Chief of European Service, J.T.A.
London.
When the Nazi regime came to power, far-sighter observers predicted that financial, not political, factors, would prove its chief stumbling block and that it would continue to hold the reins of power just so long as it managed by one artifice after another to avoid a day of reckoning.
Germany’s political victories and advances in foreign affairs, spectacular and comforting though they may be to the Nazis, have not been accompanied by any improvement in the financial condition. The rapidly worsening financial situation, aggravated by the towering expenditures for armaments and employment works, is getting out of control. There is no question about that.
Conservative estimates put Germany’s unfunded internal loans at five billion dollars. More accurate estimates are likely to put this total in excess of nine billion dollars. Much of this is believed to be in the shape of short-term loans.
What the exact position is, no one, possibly not even Dr. Schacht can say with certainty. It is stated officially that the Reich budget for 1934-35 has been balanced. But this balancing counts as revenue, the proceeds of a bond issue of $365,000,000. And it is a well-known fact that the ordinary budget of the Reich does not include the tremendous expenditures for armaments and most of the amounts expended for the public works program to furnish the employment Hitler promised Germany’s jobless millions. Most of these expenditures are charged to various state institutions and agencies.
In Recent months, forced loans have been relied upon by the government for income. Insurance companies and banks have had to subscribe $4,000,000. Householders, instead of getting a reduction in taxes, have had to pay the higher rate to accept “Certificates” for the difference—a total of $2,000,000,000 more for the government.
Industry, as has been previously reported, has had to submit to an arbitrary assessment of two to three percent of its total business within Germany in order to provide funds for Schacht’s desperate expedient of financing a dumping program abroad. A fund of $250,000,000, it is estimated, has been raised by this “voluntary” levy.
The Reichsbank and the Gold Discount Bank, it is an open secret, have been involved up to their necks in all sorts of manipulations to provide cover for the huge drains upon the government finances and coming so close to the straining point that much doubt exists that Schacht’s prestidigitations will be able to pull them through the Summer without some form of devaluation.
The Gold Discount Bank, for instance, according to the London Times, has increased its capital by 200,000,000 reichsmarks (about $80,000,000). This sum was taken over by the Reichsbank in return for fixed-interest bearing securities from its own holdings. At the same time, according to The Times, the Gold Discount Bank was authorized to issue three-month promissory notes which the capital increase was meant to cover.
“It was then announced that the Gold Discount Bank would use the proceeds of the promissory note issue to take up ’employment scheme bills’ from the Reichsbank. The extent of credit elasticity that can be obtained on the nominal working foundation of 200,000,000 marks cannot be estimated, but it is understood that over 250,000,000 marks worth of ’employment scheme bills’ with which by this time bills creating employment through rearmament orders must be considered identical.”
This is financial juggling of a high order that only Dr. Schacht can conceive. But to a layman, and I suspect to the banker as well, it looks suspiciously like taking out of one pocket to put in another— with the difference that all the transactions are paper. Such measures can only be considered temporary alternatives to forestall a final, inevitable reckoning. “Taking in each other’s washing” never provided a solution to any problem.
With regard to external obligations, the Reichsbank has had to announce that the moratorium on cash transfers for foreign debt payments will be extended from June 30, when it was to have expired, for another year. This announcement was not unexpected since Dr. Schacht’s determination not to allow any funds to leave the country for any purpose other than armaments or Nazi propaganda had long been recognized.
Germany’s position will be further complicated by the expiration on July 15 of her trade agreement with France. If negotiations for a renewal of the agreement are not successful, Germany will lose an important source of raw materials as well as a market which has proven profitable for many of her industries.
Within Germany, the ruthless subordination of everything to the determination of the Nazi leaders to make Germany an invincible war-machine is having its effects.
Industrial enterprises, suffering from the difficulty of obtaining raw materials, the loss of foreign markets and the fast-dwindling purchasing power of the home markets, and the excessive levies and taxes they have to meet, are fast approaching a parlous state. The metal industries in particular suffer seriously from high prices for raw materials caused by the shrinkage of imports.
The Cost of living has increased and is increasing further, while the wage level is being further degraded. According to official figures, the amount of wages paid in Germany has greatly increased—but the individual wages
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The Archive of the Jewish Telegraphic Agency includes articles published from 1923 to 2008. Archive stories reflect the journalistic standards and practices of the time they were published.
