East German Mark

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The following article is from The Great Soviet Encyclopedia (1979). It might be outdated or ideologically biased.

Mark, East German


(DM-Ost), the mark of the Deutsche Notenbank, the state bank of the German Democratic Republic (GDR). It equals 100 pfennigs. The East German mark was created in 1948. The mark was substituted for currencies that had circulated throughout Germany: the reichsmark, Renten-mark, and the mark of the Allied Control Council, which had circulated in East Germany from May 1945 until June 1948. The established gold content of the GDR mark in 1953 was 0.399902 g of pure gold. According to the rate of exchange of the Gosbank (State Bank) of the USSR on January 1,1974, 100 marks equaled 40 rubles 50 kopeks.

The Great Soviet Encyclopedia, 3rd Edition (1970-1979). © 2010 The Gale Group, Inc. All rights reserved.
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For a detailed discussion of the events which led to the unification of Germany and of the problems resulting from "generous" conversion rate of the East German mark and the wholesale take-over of western Germany's legal and institutional framework see OECD, Economic Survey of Germany, 1990 and 1991.
The problem, it seems widely accepted, stems from the decision of then-chancellor Kohl to speed up unification by exchanging West German and East German marks at near parity.
There were Yemeni and Iranian riyals; Kuwaiti and Iraqi dinars; West and East German marks; United States and Fijian and Maria Theresa dollars; zlotys; rubles; rupees; shekels; Ecuadorean sucres; Mexican and Chilean pesos; French and Swiss francs; British, Turkish, and Egyptian pounds.
Given the partly conflicting targets of minimizing the risk of inflation, strengthening the competitive position of the East German business sector, containing budgetary cost and satisfying the high expectation of East German population, the rates for converting East German marks into D-Marks were seen as a compromise (general conversion rate for financial assets and liabilities of one D-Mark for two East Marks, preferential rate of 1:1 for limited amounts of private savings and for contractual payments such as salaries, wages and rents).
Market participants feared that the conversion of East German marks into West German marks would result in a worrisome increase in German monetary aggregates or unleash pent-up demand for German products.
Sales were based on East German marks at a supposed exchange rate of 1.3 or less.