Despite finding victory in the Weltkrieg, the German Empire was in dire straits. Its allies, the Austro-Hungarian and Ottoman empires, were on the eve of total collapse from internal tensions. Communists throughout Europe were emboldened by Vladimir Lenin's successful revolution, seeing in Germany the ultimate form of imperialism. The Americans and British had been humilliated, and would do everything in their power to accelerate the collapse of Europe's superpower. There were not enough troops, funding, supplies, ships or bureaucrats to assert control over the half of the globe that Germany now controlled, paralysing its government. In the war, over five million German soldiers had perished. And finally, the Generals' Conspiracy, by which the far-right radicals of the Deutsches Heer had wrested control over the German government, and a genocide was likely imminent. The opposition SPD mobilised, seeing no alternative but a bloody revolution, declaring the German government corrupted of its purpose and illegitimate on the 18th of October of 1919. Kaiser Willhelm II was petitioned to join the revolutionaries in opposing Ludendorff and Hindenburg, but he refused, citing these two figures as being central in Germany's victory. In response, the SPD declared the creation of the Weimar Democratic Authority in Thuringia, joined by a number of pro-democratic army commanders and militias. A new conflict for the soul of Europe had begun, the Velvet Revolution.
To prevent massive bloodshed the likes of the thirty years' war, Kaiser Willhelm II ordered the majority of the Weltkrieg's soldiers discharged and demobilised, while remaining Deutsches Heer units would perform security in the Empire's colonies and puppet states. However, the massive influx of unemployed young men trained for war inflated the burgeoning militia problem. Internal security forces were unable to keep the situation under control either. Militias at the time could be more or less divided into the following categories.
- Far-Right Militias such as the National Socialist Sturmabteilung (later replaced by the Schutzstaffel) were staunch supporters of the junta, wishing to go through with the Septemberprogramm conspiracy at its full capacity. They were usually made up of Weltkrieg veterans, Prussian and Bavarian nobility as well as senior Deutsches Heer commanders. Bavaria eventually became their centre of operations with the election of an NSDAP state government.
- Right-Wing Militias such as the monarchist DVNP's Der Stahlhelm were also supporters of the junta, but not explicitly of the Septemberprogramm conspiracy. They were usually made up of middle class citizens and Weltkrieg veterans.
- Centrist Militias such as Zentrum's Iron Front, who were opposed to the junta, but also to violent revolution. These militias acted as peacekeepers throughout the conflict, engaging both left-wing and right-wing radicals, and acting as an ad-hoc police force.
- Left-Wing Militias such as the SPD's own Reichsbanner Schwarz-Rot-Gold, which aimed to depose the junta through direct action, and establish either a radically constitutional monarchy or a social-democratic republic. They were supported by working-class and middle-class Germans, as well as many younger NCOs and officers of the Deutsches Heer.
- Far-Left Militias such as the KPD's Roter Frontkämpferbund which aimed at the complete overthrow of the German regime and the establishment of a communist state, inspired by Vladimir Lenin's USSR. They were supported by labourers and trade unionists.
While most of the Velvet Revolution was a low-intensity conflict characterised by street fights, skirmishes and assassinations, it did come close to a civil war on what was known as the Black March. The 13th of March of 1920, generals Ludendorff and Hindenburg announced the dissolution of the Reichstag and the creation of an interim government with full executive powers. In response, the Ruhr Red Army rose up in arms, occupying much of Germany's most important industrial centre. Kaiser Willhelm II ordered the dissolution of the KPD and the dishonourable discharging of both Ludendorff and Hindenburg from their military posts, an order which simply did not go through, weakening public perception of the monarchy even further. Fighting erupted throughout the country for two weeks, in which over 34,000 Germans died. It was only when Germany's political parties (excluding the NSDAP, DVNP and KPD) met together at Weimar to discuss the crisis, proclaiming the Internal Peace Act (which ordered the Deutsches Heer to perform internal security duties), that order was restored.
On the 17th of December, 1923, these parties met once more to put an end to the overall internal conflict. This time, every political party in Germany (except the KPD) was present, as well as a number of Kaiser Willhelm II's representatives. They decided to transform Germany into a constitutional monarchy, purge the Deutsches Heer's political power, ban the KPD, and disarm most political paramilitaries (limiting the number of party security forces that any group could have). The Freikorps were to be formalised as part of the nation's overall defence strategy, much like America's apolitical paramilitary groups. On the 13th of January, 1924, the German Constitution of 1924 was enacted, ending both the Velvet Revolution and German despotism.