Reichsbank

Entity Type

Industry

Location

Founding Date

1876

Dissolution Date

1945

The Reichsbank is the predecessor of the Bundesbank. This central bank was founded upon the unification of the German state in 1871. It experienced both stable and volatile periods. In 1939, the Reichsbank was renamed as the Deutsche Reichsbank and placed under the direct control of Adolf Hitler. The defeat of Nazi Germany in May 1945 also resulted in the dissolution of the Reichsbank, along with other Reich ministries and institutions.

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The Reichsbank was thought by some to be the worst central bank in history.

1870s Bubble & 1880s Deflation
1. Soon after being created in 1876, the bank fueled an asset (stock market) bubble with easy bank credit creation
2. During the bubble, the bank tightened, which crashed the markets and created a banking/financial crisis
3. They continued to tighten which resulted in a period of deflation (1880s)
The Reichsbank was responsible for hyperinflation after World War I (Weimar hyperinflation)
Credited for helping to get Hitler into power

The bank was completely independent of government and parliament - they had no one to be accountable to for their action
- Resulted in horrible moral hazard: The bank became more powerful with each crisis. Was rewarded for each new disaster

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Reichsbank

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