ABSTRACT
The withdrawal of the Russians from quadripartite discussions and the decision of the French to conform removed the obstacles to a reform of the currency. On 20 June 1948, according to a plan worked out by the Americans with German advice, the old Reichsmark was made valueless in the three Western Zones and replaced by the Deutschmark. Everyone was immediately allowed to exchange forty of the old Marks for forty of the new ones but before they could get any more, they had to disclose how much money they had in cash or at the bank. The original intention had been to issue them with only one-tenth of this amount in the new currency but experience showed that this would not reduce the volume of money sufficiently and the rate was therefore lowered to 100:6.5. All debts, however, had to be paid off at the 10:1 rate so that creditors came out well. Existing securities of the government, municipalities and public corporations were replaced on a much smaller scale by new government bonds with the object of bringing the assets of the banks nearer to their (greatly diminished) liabilities. Thus Germans once again saw their intangible assets reduced in value to almost nothing. Banks were also given new, but scaled down, reserves in the form of deposits with a new central bank of issue, the Bank Deutscher Länder (which in 1957 became the Bundesbank). The note circulation was fixed at DM 10 billion, a ceiling which the Occupation authorities pledged themselves to observe in order to give the population faith in the new currency. The degree of devaluation gave Germany a level of costs which was relatively low by comparison with other industrial countries and therefore favoured German exports.
