This chapter examines the world in which the BdL was established. It centres on the period 1948–51, the latter being the year when monetary sovereignty was transferred by the Allies to the West Germans. The chapter documents the opinions of West German elites in the lead-up to the creation of the BdL, noting that they were split on the question of central bank independence. It argues that a political struggle surrounding the future of the central bank incentivised a variety of West German elites to confront their inter-war monetary history. The chapter then shows how the BdL adopted an active press policy in the effort to influence the Bundesbank Law. Such efforts failed to prove effective during this period, however. Other events, such as the Allied decision to transfer monetary sovereignty to West Germany in 1951, proved more decisive. But it was in this very period that the central bank established a workable framework of historical narratives that could be applied for political ends.

The chapter examines the evolution of the Reichsbank, from its establishment in 1876 until the departure of key figures of the directorate in 1939. It devotes particular attention to the record of central bank independence during the inter-war era, and the careers of those Reichsbankers who went on to lead the post-war central bank. The chapter argues that the origins of monetary mythology can be traced back to the Nuremberg trials, where a form of it was first applied in defence of Schacht amid efforts to sanitise both his record and the conduct of the Reichsbank under his tenure.

Chapter four argues that the shadows of the Reichsbank and National Socialism troubled the Bundesbank well into the 1960s. This was in large part because of the central bank’s president, Blessing. After years of using the president’s inter-war record as a source of credibility, the central bank began to see these historical narratives being challenged. Chapter four examines three case studies that centred on Blessing’s questionable past. The chapter documents the re-emergence in the public sphere of Schacht, Blessing’s mentor during the Reichsbank years. The former Reichsbank president used his notoriety to popularise the term ‘third inflation,’ while accusing Blessing of having a role to play in the second one. In 1965, too, news reports emerged in West Germany of the central banker’s past membership in Himmler’s Freundeskreis. These revelations forced the central bank to intervene covertly in the public sphere, with the aim of killing these stories as quickly as possible. These accusations, and the Bundesbank’s difficulty in addressing them, highlight how the legacy of the inter-war era continued to trouble the West German central bank even two decades after the end of the war.

This chapter examines the independence of the central bank in a decade riven by economic crises. In 1973, the Bundesbank faced a challenge to its independence – a challenge that emerged from within the SPD, which shared power in a coalition government. The argument of this chapter underlines Chapter 3’s concluding argument. It highlights how the Bundesbank Law provided the impetus for conflicts between Bonn and Frankfurt, in turn prompting the use of historical narratives concerning the two inflations applied in support of central bank independence. Furthermore, the chapter goes on to note the extent to which the 1970s were littered with monetary anniversaries. It argues that these occasions, coupled with the economic crises at hand, served as moments of reflection that allowed the Bundesbank to bolster its reputation and reinforce the parameters through which West Germans interpreted the monetary past. The chapter concludes by examining a ceremony that marked the thirtieth anniversary of the deutschmark in 1978.

This chapter examines the final years of the Bundesbank Law debate. It devotes particular attention to a 1956 public attack launched by the chancellor, Adenauer, on the central bank. The chapter argues that the crucial consequence of the ‘Gürzenich affair’ was the narrowing of the parameters of monetary debate through which West Germans interpreted the inter-war era. It argues that the provisions outlined in the Bundesbank Law reconfirmed an institutional conflict between Bonn and Frankfurt, one that was originally left behind by the Allied authorities. In providing no formal process through which conflicts between the federal government and the central bank could be solved quietly, the Bundesbank Law increased the likelihood that such disagreements would become ‘dramatised’ and spill into the public sphere. These disagreements gave rise to public controversies surrounding central bank independence, and in turn, provided further instances in which inflation narratives could be geared in support of the Bundesbank. It explains West Germany’s cultural preoccupation with inflation in institutional terms.

When two journalists of Bild, German’s best-selling tabloid, arrived in March 2012 at the European Central Bank (ECB) to interview its president, they brought with them a special gift. It was a Pickelhaube, or Prussian military helmet, dating from the time of the Franco-Prussian War.1 The present, the journalists explained, was to remind Mario Draghi, an Italian, that the newspaper had deemed him back in 2011 as the ‘most Germanic’ of candidates in the race for the ECB’s top position. According to Bild, the manner in which Draghi pursued his career demonstrated that he was imbued with what the tabloid saw as ‘Prussian virtues’.2 This fact overcame his problematic nationality – at least in the eyes of Bild – and made him the ideal man for the job.3

‘The Germans had terrible experiences with inflation in the twentieth century’, recalled Mario Draghi, the president of the European Central Bank (ECB) in March 2012. He was speaking to two journalists from the tabloid newspaper Bild at the ECB’s headquarters, who had just given him a Pickelhaube. ‘It does away with value and makes forecasting impossible. More still – inflation can downright destroy the society of a country.’1 To be dead set against inflation, to be for a strong currency, and to be independent of politics – these were ‘German virtues’. And they were virtues, Draghi said, that every European central banker should strive towards.2