Saying goodbye to D-mark
- the end of a legend


The (true) story of a currency reform
It all began with 40 DM
Asset values were not affected by the currency reform – but savings got cancelled by up to 35%
The Ostmark: the opposite to a success story
On the way to a world currency
Along with the federal bank also the internationally admired stabilization policy set in
Disputed despite all: the euro


The (true) story of a currency reform

There can be no doubt that the introduction of the D-mark at 20th July 1948 has been the beginning of the most successful era in the history of (western) Germany. It symbolized a decisive and determined step in the time after the war. The generation of our parents and grandparents got equipped with a currency which allowed them to dare a complete new beginning.

So let us ask the question: how did this rearrangement actually take place? First of all, the initial position was critical: an economic recommencement and rebuilding of the destroyed Germany could only succeed with an extensive reform of the monetary system. But since the occupying powers (USA, France, England and USSR) were at variance the USA took on the control at last. In April 1948 they brought to life a currency committee consisting of German specialists and tackled the currency reform, in top secret consultations. The Soviet military government didn’t know anything about this – and also the population was not supposed to find out anything about the secret consultations; merely around a dozen specialists were informed about the exact date on which the “Deutsche Mark” was going to be implemented.

The “Reichsmark”, which was valid until then in western as well as eastern Germany, has been cancelled fully as the currency of the western zones of occupation at the 21st June 1948. The law required for this has only been published by the allied on 18th June 1948. The change then already occurred on Sunday the 20th of June 1948.

The D-mark notes, already printed in the US months before and looking similar to the dollar notes, were handed out from eight o’clock in the morning at the places of the food ration cards: 40 MD per capita were exchanged for 60 Reichsmark; another 20 DM were handed out two months later. Employers got an advance payment of 60 DM per wage earner, which was to be charged against Reichsmark assets later on.

It all began with 40 DM

In the beginning one paid with money notes, which were available from half a DM upwards. One was allowed to use Reichs-penny coins transitionally until the first penny got coined in the end of 1948 and first circulated in the beginning of 1949 – by the way money symbol kept in its original design and form from the year of the money reform up to today and certainly the only coin which will survive the entire era of the D-mark.

“With the D-mark a new life began” is the unanimous statement of many people interviewed who experienced the currency reform back at that time. That which has happened in the years from 1945 to 1948 was (aside from the horrible war and its upsetting consequences) like a trauma to the population: the wage- and price stop hung out by the allied nearly crushed down economy; practically the only way to exchange money for the daily needs was on the black market. But the prices were accordingly: a kilo of coffee cost up to 1.500 Reichsmark, a light bulb around 50 Reichsmark, a cigarette 6 Reichsmark. Yet the average income was no more than 200 Reichsmark! One can only imagine how the barter trade flourished. Foods were officially rationed and only available for food ration cards – just as it had bin in the last years of the war too.

So now came the D-mark. But what happened with saved assets, mortgage loans, other debts or assets? Immediately an escape into asset values set in when the first rumours of a future currency reform began to reach population in April 1948. But since no one knew much about it the reaction remained rather restrained. Only when the D-mark was published officially it became obvious who was the winner and who was the loser now:

Asset values were not
affected by the currency reform
– but savings got cancelled by up to 35%

Whoever owned real properties did not need to worry about his wealth in any way. Asset values remained untouched by the change. Or rather: since the rents got changed in a relation 1:1 (!!) the landlords now got an unbeatable advantage. Because assets of Reichsmark, debts and outstanding debits got, as published on 26th June 1948, recalculated in a relation 1:10 – meaning 10 Reichsmark got exchanged for one D-mark! But that wasn’t enough: one wasn’t even able to decide about one’s newly exchanged money oneself: half of this cash value got frozen  right after the exchange – and who still had more than 5.000 DM on his account hereafter needed a clearance certificate from the tax office in order to be able to avail himself of his money. The ulterior motive hereby was obvious: in this way they wanted to find out black money depots and tax evaders. So if someone had kept high amounts of Reichsmark or had acquired money from the black market which was flourishing up to then, he was now likely to be left out in the cold.

On 4th October 1948 the final bad awakening for many set in: the fourth law for the reform of the monetary system simply decided that 70% of all frozen savings and bank deposits got cancelled! The change from Reichsmark to D-mark finally was 100:6,5 in the end – in other words, one only got 6,50 DM for 100 Reichsmark. This toughness however got alleviated a bit later on (1953) when bank deposits which had existed before 1940 “only” got invalidated at a rate of 5:1.

Pfandbriefe and other bonds got changed with 10:1, debts and credits also got recalculated with 10:1. One can easily see that money debtors got quite an advantage by this invalidation. Yet the tax authorities didn’t keep this advantage for a long time: by the Equalizations of War Burdens Act in 1952 it got regulated that the advantages so gotten in form of a credit gains tax or mortgage income tax were to be refunded, namely in a time period of 30 years; this could be gotten over in view of the advantages gotten in cash by the debts depreciation.

The Ostmark:
the opposite to a success story

There was another factor given: the bank notes and coins handed out were not covered by precious metal, foreign currencies or other goods like it used to be the case during former currency reforms. Even more so astonishing was the development of the D-mark which now formed the fundamental on which the reform and the economic miracle could unfold up to the 60es and beyond.

For the sake of completeness we also note down the development in the Soviet zones of occupation: out of fear from the Reichsmark now flowing into the east, they circulated the Ostmark four days after the introduction of the D-mark. 70 Reichsmark got exchanged into 1 Ostmark. Cash assets going beyond this amount got exchanged at a rate of 10:1; if someone wanted to exchange more than 5.000 Reichsmark he first had to proof the legitimate earning of the money.

There were quite some peculiarities and differences from the exchange relations used in the west; for instance the tax debts which got exchanged 1:1; however claims on the side of the citizens against the tax department got exchanged with 1:10 for the benefit of the state.

As it is known, the quarrel about the currency lead to the blockade of western Berlin, for the Soviets didn’t want that people traded with the new western currency there. And so it came that up to 20th March 1949 one traded with two currencies in western Berlin – the D-mark as well as the Ostmark. – It would be pointless to further talk about the story of the Ostmark; it never attained international importance up to its cancellation in 1990.

On the way to a world currency

The ascent of the D-mark to an internationally recognized and more and more treasured currency went on quickly now: someone no less than Ludwig Erhard, director of the administration of economy of the “united economic area” at that time, declared the end of the controlled economy on 20th June 1948 – with which he became highly unpopular to the allied, but gained a lot of friends in Germany. This man, courageous as he was, took on the changeover to a free economic system nearly by himself – pushed aside all considerations and found himself more than acknowledged in his economic policy only a decade later. Righteously, he is said to be one of the “fathers” of the economic miracle; the living standard had improved by about two third in this country within ten years.

Already in the 60es the D-mark became a top ranking currency in the world, aside from Swiss franks it was the strongest currency in Europe, being practically unchallenged, and it has remained it until today. What one hardly remembers today is that only in 1958 a free convertibility with other currencies has been made possible again, meaning there was a free exchange on the international field of foreign currency again.

Only in 1957 the bank of the German states got replaced by the Federal Bank as the central bank. It got the exclusive right to hand out banknotes. There still were no cover policies for the money circulation; yet the actions and decisions of the currency keepers were supposed to be geared to driving a sane course of stability. From the beginning on the Federal Bank has been an independent committee which was meant to be independent from the government in their decisions even though they were supporting the economic policy of the federal government. Thanks to this position of autonomy the D-mark became one of the most sought-after currencies in the world during the 70es.

Along with the federal bank
also the internationally admired
stabilization policy set in

Astonishingly enough, it was only in 1988 when the founder of the D-Mark, Ludwig Erhard, got the honour to be “eternalized” on a coin (the 2-D-mark coin); Konrad Adenauer, Theodor Heuss and Kurt Schumacher had already made this before him. And another remarkable occurrence can be noted in the history of the D-mark: in the year 1975 the silver coins used until then (5-D-mark coins) got replaced by a nickeline coin; that was the end of the era of precious metal money in Germany, which had lasted for more than 2000 years.

The international position of the D-mark really gained momentum and importance after the fixed exchange rate system of exchange rates crashed in 1973. Other currencies lost rapidly, also the US dollar was at the bottom, while the D-mark advanced to the second-most important reserve and investment currency in the world. While in 1973 only 2% of the world foreign currency reserves were invested into D-mark, this amount increased to 14% by the end of 1987 – just behind the US dollar (74%).

On March 13, 1979, the end of the D-mark already got heralded more or less. With the introduction of the European currency system a factor entered into the game, which bore the name ECU; a currency unit which consisted, by one third, of D-mark and, by two thirds, of the currencies of the remaining EU countries. The fact that the ECU lost 25% of its value from 1979 up to 1990 lets us assume what inflationary developments only become apparent when the actual anchor of stability of the European currency system – namely the D-mark – gets cancelled and this system gets sort of left to its own devices.

Disputed despite all: the euro

Opponents of the euro use a lot of reasons for keeping the D-mark as arguments. We only mention few of these here:

The lawmaker has unlimited power to act arbitrarily. Neither the population gets asked nor does it even get informed about what exactly is supposed to happen now and how.

Why in the world do tax declarations get filed in DM until the end of 2002? One tends to believe that one wants to avoid a possible corruption of buying power especially in the first years of the change.

It is pointless to discuss about the effect onto larger cash savings kept. Whoever does have a considerable amount of black money hidden somewhere in form of DM is well advised to make up his mind in time and think about preventing governmental punishment by turning himself in. In any case it will be difficult to exchange the old D-mark into the new euro without exact and precise notes being taken of it.

Additionally: the current inflation rate in Europe is considerably low: at least it features a hesitating purchasing behaviour with a tendency to rather keep money than bringing it into circulation. This could turn into an explosive mixture: the high unemployment rate, high state indebtedness and the increasing impoverishment of entire population strata do not form what comforting future dreams are made of…


There is no doubt: at these times, he who has got his asset values made, meaning who has invested his money remote from any possible arbitrary decisions of the government, will have a soft sleep.

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