GERMANY’S OBSESSION WITH INFLATION: How post-war central bankers manipulated national memories to assert their power

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25 Mar 2015

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Germany’s current obsession with inflation has little to do with the so-called ‘national trauma’ of the 1922-3 hyperinflation. Rather, its origins can be traced to a post-war clash of interests between the West German central bank and government concerning the monetary authority’s independence.

That is the central finding of research by Simon Mee to be presented at the Economic History Society’s 2015 annual conference. He writes:

‘Historical narratives of 1922-3 and the second inflation entered the public discussion primarily due to a clash of interests between Frankfurt and Bonn.

‘These narratives remained thereafter because an increasingly powerful institution – the Bundesbank – had a strong interest in propounding them. The memory of the hyperinflation has survived so well in Germany in part because it proved to be a useful one.

‘My research provides a clue as to why the Weimar inflation is remembered to this day in Germany, while other ‘traumas’ of Weimar – such as mass unemployment – are largely forgotten.’

Why do Germans today remember the ‘lessons’ of the hyperinflation and not those of mass unemployment? Mee’s research examines the extent to which the West Germany’s first central bank, the Bank deutscher Länder, used monetary history to defend its interests in the media sphere.

In particular, Mee analyses how the monetary authority used the ‘lessons’ of the Weimar hyperinflation in the media to underline the urgent need for central banking independence.

He shows that there was no West German consensus for central banking independence when the Federal Republic of Germany was established in 1949. Far from it, the issue was a controversial one. This was because of the poor record of central banking independence during the inter-war period.

The controversy surrounding central banking created a public debate. And it was in this public debate that narratives of Germany’s hyperinflation first entered the West German media. They were geared in support of central banking independence.

The Bundesbank Law of 1957 crystallised this conflict of interests. The legislation established the Deutsche Bundesbank, which retained a sizeable amount of independence. The independent central bank would go on to clash with the government on a number of occasions throughout the post-war period. These episodes invited further public debates about central banking independence, in turn creating further opportunities in which the ‘lessons’ of the hyperinflation were used.

The argument underlying Mee’s research is that some memories are more useful than others. Memory can be used by institutions to assert and justify their own power.


Central banking independence, historical narratives and the Bank deutscher Länder, 1948-1957, by Simon Mee

University of Oxford


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