# Purchasing power comparisons of historical amounts of money

## General notes

In order to determine what a historical amount of money would be worth today, its purchasing power has to be calculated. This provides information on the present-day value of goods and services that could be obtained for a certain sum of money in the past. The calculated comparative values are referred to as purchasing power equivalents. While the figure of interest is the equivalent in euro (), historical amounts are frequently quoted in the currency units formerly used in Germany: for instance, Deutsche Mark (DEM), Reichsmark (RM), Mark (M), Prussian thaler or south German florin (fl). Depending on the currency, period and specific issue being considered, different methods of calculation have to be used and various reservations need to be taken into consideration when calculating the purchasing power equivalent.

A short insight is given below into the history of money in Germany since the 19th century. The methodology for calculating purchasing power is then explained using several examples. In addition, caveats relating to purely mathematical purchasing power comparisons are described.

See the right-hand column for a table with current purchasing power equivalents of historical amounts in German currencies from 1810 and sample calculations.

## The history of money – from the thaler and florin to the euro

During the time of the German Confederation (established in 1815), practically all of its almost 40 member states had a silver currency. Only Bremen continued to use the gold standard. The Prussian thaler with a fine silver content of 16.7 g and the south German florin with a fine silver content of 9.5 g established themselves as the dominant currencies (in particular thanks to the Dresden Coinage Convention of 1838 and the Vienna Monetary Treaty of 1857).

After the German Reich was founded in 1871, local currencies were gradually replaced by the Mark. The exchange rate of the Prussian thaler was set at 1 thaler = 3 Mark and the exchange rate for the south German florin at 1 florin = 12/7 Mark (Coinage Act of 9 July 1873). From 1 January 1876, the Mark was the only valid currency for the entire German Reich.

With the Coinage Act of 30 August 1924, the Reichsmark replaced the Mark as the official currency. The exchange rate of the Mark against the Reichsmark was set at 1 Reichsmark = 1 trillion Mark.

Historical amounts of money are frequently quoted in “Goldmark” rather than Mark or Reichsmark. However, the Goldmark was a unit of account, not a legal unit of currency or legal tender. The Goldmark referred to the value of a given amount of fine gold, the price of 1/2790 kilograms of fine gold, to be precise. Amounts denominated in Goldmark were payable in units of the prevailing official currency, i.e. the Mark up until October 1924 and then the Reichsmark up until 1948. As the Mark had a legally fixed exchange rate to gold (gold parity), one Goldmark was worth one Mark up until the outbreak of the First World War. When the Reichsbank suspended the exchange of Mark banknotes for gold on 31 July 1914, thereby de facto ending gold parity, the value of the Goldmark in Mark increased with rising inflation and in line with developments in the US dollar exchange rate. On 20 November 1923, the exchange rate of the Mark to the dollar, which was backed by gold – and thereby also the exchange rate to the Goldmark – was stabilised. After that, the value of the Goldmark consistently stood at 1 trillion Mark until the Reichsmark was introduced on 11 October 1924. From the introduction of the Reichsmark until the 1948 currency reform, a Goldmark was worth one Reichsmark.

With the introduction of the Deutsche Mark on 21 June 1948, a conversion rate of 1 Reichsmark = 1 Deutsche Mark applied to everyday payments such as wages and salaries, pension payments from social security funds, civil servant pensions and rental payments. However, different conversion rates applied to private bank balances, for instance. For more information on the 1948 currency reform, see “Further information” and “References” listed at the end of this page.

On 1 January 1999, the euro was launched as book money and, three years later, on 1 January 2002, the first euro banknotes and coins came into circulation. The exchange rate is €1 = DEM 1.95583.

## Developments in specific purchasing power

Where today’s purchasing power is calculated based on the prices of specific goods or services, the term specific purchasing power equivalent is used. A specific purchasing power equivalent is obtained by comparing the historical price of a specific good with what the same good, or at least a comparable good, costs today.

The following table lists the prices of various food items in 1882 and compares them with their 2023 prices. The specific purchasing power equivalent is calculated as the 2023 price divided by the 1882 price.

 Food product 1882 price in M 2023 price in € Purchasing powerequivalent of one M in € 1 1 kg rye bread 0.26 4.11 16 1 kg wheat flour 0.45 1.26 3 1 kg potatoes 0.07 1.84 26 1 l whole milk 0.17 1.25 7 1 kg butter 1.98 7.74 4 10 eggs 0.50 2.86 6 Sources: Statistical Office in Hesse (Statistisches Landesamt Hessen) and Bundesbank calculations based on consumer price indices published by the Federal Statistical Office. 1 The purchasing power of one Mark in 1882 would thus be equivalent to the purchasing power of €... in 2023.

The results of the calculation yield a relatively wide range for the value of the euro against the Mark. Basing the calculation on the price of potatoes, for example, one Mark in 1882 would have a purchasing power equivalent of €26 in 2023, while the price of wheat flour produces an equivalent value of only €3. If the prices of other goods are used as the yardstick, the results may be significantly different again.

## Developments in general purchasing power

When assessing the purchasing power of money in general, developments in the general price level need analysing rather than developments in the price of individual goods. This is generally done using consumer price indices. Price indices measure average price developments in a representative “basket of goods”, consisting of all goods and services households purchase for consumption purposes.

In Germany, the consumer price index is calculated by the Federal Statistical Office. The composition of the basket of goods is regularly adapted to households’ consumption patterns, and changes in the quality of goods are also taken into consideration. Changes in the composition of the basket of goods make it difficult to compare general purchasing power, especially over longer periods. The overlap between today’s basket of goods and past baskets of goods becomes smaller as more time elapses between the periods being compared. First, households' consumption habits change over time; and, second, a large percentage of the goods and services common today were not available in the past or not in a comparable form or quality. This issue is discussed in greater detail in an expert opinion on developments in the value of money which the Bundesbank prepared for the Federal Finance Court (Bundesfinanzhof) in 1965 (see “Further information” below).

See the PDF table “Purchasing power equivalents of historical amounts in German currencies” on the right for the results of general calculations of purchasing power based on German consumer price indices from 1810 onwards. The purchasing power equivalent is calculated here as the quotient of the price index for 2023 and the price index of the year with which it is being compared. For example, it shows that one Mark in 1882 would have had roughly the same purchasing power as €8.70 in 2023. The right-hand column also includes a link to two sample purchasing power calculations.

The figures calculated in the table “Purchasing power equivalents of historical amounts in German currencies” allow an analysis of historical developments in purchasing power. However, where the objective is to ensure that the payments (e.g. rent, leasing payments, civil servants’ pensions, other everyday payments) that creditors receive will, going forward, have the same purchasing power as they do today, contracts frequently include stable value clauses. Stable value clauses are often also based on the consumer price index. On its website, the Federal Statistical Office provides background information on stable value clauses in contracts as well as detailed information on the German consumer price index (see “External links” in the right-hand column).

## Caveats and notes

Purchasing power calculations are subject to uncertainty. Calculated purchasing power equivalents should therefore always be seen in the light of certain caveats:

• As already explained in the previous section, the informative value of general purchasing power comparisons is limited, especially over lengthier periods of time. For specific purchasing power calculations, too, the comparability of the underlying goods in the past and present is often limited.
• The informative value of purchasing power comparisons starting in a period of exceptional economic conditions is particularly small, as households’ consumption habits then differ from those in “normal” years. For Germany, this particularly concerns the years during and after the First World War, the period of hyperinflation lasting until 1924, the Great Depression beginning in the late 1920s and the years during and after the Second World War up to 1948.

In addition, the German consumer price index for the years during and after the Second World War up to the currency reform in 1948 mainly includes state-regulated prices. Furthermore, only a very limited amount of goods were available at these official prices. Prices on the black market (especially in the post-war period) thus differed enormously from the official prices. A purchasing power calculation starting in this period is therefore largely based on price data that do not correspond to the actual prices of goods and services at that time. Consequently, the results obtained from purchasing power calculations for this period additionally have to be seen in this light or even taken to have no informative value at all.
• Alongside the time component that can limit the informative value of purchasing power calculations, the choice of goods or price index that forms the basis of purchasing power calculations has a decisive impact on the outcome. As illustrated by the sample calculations for 1882, applying a different calculation basis can yield significantly varied results. This means that, in individual cases and depending on the specific issue being considered, it is necessary to weigh up the most appropriate basis for the calculation.
If, for example, the purchasing power of a historical amount of money is to be assessed in connection with the value of a residential property, a construction price index can serve as the calculation basis. In these cases, calculations can be based on the price index for the construc-tion of new residential buildings compiled by the Federal Statistical Office (see “External links”: Rebuilding value of residential buildings erected in 1913/14). On this basis, for example, one Deutsche Mark in 1955 has a purchasing power equivalent of €7.21 in 2023. For comparison, the corresponding purchasing power equivalent based on the consumer price index is €2.94.

In any case, a specific euro equivalent for a historical amount of money can only serve as a rough guide and should always be treated with caution. To better gauge the economic significance of the amount during the period in question, it should be viewed in relation to other value data from that time. Macroeconomic variables such as the national product can provide additional information, as well as prices for food, land and buildings, and wages and salaries. In addition, converting a historical amount of money and converting current prices or calculated purchasing power equivalents into earnings and working hours can enable a relative comparison over time. Data on employee earnings in Germany from 1913 onwards are available on the Federal Statistical Office’s website (see “External links”). Further information can be found in the references listed below.

In addition, we would like to point out that, in certain cases, currency regulations apply when calculating a current value (e.g. for many land registry entries). These may stipulate that the amount is to be converted at a specific conversion rate.

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## References

• Deutsche Bundesbank (1968), The Extent of Depreciation of Money since 1950, and the Prospective Trend of the Value of Money, Monthly Report, March 1968, pp 3-19.
• Wolfram Fischer, Jochen Krengel and Jutta Wietog (1982), Sozialgeschichtliches Arbeitsbuch I, Materialien zur Statistik des Deutschen Bundes 1815-1870, Ver­lag C.H.Beck, Munich, pp 147-167.
• Gerd Hohorst, Jürgen Kocka and Gerhard A. Ritter (1978), Sozialgeschichtliches Arbeitsbuch II, Materialien zur Statistik des Kaiserreichs 1870-1914, Ver­lag C.H.Beck, Munich, pp 92-117.
• Dietmar Petzina, Werner Abelshauser and Anselm Faust (1978), Sozialgeschichtliches Arbeitsbuch III, Materialien zur Statistik des Deutschen Reiches 1914-1945, Ver­lag C.H.Beck, Munich, pp 90-106.
• Bernd Sprenger (2002), Das Geld der Deutschen: Geldgeschichte Deutschlands von den Anfängen bis zur Gegenwart, Schöningh, Munich.
• Statistisches Landesamt Hessen (1960), Hessen im Wandel der letzten hundert Jahre 1860-1960, Wiesbaden.