Dr. Hjalmar Schacht was president of the Reichsbank before Paul von Hindenburg was President of Germany. He was Adolf Hitler’s Economics Minister from 1934 to 1937. As his country turned away from orthodox finance, substituting an economy of warfare for an economy of welfare, Dr. Schacht turned away from orthodox banking practice. He invented and juggled dozens of kinds of export marks to buy Germany what she needed abroad—largely for rearmament.
But while Dr. Schacht was not an orthodox banker any longer, he was still a banker. And while he juggled marks abroad, he tried to keep the lid on at home.
With German money markets flooded with Government bonds to pay for rearmament and public works, Germany’s private industry has been starved for capital. Railroads, big and little industries are badly in need of repair and replacement. One way to get money to pump into private industry is for the Government to borrow it from the people. But last week a Government loan was undersubscribed by from 300,000,000to 400,000,000 marks because private investors would not buy. Another way to get money is to tax it out of the people. But Germany is one of the most taxed nations.
The last way to get money is to make more of it. Dr. Schacht who had pulled Germany out of the horrors of the 1923 inflation, put his foot down on printing more money. That, in the last analysis, was believed to be the reason that last week he got his walking papers. Hjalmar Schacht, onetime orthodox banker, will be replaced by Walther Funk, onetime newspaperman.
Never one to mince words, Dr. Schacht was often frank to the point of incaution. Regarded as one of the financial geniuses of his time, he once was reported to have told Fuhrer Hitler and an assembly of Nazi potentates: “You need me. And you’ll continue to need me for several years. After that, you can shoot me if you want to. But you can’t shoot me yet.” Asked once what he thought his future would be, he said: “A monument or the gallows.” And last week Fuhrer “Hitler, in telling him that hereafter he would be able to use him for the “solution of new tasks,” wrote: “Your name will be connected forever with the first epoch of national rearmament.”
Dr. Schacht will remain a Reichsminister without portfolio, but few believed that he would continue to be a power. At the time of his dismissal he was negotiating with George Rublee, director of the Inter-Governmental Committee for Refugees, on a plan whereby Germany would increase its export trade by letting the Jews emigrate. These negotiations were curtly stopped, later resumed by Dr. Helmuth Wohlthat.
The Reichsbank, since 1924 a semi-independent institution not under the Government’s domination, will now be under the direction of the Reich Economics Ministry. In his letter to Dr. Funk outlining his tasks, Herr Hitler directed that Dr. Funk now convert the Reichsbank into a “German bank of issue unconditionally subjected to the sovereignty of the State, in conformity with National Socialist principles.”
Chubby, jolly Dr. Funk, long a Nazi Party member, and once head of the Third Reich’s Press Department, will keep his Economics Ministry which he took from Dr. Schacht in 1937. Specifically charged with maintaining the stability of wages and prices, he will now have the added and important job of opening up and enlarging, in Herr Hitler’s words, “the capital market for private financial needs.”
Not credited with either the genius or the stubbornness of Dr. Schacht, Dr. Funk is not expected long to resist the demands of those Nazi radicals who have wanted to print bank notes against such newly created wealth as public buildings, roads. They have professed to be less interested in how much gold a ten-mark note represents than how much bread it will buy. As if in expectation of inflation, values on the German stockmarket rose in terms of marks, while German bonds elsewhere sank lower.
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