Lords of Finance_ The Bankers Who Broke Liaquat Ahamed

[ Pobierz całość w formacie PDF ]

plane, this time for Basel, to make one last desperate plea to the central bankers gathered at
the BIS. After being closeted in conference for twelve hours, they emerged to announce that
no new credits would be forthcoming. At 11:20 p.m. Basel time, Harrison got through to Nor-
man. The Englishman sounded tired, disgruntled and discouraged. The problem was just
too big for the central banks, he reported. The only solution was for the whole structure of
war debts and reparations that had weighed down the world for the last dozen years to be
swept away.
On the morning of Monday, July 13, as Luther was setting off for Basel, the Danatbank
had failed to open. On the locked doors of all its branches was posted a government decree
guaranteeing its deposits. At a press conference, Jacob Goldschmidt revealed that the bank
had lost 40 percent, some $240 million, in deposits over the last three months, about half of
which were to foreigners. He blamed the run on wild rumors fueled by anti-Semitic agitation in
the Nationalist press.
The Reichsbank, hoping that the impact might be contained, kept the rest of the banking
system open that day. By lunchtime, branches of every bank in the country were besieged.
The leading banks restricted withdrawals to no more than 10 percent of a depositor s balance.
In the Berlin suburbs, savings banks were so overwhelmed that that they closed under heavy
police guard. In Hamburg, sporadic riots were blamed on Communist agitators. That evening
President Hindenburg proclaimed a two-day bank holiday. The authorities hoped that a short
breathing space would allow people to come to their senses. In the event, banks throughout
Germany remained closed except for the most essential business of paying wages and
taxes for another two weeks, during which commercial life in the country was brought to a
virtual standstill.
All the banks in Hungary were closed for three days. In Vienna, another of the large banks
shut its doors. In Danzig and Riga, in Poland, Yugoslavia, and Czechoslovakia, banks were
suspended. German tourists across Europe, even in fashionable sophisticated cure resorts
like Marienbad and Carlsbad, were stranded when no hotels or shops would accept their
marks. The German government issued one decree after another. Despite the massive unem-
ployment, interest rates were hiked to 15 percent just to keep money in the country. All pay-
ments on Germany s short-term foreign debt were suspended. All foreign exchange had to be
turned over to the Reichsbank and all movements of money out of Germany were tightly regu-
lated, the practical equivalent to going off gold.
For the second time in less than eight years, Germany faced economic disaster. Despite
the chaos, the country remained surprisingly peaceful, save for a few small riots in Leipzig
and Dresden, D�sseldorf and Koblenz. There was an atmosphere of resigned passivity born
of a weary submission to the inevitable, wrote the New York Times, the consequence of a
decade of economic turmoil. The British ambassador, returning after a few weeks absence,
noted that he was much struck by the emptiness of the streets and the unnatural silence
hanging over the city, and particularly by an atmosphere of extreme tension similar in many
respects to that which I observed in Berlin in the critical days immediately preceding the war .
. . an almost oriental lethargy and fatalism.
In such circumstances, he continued, Dr Schacht s financial reputation has revived and
he has reappeared on the stage . . . there are small but widening circles which feel that Dr.
Schacht, if only he could overcome his unpopularity abroad, and especially in the U.S.A. and
with Social Democrats at home, might yet be the man to save Germany. The government did
try to induce Schacht to return to power, offering him the position of the banking czar with re-
sponsibility for sorting out the whole mess caused by the meltdown. Fearing he was being
offered a poisoned chalice, he refused and returned to his country estate to wait upon events.
The collapse of the German banking system in the summer of 1931 sent the economy
lurching downward once again. Over the next six months production fell by another 20 per-
cent. By early 1932, the industrial production index reached 60 percent of its 1928 level.
Nearly six million men a third of the labor force were without work.
In October 1931, the parties of the right collectively staged a rally in the little mountain spa
of Bad Harzburg, one of the few places where the wearing of brownshirt Nazi uniforms had
not been banned. It was a reunion of everyone who was or had ever been against democracy
in Germany. The town was festooned with banners in the old imperial colors. Aged generals
and admirals from the previous war turned out, as did two of the sons of the ex-kaiser, the
princes Eitel Friedrich and August Wilhelm, rubbing shoulders with an assorted collection of
industrialists, politicians, and five thousand goose-stepping paramilitary militia and storm
troopers from various factions. The event was kicked off by an invocation for divine guidance
by a Lutheran pastor and a Catholic priest. The star of the occasion was Hitler, who hogged
the spotlight with his impromptu speeches.
An equally big stir occurred, however, when Schacht, in his first public appearance as an
associate of the Nazis, ascended the stage to speak. He accused the government of mislead-
ing the country on the amount of foreign debts and gold reserves. As to the economic policies
of the opposition, he was obscurely vague, saying only that the program to be executed by a
national government rests on a very few fundamental ideas identical to those of Frederick the
Great after the Seven Years War.
The speech provoked outrage in the Reichstag and within the government. For the ex-
president of the Reichsbank to declare publicly that the country was bankrupt though this
was essentially true was viewed as an act of vindictive irresponsibility and betrayal that
could only add to the economic turmoil. That most of the foreign debt had been amassed on
Schacht s watch only added to the anger. There were even calls in parliament and in the
press for his prosecution on a charge of high treason. Schacht had long since broken with the
left. He had now estranged himself from the democratic center. His only home was with the
Nazis. And though the struggle against reparations was now essentially over, the fight for the
future of Germany was still to enter its last act.
Lords of Finance
20. GOLD FETTERS
1931-33
Lo! thy dread empire Chaos! is restored:
Light dies before thy uncreating word;
Thy hand, great Anarch! lets the curtain fall,
And universal darkness buries all.
ALEXANDER Pope, The Dunciad
ON July 14, Norman returned from Basel to find the crisis now spreading to Britain. That
evening Robert Kindersley, a director of the Bank of England and head of the London arm of
the great investment house of Lazards, asked to see him in private and told him that Lazards
itself was in serious trouble. Ironically enough it had little to do with the crisis ravaging Central
and Eastern Europe. In the midtwenties, a rogue trader in the Brussels branch of the bank [ Pobierz całość w formacie PDF ]

Linki