THE NOTION IS WIDESPREAD that for a long period of time and in a large economic area cigarettes served as currency in Germany after the recent war. Probably the most explicit statement of this belief, which the writer finds erroneous, is the following: "In Britain it [the cigarette] never, even at the height of the American occupation, went so far as to replace the existing metal or paper coinages. In occupied Europe it did."' While we examine here only the German case, it is probable that situations similar in many respects existed elsewhere. In order to understand the role played by cigarettes as money, it is essential to examine the historical background of the problem. Up to the fall of I946 American cigarettes were not considered either as a general measure of value or as an instrument of exchange.2 The Reichmark (henceforth RM) was still reasonably stable, black market trading was limited, and the worst period of Germany's economic decline had not yet begun. Although the price of cigarettes was very high, it was fixed by the general laws of supply and demand.3 Usually cigarettes were sold for Reichmarks, which at that time could be exchanged by American and British soldiers for pounds or dollars. Consequently, a soldier could sell part of his ration, have all the money he desired for his non-military expenses, and still save his whole paycheck. Large dollar and pound profits were made in many cases.4 However, in August of I946 the Allies took steps to alter the situation. A partial conversion of cigarettes into a money medium came