Zombie Economics Debate between Albrecht Ritschl and Hans-Werner Sinn

There is ongoing back and forth in the press between two prominent economists, Albrecht Ritschl and Hans-Werner Sinn. The two are debating the size of the economic bailout to Greece in comparison to the U.S. Marshall Plan to Germany that followed World War 2.

Yesterday, in the fourth article of the debate, Ritschl referred to “zombie assets” as part of the debt structure provided to German banks in 1944. Ritschl in the Economist.com, explains:

German public debt in 1948 amounted to 379 billion reichsmarks, roughly four times Germany’s 1938 GDP. Currency reform under the auspices of the US Army in 1948 wiped out this debt. To zero. Now you cannot wipe out a country’s national debt without causing a banking crisis. Therefore, all other nominal assets in Germany were converted at 10:1 (later raised to 6.5:1), and banks received compensating claims, zombie assets, against the state. These amounted to 18 billion deutschmarks, to be written off slowly.

I am in no way competent to evaluate this economics debate – though the major issue may have to do with which programs you consider part of the Marshall Plan and whether most of the debt forgiveness that Ritschl ascribes to Marshall was, according to Sinn, the “London Debt Agreement of 1953 rather than to the Marshall Plan”. Anyway here are the four articles in the debate:

Sinn Op-Ed in NyTimes – Jun13 – “Why Berlin Is Balking on a Bailout“
Ritschl in The Economist – Jun15 – “Germany, Greece and the Marshall Plan“
Sinn in The Economist – Jun21 – “Germany, Greece and the Marshall Plan, a riposte”
Ritschl in The Economist – Jun25 – “Germany, Greece and the Marshall Plan, another riposte “

Who doesn’t love a good academic debate about Nazi zombie debt asset structures. Only Ritschl used the word “zombie”, but frankly I really wanted to draw on Sinn’s head:

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