What is Economis behind the currency

Currency / currency reforms

Since Bodin at the latest, currency sovereignty has been an essential feature of sovereignty of states. The corresponding principle "one state - one currency" can also be traced back to developments in Germany. It was not until the formation of the German Empire in 1871 that a uniform German currency was introduced, and its link to gold reserves was lifted in 1914. The German experiences also emphatically prove the possibilities of state abuse associated with the currency sovereignty. Funding for World War I and the immediate postwar burdens resulting from the defeat resulted in one of the worst inflations the world has seen. The first currency reform that became necessary in 1923 (introduction of the Rentenmark on the basis of 1 Rentenmark = 1 trillion old Reichsmarks) devalued the financial assets of the middle classes and alienated them from the Weimar Republic.

1. The currency reform of 1948 and the consequences

The Second World War was financed by the Third Reich mainly through the printing press, so that after the end of the war there was a gigantic amount of money compared to a small amount of goods produced. The inflation resulting from the disproportion was outwardly dammed by the rigorous state price controls, but manifested itself in the shift of the exchange of goods to the "black market" and monetary policy in the loss of function of the Reichsmark, which is partly due to the "cigarette currency" - American cigarettes as a medium of exchange and unit of account - was replaced.

Even during the war, there was astonishingly open discussion in German expert circles about how the enormous excess money could be eliminated after the end of the war. After unsuccessful negotiations between the four victorious powers, the western allies decided on a one-sided radical currency cut for their zones of occupation. The technically efficient currency reform carried out on June 21, 1948 was the responsibility of the victorious powers, even if German experts played a key role in the preparation. With the introduction of the new Deutsche Mark (DM), it resulted in the most extensive expropriation of financial assets (conversion ratio as a rule 100 RM: 6.50 DM, with the "old savings" existing before the start of the war 100: 20). In terms of distribution policy, the strong favoritism associated with the currency reform for real assets and thus also large fortunes was only corrected within narrow limits by the burden-sharing that was only carried out under German responsibility in 1952. The Soviet Union reacted to the western German currency reform a few days later by introducing its own currency (East Mark) for its zone of occupation. In the → GDR interpretation, the western German currency reform was the cause of the division and an expression of the western will to split. In fact, the division of Germany could not have been prevented in the context of the looming East-West conflict and the currency division was only an expression of this development towards the division of the state, albeit more symbolically. Regardless of the occasional scientific controversy about the real significance of the currency reform for the "economic miracle" in the FRG, the creation of a solid currency base must be seen as a key factor for the → social market economy. The history of the DM controlled by the independent → Deutsche Bundesbank is also seen as an outspoken success story internationally. In the course of the growing global economic integration of the FRG, the DM developed into one of the most respected and hardest international currencies, even if the internal loss of purchasing power with an average inflation rate of almost 3% annually is not negligible. An expression of the international reputation was the development to the second most important "reserve currency against will", i. H. After the US dollar, the DM made up the largest share of the currency reserves of the national central banks and private investors.

2. Innerdt. Monetary union

The East Mark was much less important within the centrally planned GDR economy. The GDR currency was not convertible towards the west, and even within the Eastern Bloc currency integration remained at a very low level of development. The "hunger" for Western currencies prompted the GDR leadership in the 1980s to adopt relatively permissive regulations for GDR citizens with access to Western money ("exquisite shops" with otherwise unavailable goods for foreign currency, DM accounts). With this, a new "class division" according to the criterion of availability above DM was surprisingly accepted and the currency of the West German "class enemy" was de facto the key currency of the GDR citizens. Against this background, the great symbolic value of the DM for the GDR citizens is understandable, which in the revolutionary upheaval phase expressed itself in slogans such as "the DM does not come to us, let's go to it".

Chancellor Kohl's offer for an innerdt. Monetary union in February 1990 was a political decision by the government that the Deutsche Bundesbank loyally accepted. The conversion rates for the currency reform in the (still) GDR, which was again carried out technically in a highly efficient manner by the Deutsche Bundesbank on July 1, 1990, were political decisions under the pressure of expectations of GDR citizens. While the current items such as wages, rents etc. were converted at a ratio of 1: 1, a conversion rate of 2: 1 applied in principle to the stock sizes of bank balances, corporate debts etc., although smaller balances were also exchanged 1: 1 under social criteria. Overall, the conversion ratio for private financial assets was 1.7: 1, which from the point of view of distribution and in comparison to 1948 is to be assessed as extremely favorable for the East German population. However, the monetary union also meant that the GDR companies were suddenly exposed to competition from the world market.

Just as the currency split in 1948 preceded the division of the state, the monetary union in 1990 led the way in state unification and deprived the GDR of sovereignty in a central area of ​​activity. In the triangle of currency integration, economic integration and political integration, the monetary union was deliberately used as a motor for integration, not least in order to quickly eliminate the irreversibility of the innerdt in an uncertain foreign policy constellation. To secure the unification process. In view of the planned immediate introduction of the social market economy and the state association and thus the rapid follow-up of integration in the other areas, the risks assumed seemed justifiable. Fears of inflation directly related to the monetary union - the GDR citizens liquidate their converted assets and trigger an explosion in demand - have not come true due to the relatively cautious buying behavior of the GDR citizens and the flexibility of the global market.

3. European economic and monetary union and introduction of the euro

The willingness to take risks at the innerdt. Monetary union has increased demands on the German → Federal Government to give up the "coronation thesis" (currency integration only as the "coronation" of economic policy harmonization) within the framework of the EU and according to the "motor thesis" as in the inner city. Example of using the monetary union as a motor for integration. Within the framework of the European Monetary System (EMS), the DM acted as the anchor currency. The resulting dominance of the DM and its tax center Deutsche Bundesbank was a motive for other EU states, especially France, within the framework of a European Economic and Monetary Union (EMU), a single European currency with the name "Euro" and a European central bank as the tax center to promote. Not least due to pressure from the Federal Government and the Deutsche Bundesbank, the Maastricht Treaty has normatively oriented the EMU strictly towards the goal of price stability and provided it with institutional safeguards - in particular, quantified stability criteria for candidate countries related to price level, interest rates, exchange rates and national debt, a financial policy flank protection in the form of Stability and Growth Pact and an independent European Central Bank System (ESCB) based on the basic model of the Bundesbank. The political argument about the introduction of the common currency euro and its likely consequences was fierce, especially in Germany, where the usual spectrum of political actors is not only about the → Federal Constitutional Court, but also about "professing" groups of scientists or a "Pro D" initiative appearing as a new party Mark "was expanded. With the euro skepticism, which is particularly pronounced in Germany according to opinion polls, the strong, also emotional identification of the German population with the DM must be taken into account, which for a long time played a kind of substitute function as a symbol of national pride and in East Germany. is also considered a new achievement. The schedule of the Maastricht Treaty was adhered to, however, and the third stage of EMU was implemented on 1.1.1999 with the introduction of the euro as book money with unchangeable exchange rates between 11 participating countries of the EU (GB and DK made the "opting out" clause granted to them Use, also S de facto refused, and GR clearly failed to meet the accession criteria). Since January 1, 1999, responsibility for monetary policy has also been transferred to the ESCB, into which the Deutsche Bundesbank has been incorporated. At the beginning of 2002, the national currencies such as the DM were finally withdrawn from circulation and also replaced by the euro in the case of cash.

The euro project is undoubtedly an ambitious leap with regard to European integration, but it is also associated with considerable material and integration-political risks. The experience with the innerdt. Monetary union emphatically demonstrate the economic policy dangers resulting from the abandonment of the exchange rate buffer. In particular, the Deutsche Bundesbank has emphasized the experience-based thesis that a monetary union is a non-cancelable community of solidarity that must be embedded in a comprehensive political union in order to secure its long-term existence. The asymmetrical integration construction that started with the currency as a motor with the open flank of the euro, especially in national financial policy, led to the political failure of the StWP, which was intended as a safeguard, and the level of → national debt in the wake of the global economic crisis of 2008/09 a risk situation that is particularly hotly discussed in D as the "euro crisis", but which is de facto a sovereign debt crisis in some euro countries (GIIPS - GR, IRL, I, P, E). Whether the crisis solution through financial aid through the new European Financial Stability Facility (EFSF) and the IMF on the one hand, catch-up integration of economic and financial policy (in particular community control of budgets to reduce national debt) in the euro zone on the other, succeeds or at least individual countries such as GR the Eurosystem have to leave remains to be seen. Internationally too, the introduction of the euro, which among other things inherited the role of the DM as the second most important reserve currency, a qualitative change in the international currency system, which will probably be more multi-polar in the future.



Source: Andersen, Uwe / Wichard Woyke (ed.): Concise dictionary of the political system of the Federal Republic of Germany. 7th, updated Aufl. Heidelberg: Springer VS 2013. Author of the article: Uwe Andersen