en
cs
de
Exhibit of the Month 12 / 2016
1 Rentenmark (Rentenmark) used from 1923 – 1948
In the second half of 1923, Germany was experiencing the worst price inflation that humanity had ever known. Paper (inflation) marks were losing their value almost from hour to hour, and the financial system was collapsing. In this situation, a plan was born for a completely new currency that would restore the trust of the population in the financial system. Even before its introduction, the situation required an immediate alternative solution to the need for a stable currency. Therefore, the government initially released Dollar Treasury Bills (Dollarschatzanweisungen) into circulation and later the "Gold Loan" (Goldanleihe). Individual pieces of the Gold Loan were used as means of payment of stable value. However, the guarantee of their stable value was merely a fiction, as they were actually not backed by anything. Nevertheless, these currencies enjoyed great trust among the population, and thus retained their value. They were primarily used for paying wages and were in circulation only in small quantities.
On November 15, 1923, a currency reform began in Germany with the introduction of the Rentenmark (Rentenmark). The Rentenmark was issued in denominations of 1, 2, 5, 10, 50, 100, and 1000 marks, as well as in coins of 0.01, 0.02, 0.05, 0.1, and 0.5 Rentenmarks. An important part of the currency reform was the enactment of a ban on further lending to the German government by the Reichsbank, which had been a method of financing government expenditures in previous years.
The task of the new currency was to restore confidence in the financial system and bring inflation under control until a new Reich currency backed by gold could be introduced. The introduction of the Rentenmark was a successful monetary experiment, and since inflation was brought under control almost immediately, it was referred to by contemporaries as the "miracle of the Rentenmark." The exchange rate of the Rentenmark was set at 4.2 dollars for one Rentenmark, the same rate that the former gold mark had before 1914. This rate was maintained through monetary interventions in the foreign exchange market.
Since the gold reserves of the Reichsbank were depleted during the occupation of the Ruhr, there was consideration of introducing a so-called "rye mark," backed by stocks of rye, even before the introduction of the Rentenmark. However, the plan was not approved due to the large fluctuation in the price of this grain. Because the Reichsbank could not back the new currency with gold reserves, mortgages on land and industrial bonds were used to secure it. This more or less fictitious backing of the Rentenmark generated the necessary psychological effect, which gave the new currency the trust of the population. Formally, 500 Rentenmarks were exchangeable for bonds with a nominal value of 500 gold marks (so-called Renten bonds with a yield of 5% per year). The psychological effect was also enhanced by the very fact of the different name of the new currency.
From an economic perspective, the introduction of the Rentenmark is interesting in that inflation was not brought under control by stabilizing the money supply (the total amount of money available in the economy) or by contraction, that is, reducing the amount of money in circulation, but rather due to the trust of the population in the new currency, the amount of money in circulation could be gradually increased. Due to hyperinflation, the real amount of money was much smaller than necessary for the stability of the financial system. From November 30, 1923, the amount of paper marks in circulation increased from 400 trillion to 1.211 trillion in July 1924. Additionally, 2.4 billion Rentenmarks were further issued.
The exchange rate between the inflation mark and the Rentenmark was set at 1 trillion paper (inflation) marks for one Rentenmark. In November 1923, 1 Rentenmark was worth 8 Czechoslovak crowns. On December 7 of the same year, 1 Czechoslovak crown was worth 123,490,000,000 paper marks.