Why did Europe create the European Central Bank in the image of the Bundesbank? More generally, what accounts for the current consensus over how a central bank should conduct monetary policy? Germany's experience of hyperinflation and deflation illustrate the West's disastrous experiments in monetary arrangements in the first half of the twentieth century. With the 1948 currency reform, Germany and the Western world started down a more promising path toward monetary arrangements that would provide monetary and economic stability.

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