The Review of Politics

Research Article

The Consequences of the Currency Reform in Western Germany

Heinz Sauermann

Following military collapse both in 1918 and in 1945 Germany presented two economic phenomena indicative of the destruction of economic life. In the twenties an open inflation occurred. For a relatively short time German money lost its value and purchasing power. This period of a completely open inflation was limited by a currency reform of a particular kind. Instead of cancelling the money in circulation the volume of money was increased by introducing a new stable money, the so-called Rentenmark. At the same time, the old money in circulation had been devaluated at the rate of one billionth of its face value. This controlled monetary experiment as well as the preceding huge inflation have found a place in the history of money. On account of the undoubted success of the devaluation experiment in 1923, the opinion seems to prevail that a devaluation is the best, if not the only way to reform the currency.

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