Chapter 102 Currency War 1
"269 billion gold marks! Oh my God, how can they ask for so much? How much gold is that equivalent to? 60,000 tons or 70,000 tons..."
It is January 28, 1921, and the presidential palace in Berlin is in chaos. President Ebert walks around the room in a rage, Chancellor Constantine Fehrenbach (Catholic Center Party) sits on the sofa in silence, Defense Minister Otto Gessler stands at the window dumbfounded, and Transport Minister Admiral Wilhelm Groener breathes heavily.
Since the second half of 1920, the economy of the Weimar Republic has improved slightly. Thanks to orders from the Soviet Union and the Baltics, Germany's industrial production has begun to recover. The government's revenue is also increasing. In the last few months of 1920, revenue has covered nearly 70% of expenditures, and the value of the mark has remained stable. Seeing that the German economy may recover in 1921, the Allied Reparations Commission gave the Weimar Republic a blow! No, not a stick, but a time bomb tied to the Weimar Republic!
Britain and France used an astronomical reparation of 269 billion gold marks - which could not be paid off in the era of the gold standard - to announce the death sentence of the Weimar Republic!
The Weimar Republic had no way out economically. The mark, which was backed by gold and national credit, could not escape the fate of becoming waste paper. Even if it did not become waste paper, Germany's monetary sovereignty was lost. From now on, it could only rely on loans from Britain and the United States - relying on foreign loans as a guarantee for issuing paper money, and letting the German Imperial Bank (central bank) accept de facto international co-management (half of the members of the General Council of the Imperial Bank were foreigners). The essence of the so-called "Dawes Plan" lies in this. It could not save the Weimar Republic, but could only delay its demise.
It can be said that when the Allied Reparations Commission announced this reparations figure, it was destined that German tanks would rampage across the European continent.
However, on January 28, 1921, few people could foresee such consequences, and those in President Ebert's office were no exception. They now only see the reality that the demise of the Weimar Republic is a foregone conclusion, and no one can save this regime that brought democracy to Germany...
"Constantine, what should we do?" President Ebert looked at his political opponent, Constantine Fehrenbach, the chairman of the Catholic Central Party who served as the prime minister, with almost desperate eyes.
"Mr. President, we can't take it out!" Constantine Fehrenbach also felt desperate. The current fiscal revenue can only cover 70% of the expenditure, which means that 30% of the expenditure is maintained by printing money. In such a fiscal situation, let alone 269 billion gold marks, even one-tenth of this number cannot be taken out.
"If they can't take it out, they will occupy the west bank of the Rhine!" Albert looked at Defense Minister Gessler and Transport Minister Groener again. This is actually asking them how much resistance Germany still has.
The two looked at each other and shook their heads at the same time. Gessler said: "Now the army has only 200,000 people, and there are not many heavy weapons and no aircraft. It is impossible to resist."
Grena said: "The Baltic Republic still has 45,000 defense forces, but they can quickly expand to 150,000. Before signing the Treaty of Versailles, we also hid 1,500 cannons of various types, 10,000 machine guns and 500,000 helmets, as well as a large number of shells and bullets in Miuta. In addition, the Baltic Defense Force has now established an air force with 200 aircraft with very superior performance. There are also factories of the FK-BF Aircraft Manufacturing Association and the Junker-Fokker Aircraft Company (which was established at the end of 1920 and specializes in the production of large transport aircraft) near Riga. If we need them, they can deliver about 100 aircraft every month..."
"Okay, I know!" President Albert's face was a little ugly. Hiding so many weapons in the Baltic Republic clearly violated the Compiègne Agreement and the subsequent Treaty of Versailles. And what's worse is that as the president, he didn't know anything about it before!
"It seems we can still resist!" Albert said, "Reject it! Then negotiate and try to reduce the indemnity to 50 billion gold marks, and postpone the payment for another four years, so that we may be able to hold on."
...
"If we don't count the gold we have in Switzerland, the entire German financial system, including the reserves of the Imperial Bank, all the gold, silver and foreign exchange total only equal to about 2.3 billion gold marks..."
In the Charlottenburg district, inside the headquarters of the Economic Promotion Company. At this time, an emergency meeting was also held. In addition to several members of the Industrial Promotion Committee, including Hirschmann, Schleicher, Er. Haushofer, Colonel Schleicher, and Dr. Schacht, the meeting was attended by Chief of Staff Seeckt, General Ludendorff who had established a cooperative relationship with the National Socialist German Workers' Party, and Colonel Oscar von Hindenburg, the son of Marshal Hindenburg, and two members of parliament, Gustav Stresemann of the People's Party and Colonel von Papen of the Center Party.
Dr. Schacht, the general manager of the National Bank, first told everyone about the financial assets of the entire Germany. After handing over gold coins, foreign exchange, precious metals and physical objects (mainly physical objects) worth 20 billion gold marks, Germany really did not have much wealth left.
“We also spent a lot on gold stored in Switzerland,” Schacht added. “A quarter of it (worth 600 million gold marks) was lent to the Baltic Republics to prepare for the issuance of the Baltic Mark. In addition, The same amount of gold was used to establish a 'Special Overseas Investment Fund' to support large German industrial companies in transferring production capacity overseas or acquiring heavy industry and mining companies in the former Austro-Hungarian Empire... But even if the Swiss gold was not used, It is impossible for us to pay compensation of 269 billion gold marks. I think they understand this, so they don’t really want us to pay.”
"You don't really want compensation?" Ludendorff asked angrily, "Then what do they mean?"
Hersmann said: "They are fighting a currency war with the goal of destroying Germany's monetary and financial sovereignty!"
Ludendorff looked at Dr. Schacht, who nodded: "Yes, the Lieutenant Colonel is right. If they really want us to compensate, they can ask us to repair towns, factories and railways in Belgium and northern France." … If we can keep all the gold and foreign exchange as the basis of the mark, we can raise funds by issuing bonds and printing money, and let German companies and workers repair those things. This is not the same as taking the gold directly!”
If the Germans are asked to repair what is broken, then the German government pays businesses and workers in paper marks that can be printed out. In addition, companies will generate profits and pay taxes, and workers will receive wages to stimulate consumption, thus driving economic development. Of course, the mark will also depreciate as a result, but the extent of the depreciation is controllable because the government and the Imperial Bank have large gold and foreign exchange reserves. You can take action to support the market when necessary. But once Germany loses most of its gold and foreign exchange, and there is no government that can strongly control the German economy - such as the governments of Nazi Germany and Soviet Russia - then the currency can be redeemed at any time (that is, paper currency is linked to gold). convertible) era, Germany’s credit currency system will not be able to maintain, and the collapse of the currency system will be quite fatal to the German economy!
Schacht finally said in an extremely low tone: "So, they are not asking us to pay reparations, but they are launching a currency war aimed at destroying the German economy!"
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