One of the biggest hot topics of economic thinking is inflation and the period of hyperinflation experienced by Germany and Austria is one of interest to economists and Central Bankers. The question often posed by many people in trying to understand monetary policy and the role of money is "how did hyperinflation occur?" and "is this the consequence of printing money?" The short answer to both questions is that hyperinflation occurred because of excessive monetary policy, meaning a significant increase in printing money, however more fundamentally it was caused by significant trade deficits and a lack of proper taxation policy compounded with heavy war debt.

The system of reparations definitely contributed to the period of hyperinflation in Germany and Austria, however the significant war debt contributed to more fundamental problems that had existed in Germany before the war. Germany's biggest problem lied in its failure to adequately finance the war and initiate a proper taxation policy in the years prior. Both Germany and Austria did not tax their constituents enough to generate significant revenue for public spending and as a result in order to finance the war, both countries took on significant amounts of wartime debt prior. Fiscally, a government generates revenue by imposing taxes and borrowing through sovereign debt from other nations and creditors. However, for several political reasons both Germany and Austria refrained from taxing its population base.

In addition, both Germany and Austria ran substantial trade deficits with other nations in the years prior to the war and the period of hyperinflation. This exacerbated the already difficult fiscal policy they had and as a result suffered from significant capital outflows form the country, meaning that a large part of the money supply was pumped out of the economy. As a result, once the war time debt accrued and the system of reparations were established, Germany had no way to efficiently pay back the debt outstanding it owed both during the war and in the aftermath. The only choice Germany had was to devalue its currency by printing a large amount of currency. The printing press was so active that there was a significant shortage in supply for the amount of money that was printed. The hyperinflation helped to alleviate a significant amount of war debt, however the resulting shock crippled Germany's economy as so much money was chasing a much lower amount of goods, driving prices up significantly and keeping wages stagnant.