, even though the system worked, powerful German commercial interest was constantly pushing for a unified monetary system. 

Following the nation’s unification in 1871 and the formation of the German Empire, the German government established a new gold-backed monetary system, effectively putting the nation for the first time in its history on a pure gold standard. Imperial gold coins were introduced in denominations of 10 and 20 marks, carrying the effigy of the first German Kaiser, King Wilhelm I. After England and Portugal, Germany was the third country to base its monetary system on gold. This system was in place up to WWI, powering Germany’s second industrial revolution, a period of remarkable growth that made the nation, along with the United States, the leading economy in the world.

The 20 mark gold coins protected Germany from hyperinflation

The onset of World War I in 1914 led the German Central Bank to suspend the gold standard. German paper marks, without any tangible backing, took centre stage and became the primary tool of the government to finance the huge expenses related to the war effort. The printing presses were rolling consistently throughout the war, and up until 1918 the supply of new paper marks had increased four-fold, leading consumer prices to surge. However, the inflated money supply and corresponding rise in prices was still manageable and was actually in line with that of other countries during this period, notably England and France. This all changed in the aftermath of the war when the allied victors imposed harsh reparation payments on the battered and economically drained Germany.

Because the reparation instalments had to be paid in foreign currency or gold, the German government thought they could solve this dire problem with printed marks that were then used to buy these items. At first, this seemed a good solution, but the issuance of new paper marks only furthered the already high inflation rate. The more foreign exchange or gold the German government purchased, the quicker the value of the paper mark declined.

By 1920, consumer prices had increased by a factor of 12 since the onset of the war, exerting immense pressure on the living standards of ordinary German citizens. Three years later, the German government failed to meet the reparation instalments due to its inability to acquire the needed financial assets, as everybody was shunning the ever-depreciating German paper mark. This pushed France to occupy the Ruhr, which at that time was one of Germany’s most important industrial regions, forcing the Germans to continue to pay their instalments in goods and raw materials.

The occupation of the Ruhr region dealt a decisive blow to the already weak German economy, which, coupled with millions of unhappy workers, surging prices and the fear that France might even invade Berlin, resulted in a complete loss of confidence in Germany’s political establishment and the country’s Central Bank. With panic spreading, everybody began to exchange marks in favour of tangible assets at any price. This was a psychological event, which morphed into hyperinflation. In just a couple of months, the surging inflation rate rendered the German paper mark valueless. During this period, the currency was depreciating at such an extreme pace that prices were doubling every few hours, leading German housewives to burn paper marks in their kitchen stoves because the currency was worth less than firewood.

By the end of 1923, the value of the 20 mark gold coin was worth over 23 trillion paper marks, a clear testimony of gold’s quality as a hedge against inflation. Fortunate were those that held on to their gold marks, as they were spared many of the misfortunes that occurred during this period.