Page 160 - The Making of the German Post-war Economy

1948 – ASPIRATION AND APPREHENSION 133

relatively low prices and a flexible handling of rationing instructions [...]
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lured the consumer and opened the moneybags.’ While one day apathy
was mirrored on German faces, on the next a whole nation looked
hopefully into the future.
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The initial euphoria in West Germany was subdued when the Soviet
Union countered with the introduction of its own currency in the eastern
zone on 23 June and blockaded entry into West Berlin the following day
leading to the feared definite division of Germany. It eventually came to a
sudden end with the proclamation of the ‘Third Law for Monetary
Reform (Conversion Law)’ that was announced later the week on 26 June.
It stated that

the old currency credit balances [...] shall be converted so that the
owner is credited with one Deutsche Mark for every ten Reichsmark. Of
this, one half shall be credited to a free Deutsche Mark account
(Freikonto) and the other half to a blocked Deutsche Mark account
(Festkonto), with regard to which regulations will be issued within 90
days.
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These regulations, which eventually formed the so-called
‘Festkontengesetz’ (Fixed Account Law) issued later on 7 October,
determined that saving deposits were reduced to just 10 per cent of the
original nominal value and half the deposit was frozen for a fixed period,
after which 70 per cent of that nominal sum was again taken away on the
release date. Thus all savings were actually not converted at a ratio of 10:1,
a rate originally envisaged in the Colm-Dodge-Goldsmith Plan of April
1946, but proportionately 10:0.65. Consequently, for 100 RM one merely
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received 6.50 DM. This currency devaluation annihilated massive private
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wealth, yet left wealth in estate and production unaffected. Whereas
debtors benefited, the accounts of savers were diminished and many lost
their savings – though it is estimated that 28 per cent of the adult
population at that time had no bank accounts and that another quarter of
the population had less than 2,000 RM in bank and savings accounts.
41
In addition to the currency reform which involved both the substitution
of the Reichsmark by the Deutsche Mark and the sterilisation of the excessive
money supply, people had to cope with rising prices as a consequence of
the enormous demand and relatively low production. After the Economic
Council had adopted Ludwig Erhard’s draft for the Guiding Principle Law
cancelling existing economic controls at the same time to currency reform
on 18 June, price ceilings were maintained only for a limited number of
essential foods, rents and some basic materials, such as coal and steel;
clothing and footwear were freed of controls but subject to rationing.