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» Economics » Currency » Topics begins with C » Currency reform

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The term currency reform designates a change of relevant characteristics of a currency. A currency reform in most cases consists of a conversion of old currencies to a nationally specified rate of exchange in units of the new currency. Often thereby different exchange rates apply to cash, bank assets and commitments. Only if a simple conversion of all prices and values takes place to a uniform course, then one speaks also of a currency reform. Usually also a change of the name of the currency is connected with a currency reform. The extreme case of a currency reform is the introduction of the currency of another country (Dollarisierung, Euroisierung). The beginning and the end of each currency are always marked by a currency reform.

In Germany the term is used often also as synonym for the introduction of the D-mark 1948.

Reasons for currency reforms

Currency reforms are accomplished from a set of reasons:

  • Completion of a current hyperinflation: Countries, which exhibit high inflation rates, which by the other means of the money and monetary policy gentleman does not try it to become to be able, often, to terminate by the psychological means of a new start the confidence loss into the own (old) currency. The again introduced currency will provide creating measures then frequently with additional, reliability - for example a firm rate of exchange to a price-stable currency, an independent central bank o. examples of such a currency reform are Argentina 1991 and Germany 1923 (see below).
  • Removal of the negative effects of earlier inflations: Countries, which had to suffer in the past under durably high inflation rates, feel the long-term effects of the inflation v. A. in the form of high, intransparenten prices, i.e. units of a relatively worthless property cost already comparatively many monetary units. This causes high transaction costs, since the price markings are intransparent due to their extent for the offerer by goods and for the Nachfrager. Remedy creates here the introduction of a new currency, with which in relation to the old currency often simply several zeros (Henning) are removed. Examples of a such currency reform are the introduction of the new Turkish Lira 2004 or the French currency reform 1960.
  • Political reasons for the introduction of a new currency: In rarer cases it comes also from political reasons to currency reforms. Step currency areas another country with (example: Joins the GDR to the FRG 1990) or break countries apart (example: Czechoslovakia 1993), then comes it to currency reforms.
  • Economic reasons in accordance with the theory of optimal currency areas: In recent time increase other economic reasons than inflations play a role during the introduction of new currencies. A prominent example for this is the introduction of the euro 1999; the European currency was introduced beside political also for economic reasons, in order to reduce the transaction costs of the trade between European Union countries.

Currency reforms in Germany

The currency reform 1923

The conversion of the German Reich of the "Mark" (m) on the "pension Marks" (later "realm Marks", RM) terminated a galloping inflation and was the most remarkable and at short notice most successful German currency reform at all, with a course of,000 M: 1 RM.

The currency reform 1948

In Germany with the term the introduction of the German Mark (DM) in "West Germany" (i.e. in that English, American one and French zone of occupation) on 20 June 1948 is usually connected. Here each person in two steps immediately 40, - DM and somewhat later 20, - DM were bar disbursed;

  • Debts converted with the course 10 realm Marks (RM) to 1 DM (10: 1) changed over;
  • Wages and rents however with the course 1:1;
  • Cash was exchanged to the course 100 realm Marks to 6.50 DM.

The new volume of money lay in the months after the currency reform with approximately 13 billion DM (M3, without and Buchgeld).

This currency reform was the collective experience of the West German post-war period most salient in the positive sense after 1945, above all, because Ludwig Erhard connected it with the nearly complete abolition of the "managements" (rationing) of the goods of the everyday life need: "On a mark there was everything!" The currency reform had been prepared by on 23 July 1947 by the economic council of the Bizone created special place "money and credit" in bath the Homburg, under the direction of Ludwig the Erhard stood. The last refinement were decided in the spring 1948 under strictest secrecy in the buildings of the Fritz Erler barracks to Rothwesten (district Kassel).

Since the currency new creation of the German Marks came so suddenly and only in the "west zones", the whole remaining realm Mark cash flowed into the Soviet zone of occupation, where it worked there inquiring, so that because of the price increase resulting from it (further) a galloping inflation threatened there.

The currency reform strengthened the conflict between the USSR and the Western powers, already existing, so that it was among other things (more welcomely) cause for the intensification of the Berlin blockade.

In the Soviet zone of occupation a reform took place likewise on 23 June 1948. Here each person received 70 RM, which were exchanged in the relationship 1:1 in ostmark, whereby old realm Mark lights became to provide simply with coupons and value stickers.

Introduction of the D-mark in the GDR 1990

In the context of the introduction of the German Marks in the GDR in the apron of the reunification different kinds of funds with different sentences were exchanged (1: 1, 2:1). Wages, salaries, pensions, rents and other "recurring payments" were changed over 1:1. BeiBargeld and bank assets were more complicated the regulations: Children under 14 years knew 15 - to up to 4.000 GDR Marks, who was older, 6,000 GDR Marks up to 2.000 GDR Marks in the relationship 1:1 conversions. In addition-going amounts were changed over in the relationship 2:1.

Introduction of the euro 1999/2002

Major item: Euro

The introduction of the euro to 12 states of the European union was not a currency reform to lose or win but only one currency reform, since all money existing to end 1998 were changed over directly over the official euro-rate of exchange in euro, without thereby at value. Since that the currencies of the euro-countries are firmly coupled to the euro, them are only different accounting units of the euro.

The euro applies since the year 1999 as Buchgeld, it on 1 January 2002 as cash was introduced. Since the cash introduction the old currencies of the euro-countries lost their characteristic as legal tender. Notes and coins were drawn in and can be exchanged in some countries also still for an unlimited period in euro. Cashless monetary values were changed over automatically until at the latest 1 January 2002 to euro.

A reform of the monetary system took place only to that extent that the national issuing banks their self-sufficiency lost and instead the task of an issuing bank took over the European central bank. The D-mark lost thus its role as European key currency.

Currency reforms in Austria

See: Currency reforms in Austria


Siegfried Freick, the currency reform 1948 in West Germany. Switch position for a half century, Schkeuditzer book publishing house, Schkeuditz 2001

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