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' Being devoid of learning and of memory, most Americans are unaware of the Currency Reform in Germany on June 20, 1948, and how, on the following day, one of the dreams of socialism was achieved : everyone in the western zones was guaranteed an equal amount of money, and the rich and propertied had the value of their money voided or reduced to a tenth of its former value.
[b]"Overnight everyone’s money became worth only one tenth what it had been the day before. This applied to bank and other savings deposits as well as loans and mortgages, for obviously debts had to be scaled down at the same rate as the money with which they could be repaid. So that people with little money should not find themselves destitute, a minor exception was made with regard to cash. Everyone could exchange forty of their old Reichsmarks for forty of the new Deutschmarks and two months later another twenty marks at the one for one ratio.... Businesses were allowed sixty Deutschmarks for each employee on the same one for one terms. State, local and public authorities were given an allowance equal to one month’s income. The rest of their funds, however invested, were cancelled outright." (Crawley, p. 157).
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Erhard also took action to dismantle the rest of the hated command economy, by abolishing most wage and price controls. Erhard acted as if his plan had already received full approval and endorsement by the Allied authorities—-a brilliant bluff that worked.
Erhard’s gamble amounted to blowing up a dam: The blocked productive capacities of the West German economy were able to flow freely again, to find their natural courses, once the crude irrigation system of controls and mandates had been cleared away. The wild flux would be guided by the price system once again and channeled only by the rigors of a strictly guarded money supply. Harsh measures—-with brilliant results, as historians Dennis Bark and David Gress relate:
"The day following...euphoria engulfed most Germans at the sight of goods and food items they could only dream about in the past. Bakeries miraculously produced and displayed delicious cakes; vegetables, butter and eggs appeared in abundance. Items that had obviously been hoarded secretly and had been available on the black market only, suddenly appeared in display windows." (A History of Western Germany, p. 205).
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Productivity leapt up by 30 percent in the following three months—-six times its increase a year before. West Germany would become once more the engine of prosperity for the Continent.
