Paper short abstract:

Historically, currency reform is best enacted hot on the heels of regime change. In both Germany and Japan, however, hundreds of millions of U.S. dollars were exchanged by military authorities for dubious paper currencies issued by the defeated enemies, and by other occupying powers.

Paper long abstract:

The continued use and circulation of Nazi, Imperial Japanese, and assorted Allied military currencies, and the redemption of these currencies in U.S. dollars, were the source of a huge financial threat to U.S. military authorities in Germany and Japan. Historically, currency reform is best enacted hot on the heels of regime change. In both Germany and Japan, however, hundreds of millions of U.S. dollars were exchanged by military authorities for dubious paper currencies issued by the defeated enemies, and by other occupying powers (principally the Soviet Union in Germany). The scale of these exchange transactions was such that the U.S. Treasury Department made dire warning of financial dysfunction and insolvency at the very highest levels of military command. Against this background, what were the currency and monetary policies of the Allied occupational forces in Germany and Japan? Which individuals or institutions benefited most from these policies? And how did U.S. currency policy proceed given the wider frameworks of quadripartite and Far Eastern Council oversight and requisite negotiations? In order to answer these questions, my presentation at the forthcoming EAJS aims to shed some light on the "shoddy history" (in Charles Kindleberger's words) of how U.S. military authorities managed to "squeeze" U.S. dollars back from Allied occupation personnel "without loss" to the U.S. Government, and ultimately, to present new insights into how the introduction of new currency systems helped reinforce America's position in Germany and Japan during periods of great economic instability and the emerging cold war.