5 - The Bundesbank, Social Democracy and the Era of the ‘Great Inflation’, 1970–1978

Summary

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.