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The Euro, Germany and Currency Shocks

Few economic challenges are as potentially destabilising as threats to currencies – or exchange rates. German history, including the rise of Hitler, was a shattering response to the hyperinflation that destroyed savings in the 1920s.  Assets had been destroyed by a currency that in Nov 1923 traded at 67 billion to the US dollar. Inflation that meant money was carried in wheelbarrows; and one needed more and more barrows.
Ever since that time, German unions, businesses and households have been inflation averse to a very marked degree – which made the 1999 Euro decision understandable in non-inflationary times, but unwise given widely divergent economic conditions across Euro nations and an uneven level of fiscal discipline across many European countries.

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