The story of East Germany’s central bank and the destroyed East German Marks notes..

Fascinating piece on German monetary history (HT: JP Koning).

It tells this story of East German Mark which suddenly was no more valid as legal tender post unification (older post on the topic here):

If the East German central bank is remembered for anything, it’s usually only remembered for one thing — its sudden and utter demise.

The Berlin Wall fell on November 9, 1989. A few months later on Sunday, July 1, 1990, the East German central bank handed over its monetary policy sovereignty to West Germany’s Bundesbank — more than three months before the two countries actually became one.

Suddenly the East German mark, called Mark der DDR, was out and the West German mark was officially in as the country’s sole legal tender. Money in East German banks was automatically converted. But the nearly 17 million East Germans only had six days to convert their hard cash or lose it.

There were no actual exchange counters where currencies changed hands. All East German marks had to be deposited in a bank account in order to be exchanged. Cash found after July 6 was worthless. The race was on.

A tiered exchange rate allowed for a one-to-one exchange, but only for a maximum of 6,000 marks for those over 60, 4,000 marks for adults and 2,000 for kids under 14. Any amounts over that were exchanged at the reduced rate of 2:1.

The invalid East German Mark notes were buried in tunnels:

what happened to all that East German cash? According to KfW, in the runup to the monetary union, 620 million notes with a value of 17.8 billion marks were deposited for exchange. In total, 431 billion East German marks were exchanged for the West mark, 62 billion of that at a 1:1 exchange rate, the rest at the higher 2:1 ratio.

Suddenly banks were inundated with worthless currency and had to find a solution. Coins weighing 450,000 tons and nominally worth 640 million marks were simply melted down right away for their metal — mostly aluminum.

Paper money though had another life of its own. All of the notes, including the cash collected during the monetary union and the never-issued 200- and 500-mark notes, were gathered and hidden in underground tunnels near Halberstadt in rural Saxony-Anhalt. It was assumed that moisture mixed with the poor quality of the notes would lead to their decay, but that didn’t happen.   

East German marks being dug up (picture-alliance/ZB)

Printing money is not cheap, either is destroying it. Here deep underground workers are unearthing piles of East German marks to be incinerated. This huge project cost an estimated €500,000

After break-ins and thefts, the KfW caretakers decided to speed up the process. In early 2002, all that remained of the 3,000 tons of the cash was dug up. Eventually 298 truckloads were sent to an incinerator, mixed with household trash and burned, bring an end to part of East German history. 

There is another fascinating piece on how KfW has preserved the history and large number of Koreans visiting the Archives:

Meanwhile, the KfW has around 250 annual requests for access to the archive. For the 25th anniversary of the end of the Berlin Wall, the number of enquiries has increased again.

Koreans, whose own country is still firmly divided, are frequent visitors. They want to know what monetary union was like and marvel at the well-preserved notes and detailed design portfolios. Finally, all want a tour of the impressive building. The KfW has carefully restored and renovated its headquarters.

KfW Senior Director Martina Köchling recalls with pride: “Following the merger with the former central bank, the KfW took over responsibility both for its employees and for the historically and architecturally significant buildings in the heart of Berlin. “We took on all of the employees, and this listed building has been painstakingly restored in consultation with the historic preservation authorities.”

This means the historic building can once again be admired in its original splendor. Goldbach is particularly proud of the Maple Room. Together with a ceiling height of at least six meters, its beautiful, almost perfectly preserved wood paneling and a huge stately fireplace give the room an imposing appearance.

It was a stunning way to receive the wealthy clients of the former Berliner Handels-Gesellschaft. But it’s harder to imagine that under communism, this was a police station. Goldbach shows old photos from the 1980s in which the floor was covered with cheap linoleum and the high ceilings were hidden under polystyrene tiles. People’s Police officers stare into the camera.

Amazing to learn all this…

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