Reading some of the accounts of the last days of the Weimar Republic (as well as more recent articles about the declining Venezuelan economy), I was struck by the fact that traders and sellers seem to possess an uncanny sense of the value of money, inflating their prices to incredible levels, sometimes multiple times in the same day.
The rapid devaluation of paper money created ludicrous scenes. The value of paper money evaporated so quickly that some companies paid employees in late morning so they could rush off and spend their wages at lunchtime. Wives waited at their husbands’ factories on payday so they could hurry to the stores. One man reported ordering a coffee but learned its price had doubled by the time it arrived at his table. By September 1923, as the hyperinflation crisis neared its worst, Germans needed enormous amounts of paper money to buy even basic commodities. It was not uncommon to see shoppers hauling buckets, bags, even wheelbarrows full of banknotes. One Munich woman dragged a suitcase of banknotes to her local grocery store; she left it outside briefly, where someone stole the suitcase – after emptying the money onto the street. Children used worthless banknotes as toys; their mothers used them to light stoves and boilers, line cake tins, even as wallpaper. Many Germans abandoned money altogether and began bartering as a means of obtaining what they needed.
In a pre-Internet era, how could a mere urban coffee shop owner or sandwich vendor gain sufficient market information to know how much to inflate their prices by? What was the mechanism by which a seller would learn that they needed to double their prices?