This month marks the birthday of the symbol of the economic upswing in Germany: On June 21, 1948, the Deutsche Mark replaced the Reichsmark, which had become worthless after the World War was lost.
► Suddenly the shop windows were full of goods again and the German economy was jolted. The new currency became a symbol of reconstruction, as did the VW Beetle, the television, and vacations in Italy.
Without the euro, our D-Mark would now be 75 years old.
More than 20 years after the introduction of the euro, many would like the old currency back and blame the euro for the high inflation. But the truth is: Not everything was better in the past.
What made the D-Mark so strong?
An important insight from our time with the D-Mark is that stable money is a prerequisite for prosperity. A stable currency can be recognized by a long-term low inflation rate. There is no prosperous nation in which the monetary system is not in order.
Together with the social market economy, in which the markets are as free as possible, but everyone should share in the prosperity, it was the cornerstone of the German economic miracle.
But the D-Mark also had dark times: In the early 1970s, inflation rose to over 7 percent and remained stubbornly high throughout the decade. The trigger at the time was an energy price shock with the oil prices – similar to the euro today.
Is the euro an equivalent substitute for the Deutsche Mark?
So far, the euro has been able to compete with the D-Mark in terms of stability. Up until two years ago, the inflation rate was even slightly below the D-Mark period. And even the currently high inflation would not have stopped at the D-Mark.
The combination of supply chain problems and skyrocketing gas prices would have pushed any currency into inflation.
► Then as now, it was important for the central bank to step in and bring inflation under control again. The Deutsche Bundesbank succeeded in doing that at the time. Today, the European Central Bank is in the midst of efforts to contain inflation, the end is still open.
The euro has become one of the world’s largest currencies: it is a voice in Europe that is heard around the world. Although not as widely used as the US dollar, it is still the second largest reserve currency in the world.
Is the next currency reform coming soon?
Definitely not. Contrary to all prophecies of doom when the common currency was introduced in 1999 and during the euro crisis ten years ago, the euro is still there.
And the European Central Bank is serious about fighting inflation, at least so far. The euro is currently appreciating again against the US dollar. But there are also serious problems.
If it is not possible to get the high government debts of many member states under control in the next few years, the next euro crisis is inevitable.
Should I invest my savings in other currencies or in gold?
US dollars, bitcoin, gold: none of these are alternatives for investing your entire fortune. Because each of these safe haven currencies has its own problems and the exchange rate fluctuations against the euro are immense, both upwards and downwards.
Therefore: A broad diversification of assets in stocks, real estate shares and bonds from different parts of the world is the most sensible way to hold assets – regardless of whether the currency is DM, Euro or Dollar.
*Four financial experts take turns writing about money in BamS. This time: Ulrich Kater, chief economist at Deka Bank.
This article comes from BILD am SONNTAG. The ePaper of the entire issue is available here.
Source: Asia Times
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