Within days of the arrival of the Germans, Jersey people had to come to terms with a new courrency. An exchange rate of nine Reichmarks to the Pound was fixed, and after a day or two of settling down, trade got back more or less to normal. Shops were packed with hundreds of occupying troops, who had had little opportunity to buy any luxury goods as the German army swept across Continental Europe in the preceeding months. Within days the exchange rate was reduced to 8 Marks to the Pound and restrictions were placed on what the Germans could buy.
Almost all of the island's revenue, chiefly derived from import dues and from Income Tax on the English tax-dodging wealthy people and companies, had completely gone, but expenditure, including the heavy burden of unemployment, as well as the entire cost of the occupying forces was soaring.
Income Tax demands at 4s in the Pound were followed by the news that, for 1941, earned incomes would be subject to 50% surtax on this, and that two years' tax would have to be paid for one year.
Barter became one of the principal methods of transacting business, and it took a lot of money to tempt people into parting with the articles no longer available in the shops. Many islanders did not see their transactions as part of the burgeoning black market, but simply a natural reflection of market conditions. Second-hand cycles were fetching anything up to £30, and in auction sales pullets were worth about 35s, with breeding rabbits at about the same price level. Those who sacrificed their principles, or those of the community at large, and worked for the Germans, had money in their pockets, buit less and less to spend it on as the months rolled by.
Before the middle of 1941, Jersey 2s notes were brought into circulation, in order to alleviate the acute shortage of coin change, but only after an equivalent amount of English currency had been withdrawn by orders of the Germans, to avoid inflation.
The States, who had been used, more or less, to balancing their books before the arrival of the Germans, found themselves having to sanction considerable deficits. The public debt which had accumulated before the Occupation stood at about £1,500,000. To this was added the following deficits:
- 1940-41 £78,652
- 1941-42 £423,177
- 1942-43 £491,183
- 1943-44 £369,141
- 1944-45 £456,306
- 1945-46 £527,702
Eventually this debt was written off by the British Government, which most believed was the least that it could do, having abandoned the Channel Islands in 1940 to be occupied by the Germans without a fight, but it was to be some time before Jersey's finances were brought back under control and the island went from being a substantial borrower to being able to balance its books, as was the policy of the latter part of the 20th century.