Chapter 117 Currency War 16
Outside of Berlin, the Tempelhof Airport under construction welcomed an unprecedented aircraft, with a corrugated aluminum shell and three 450-horsepower BMW101 radial piston air-cooled engines. The spacious fuselage has 16 seats and a very luxurious wood grain decoration.
This aircraft is the latest product launched by Junkers Aircraft Manufacturing Company in the summer of 1923, numbered Junkers J.23.
Because it is equipped with the BMW101 engine developed by BMW according to Hirschmann's requirements (at this time and space, the patent for radial piston air-cooled engines belongs to BMW), this aircraft not only has strong horsepower and a maximum level flight speed of more than 220 kilometers per hour, but also has excellent economy - the radial air-cooled engine has a simple structure, reliable performance, and a long service life, so the cost of use is very low.
Among the passenger aircraft of the same era, perhaps only the Fokker F5 passenger aircraft (a twin-engine 12-seat aircraft) produced by FK-BF United Company can compete with this Junkers J.23. Therefore, Junkers Aircraft Manufacturing Company and FK-BF United Company naturally became the two giants in the international civil aircraft market. Even when the German economy was almost paralyzed by hyperinflation and the Ruhr problem, these two aircraft manufacturers still occupied four-fifths of the European civil aircraft market.
The plane stopped steadily at the end of a newly built runway, and the cabin door was lowered, turning into a gangway leading to the ground. The new German Finance Minister Dr. Schacht first got out of the cabin, and then a middle-aged man in his forties walked off the plane. He was bald, had a big nose, thick lips, a mustache, and his eyes were very bright. Hersman, who was standing at the bottom of the gangway to greet the guests, had seen this man's photo a long time ago, and had heard of his name earlier.
He is the British economist John Maynard Keynes. In this time and space, he will replace the American banker Dawes as the chairman of the International Expert Committee to Save the German Economy and Currency-because Britain and Italy withdrew from the Allied Reparations Commission at the same time, and Belgium followed later. Therefore, the Allied Reparations Commission controlled by France has become a mere formality. The newly established "International Expert Committee" has actually partially replaced the functions of the Allied Reparations Commission and is responsible for studying the German reparations issue.
In response to the International Expert Committee composed of experts from seven countries including Britain, the United States, Belgium, Italy, Japan, Greece, and Portugal, the newly elected President Hindenburg (Ludendorff became Vice President) and Chancellor Stresemann decided to set up a German Expert Committee. And Hersman, who had just been promoted to colonel, joined this expert committee as a representative of the German Defense Forces.
Although he is not an economist, nor an official in charge of economic and monetary policies. But Hersman is the real soul of this German Expert Committee. The "principle of repayment in kind" that the German Expert Committee is going to recommend is formulated based on Hersman's proposal.
The so-called "principle of repayment in kind" means that Germany will no longer repay the reparations with gold, silver and foreign exchange, which Germany does not have and cannot produce - the possibility of paying the reparations with loans is completely blocked. This method of circulating funds around the real economy is a poisonous way to quench thirst even in theory. Germany borrowed dollars or pounds at a very high interest rate, and most of them were not put into production, but were immediately handed over to the victorious countries. In the long run, it magnified rather than reduced Germany's crisis.
So Hersman insisted on repayment in kind, even if it was all paid in coal, it was more advantageous than paying the borrowed pounds and dollars! Because to fulfill the obligation of repayment in kind, Germany must increase the corresponding production capacity - if it wants to repay the debt with coal, Germany must invest heavily in coal mines; if it wants to repay with industrial products such as aircraft, ships and automobiles, then Germany must invest in increasing industrial production capacity.
And these production capacities built to repay the reparations are also Germany's war potential!
Of course, repaying all debts with coal is not the most favorable option for Germany, which will only form the world's first coal mining capacity. And Hersman also wants the production capacity of aircraft, automobiles and ships. In particular, aircraft factories and automobile factories are very easy to convert to military use.
However, after several contacts, Britain always had doubts about Germany's attempt to export a large number of aircraft and automobiles with the help of reparations.
So Hersman abandoned the "OEM plan" and proposed that German car manufacturers and aircraft manufacturers produce products for their counterparts in Britain, France, Belgium and Italy, and open up technology to them at the same time. According to this plan, Germany will produce a certain number of aircraft and cars every year and hand them over to Britain, France, Belgium and Italy, and then Britain, France, Belgium and Italy will sell them to their own manufacturers at low prices, and sell them under the manufacturers' own brands.
And they don't have to sell them in Britain, France and Belgium, they can also dump them in the United States! Britain, France, Belgium and Italy all owe the United States a lot of debts - a total of 10.34 billion US dollars, and it is still impossible to use gold to repay. If they want to repay with US dollars, the United States must accept the dumping of European goods to a certain extent.
Otherwise, where can European countries find US dollars? They can't swipe them themselves, and ask Americans to borrow US dollars. Sooner or later, big problems will arise, and they are very fatal problems!
Economists like Keynes naturally saw it at a glance. Borrowing a large amount of US dollars is making European countries lose the pricing power of their own currencies - once the United States withdraws their funds, the currencies of European countries will plummet, the economy will be turbulent, and even the regime will change. In this case, European countries will inevitably become more and more dependent on the United States.
Therefore, the method of borrowing new debts to repay old debts is simply chronic suicide! And absorbing US capital to repay debts will make the economies of European countries dependent on US dollar capital. Moreover, both borrowing US dollars and absorbing US dollar capital will make the US dollar replace the British pound as the international reserve currency.
So when Keynes saw the specific plan proposed by the German Expert Committee, his eyes lit up. This plan is the real way to solve the $10.34 billion debt once and for all - sell German cars, airplanes and other things worth more than $10 billion to the United States!
If Americans insist on free trade, then use low-price dumping (compensation items have no cost to Britain). If the Americans put up trade barriers, then Britain can lead Europe to argue with the United States, and let the Americans choose between debt relief and accepting German debt repayment items...
...
"We agree in principle to the 'principle of repayment in kind' and the 'European foundry plan'."
In a conference room at the Ministry of Foreign Affairs on William Street, Hersman finally heard what he wanted to hear most these days!
Keynes finally nodded! He is the most authoritative economist in the UK. If he nodded, the British government will definitely nod.
"But we can't guarantee that France will support it." Keynes said this with a very relaxed expression - because France is "schizophrenic", their big right-wing government has fallen into crisis (government crisis is the most common in the French Third Republic), and will soon be replaced by the easy-to-talk left-wing Virgin Mary.
"If France is willing to support, we will solve the current crisis in the following ways," Keynes went on to state the conditions of the British government. "First, we must supervise Germany's central bank and the Ministry of Finance. The German Imperial Bank must be separated from government jurisdiction and become an independent central bank, with 50% of its decision-makers being foreign experts.
Second, Germany issued a new mark linked to the pound. The first reserve of the new mark was obtained from the Bank of England through borrowing - with a small amount of gold in the hands of the German Imperial Bank as collateral. Gold worth 20 million pounds was exchanged for a loan of 50 million pounds. With this 50 million pounds as reserves, 1.0206 billion new marks were issued. After that, the issuance of the new mark must also adopt this principle: how many pounds does the German Imperial Bank have in the Bank of England before it can issue the new mark. Issue the corresponding number of marks!
Third, in order to restore Germany's industrial production, the British government will help Germany issue long-term bonds of up to 1 billion pounds with tariffs, tobacco, alcohol and sugar monopoly taxes, railway revenues and industrial and commercial enterprise taxes as collateral.
Fourth, the total amount of Germany's reparations should be less than 100 billion gold marks in the end, and will be denominated in pounds, which is about 4.9 billion pounds. It must be repaid in kind, of which coal should not be less than 30%, and other industrial products should account for 70%. The specific repayment plan will be determined by Germany and Britain, France, Belgium, Italy and other countries through consultation.
Fifth, Germany began to pay compensation materials in 1926. In the first year of paying compensation materials, materials worth 100 million pounds must be delivered, which will increase year by year, and will increase to 200 million pounds in the fifth year..."
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The currency war is a bit long, but this paragraph is actually a real war. Moreover, Luo Luo believes that the reason why Germany launched World War II and lost World War II was actually because of the disastrous defeat in the currency war. In addition, some later views claim that Germany "borrowed" so many dollars from the United States to revive its industry. This is actually a statement to discredit San Dezi and the American empire. The United States lent money to Germany not to finance Germany's revival, but to seize Germany's currency issuance rights. Germany had a very complete and leading industrial system at the time, and it did not need to rely on US loans to upgrade if Germany had the right to issue its own currency.
However, Germany lost its currency issuance rights due to the crisis in the early 1920s, and the mark was forced to be linked to the US dollar, relying on US loans to guarantee currency issuance. The economic crisis that Germany encountered after 1927 and Hitler's rise to power were all caused by this. Because after losing the right to issue currency, the German central bank was unable to stimulate the economy and defeat deflation by issuing more currency. When the US dollar flowed out of Germany, Germany could only face unbeatable deflation.
The inflation that Germany faced in the early 1920s and the deflation that it faced in the late 1920s can both be seen as currency wars. After losing two currency wars, Germany actually lost most of the time during the interwar period. War preparations were of course very inadequate. Moreover, after obtaining the right to issue world currency, the United States was already invincible in the economic war with Germany. In the world war, the United States only needed to swipe some paper to import materials from neutral countries. Germany, however, had to pay real money or equivalent industrial products.
Therefore, in order to change the outcome of World War II, the protagonist had to start with the currency war during the interwar period, preserve and expand Germany's industrial advantage through "in kind compensation", and then introduce the concept of the European Community and common currency, and lay a theoretical and public opinion foundation for the later discovery of the euro.
This is a long story. Those who can read it patiently must be loyal readers of Luo Luo. Luo Luo thanks everyone for their support and shamelessly asks for a first order and a monthly ticket on May 1st. Thank you everyone.