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M ISC 136.10. 12 7' FEDERAL RESERVE BANK OF NEW YORK Date 4/14 /7 ))101 To Of From Please: Attend to Note and return Note and forward to Files For your information D For your files SeAs per conversation As requested LI See (phone) me For your comments re attached and suggestions LI Prepare reply for my signature Does attached meet with your approval? E For signature, if you approve Other remarks: C,e`fi Reieksbank - Direction Berlin, S. W. 19, November 9, 1921. 9596 D )4 The experience which we have had in securing bills of exchqnge for eV" the payment of indemnities in connection with the fulfillment of the peace trerty, mazes it seem to us desirable to bring about a direct connection among the central note banks of tnose countries which are primarily interested in the easy handling of the payments. From this point of view we should consider it suitable if the note banks concerned could open current accounts for erch other in their books. .ccoruingly we nave, among other things, already entered into communication with tne Bank of England in London for this purpose and received from it the promise thi_t The preparations are under way, and. lit will open accounts for us in its books. ;intend in tne course of time to make such arrangements that the business of Reichsbank to be liquidateo in English pounds may be settled in the main tnrou61 I.` In this connection it has also been agreed that tne Bank Bank of England. .England, insofar as, according to its constitution, it is not in the position 1110*Ae grant interest on cash capital, will undertake to maze interest-bearing invekL ` fiiints of consideraole sums with the best care for our interests. We now permit ourselves to ask you whether you are disposed to :-.4nter into a relation of like or similar form with us. ,67,;i4 In our opinion, from thei, '.bciprocal uirect connection valuable relief would gradually be afforded to the la exdnange market, with generally useful results. ,& ubout,to deposit a considerable sum in gold (minted or in bullion) abroad - probably .. rtunity we should like to ask you a second ruestion.' a corresponding change in the bank law can be brought order to use it as a oasis for short-time loans in need, in dollars. http://fraser.stlouisfed.org/ Would it be possible for your bank, Federal Reserve Bank of St. Louis Fit -2- We should be grateful if our suggestion should meet with your approval, and we most respectfully look for a favorable reply. .teichsbank - Direction navenstein 12o the. eederal _reserve Bank of Yew York, riew York. Kauffmann The president of the Reichsbank - Direction ho. 9596 D Berlin, S. W. 19 November 9, 1921. Honored Governor: I do myself the honor of sending you a letter from the Reichsbank Direction to the Federal Reserve Bank of New York, with the following observation: I took tne opportunity a short time ago to call upon the Governor of the Bank of England, :dr. :jontagu Forman, in London, and to discuss thoroughly with him economic-political questions, which affect the central note banks of countries to a great degree. of primary importance the bringing about of a close business connection among the note banks was discussed, and it gave me ' particular satisfaction to find in the Governor a comprehending approval of my suggestions. is I dare assume, according to what he said, that you too share t 11' .views of the Governor of the Bank of England, which have not been unknown to you ',since his visit in Lew York. I should like to yield to the agreeable hope that tr,. ',;tiae wishes expressed in the enclosed letter will also find approval and favor Vth you. It seems to me entirely probable that a close connection of the note (nif A banks of the United States, England and Germany might be the foundation for int Pr lOraftbent 110 Perlin SW. 19, ben 9 .November 1921. Oe5 trefitorium5. 95.95 P. Sehr geehrter Herr Gouverneur! Anbei beehre ich Rich, Ihnen ein Schreiber des Reichsbank-DireAtortuns an die Federal Reserve Bank of New Pork zu Vbersenden und dasu foLgenles E,4 bemorken: Ioh habe vor Gelegenheit genommen, den Gouverneur der Bank of England, Mr. Montagu Norman, in London aufzusuchen und it ihn eingehend wirtsehaftspolitische Fragen, die die Zentralnotenbanken alter Lander in hohem Maize berEhren, durchzusprechen. In erster Linie izurde auch lie Berbeifrhrung einer engen geschaftZichen Yerbindung zwischen den Notonbanken behande7,t, und es ger,,ichte mir zur besonderen Genugtuung, bei den Herrn Gouverneur verste:nlnisvol,7e Zustinnung zu aetnen Anregungen zu fin ten. Da ioh nach seinen iurerungen annehmen dart, da: auch St3 die Insichten des Herrn Gouverneurs der Bank of England, die Ihnen von seinen Bc,suche in New York her nicht unbekannt sind, teilen, mochte ich rzich der angenehmen An den Gouverneur .ter Federal Reserve Bank of New York, Mr. Benjamin Strong 1 New York. S Ho:: nun; hin;eben, daf die in dery beifoZgenden Schreipcn ausedri:chten Cnsche auch bei Ihnen Anklang und ZustimmunQ linden. Es erscheint mils darchaus wahrschein:ich, aaC eine en;e Yerbinlang der Notenbanken der Yereini:7ten Staaten, gn;:ands and Deutsch ands die Grandlage fir ein internatiow nales Zusammenarbeiten ler Notenbanken alter bedeutenden Ldnder werlen konnte. Mit vorsT.clicher Nochaehtung 7 Y. :1 The law concerning the autonomy of the Reichsbank according to the proposition of the Reichs= bank has meanwhile,as I already have mentioned,passed the Cabinet and wily expect,in short,also pass the Reichstag. It does entire work and will,I am sure, just as well satisfy you,as it does me. The Reichs.= kanzlers leading activity of the Reichsbank is wholly removed from the management of the Reichsbank,and on his place the full autonomy of the Directorium of the Reichsbank is installed. This latter with all its members becomes independent from the Reichskanzler, every personal commanding- power and disciplinary authority being taken from him,and the verdict con= cerning the case of introducing a disciplinary inquiry, once in question according to the German officialslaws,is also transferred to the Reichsbank- Directorium. Also the suspension of an official or his pensioning, when at the age of 65 years,being generally admitted according to officials-law in Germany,is also removed concerning the Directorium of the Reichsbank,as it is the case with the members of the Reichsgericht. There only remains the formal appointment of the President and 4Ir and the member:, by the President of the Reich,but that can not be done away with and also does not lay in the interest of the Reichsbank. But also here the autonomy of the Reichsbank is observed. The appointment of a member only can follow by proposal of the Direktorium and the Reichsrat,therefore not againA its will. Before the appointment the President,the Directorium and the Central-Committee must be heard, and it also is subject to the consent of the Reichs= rat. The constitution of the Direktorium by cooptation - existing already as a fact,because never a proposal of the Directorium for the election of its members has met a refusal- is herewith legally constituted. The appointment of an unsuitable President against the wishes of the Directorium and the Central-Committe in normal times is hardly conceivable. But if it should happen once in politically difficult times, such a President would have no significance. Because the policy of the Reichsbank is only determined by the conclusions of the Reichsbankdirektoriura;amor the twelve members the President only is primus inter pares" and his special influence can only be the consequence of object and the whole economical life,especially as we miss the financial and economical education of the City and living actually in great political and econo mical contrasts. We need full independence in both directions -government and interested spheres- and it is therefore,I believe,our system for Germany,givirE the interested spheres (central-committee) only a consulting voice,to be better and more adapted. I am sure,that this new constitution of the Reichsbank shall essentially strengthen its authority in its own country and abroad and its position towards the other Centralbanks,and I also believe,that it can become an example also for other Centralbanks and that this will agree with your wishes for a closer cooperation of the Centralbanks. The importance of corresponding meanings and resolutions of the Centralbanks and their influence on the economical and finan= cial policy of the Government shall be the greater,as the position of the Centralbanks is independent and as it will be clear,that they only aim at serving the matter. It wants no confirmation,that the Reichsbank as far as possible,also in future will oppose herself to wrong economical measures and especially a policy of inflation inflation of the government,and the autonomy of the Reichsbank will,if necessary,lay more stress upon such a policy. But in the whole for the next coming time I only see limited possibilities for the Reichsbank to inter. fere,and chiefly for limiting the inflation to day the autonomy of the Reichsbank is but a very small expedient. The Allied Governments and especially the Reparation Committee apparently much underrate the large,honest and successful efforts of the Gernan government to limit expenses and to cover the ncccssa ry expenses by direct and indirect taxes and,a: actually,also by loans. But the conditions forced upon us are stronger than human beings,and the financial position of Germany,if remaining such,as it is,is hopeless and the inflation must continue,as long as the impossibility of compensating the balance of payment and of balancing the budget caused by the impossible re)aration payments exists. The proceeds of the new direct and indirect taxes and duties settled by the Reichstag amounts to approximately 40 milliards of papertharks;it is ,I believe,the very last sum,that can 4V can be wrought from the German people. But the enclosed tastes on the budget for 1922 414.4.44e-v kft+ftre II),which already contain all these new taxes,will show,that only the own expenses of the Reich and its administrations can be covered with all these extraordinary high charges. A surplus of 16,5 milliards in the ordinary budget is faced by 12,3 milliards in the extraordinary budget and that of the administrations of Post and Railways,not yet being covered and to be coverd only by loans,so that the real surplus over the whole amount of the own expenses of the Reich ( 206,2 milliards of Marks) only consists in a little over 4 milliards. But also this surplus surely will before the end of the year soon be exhausted,because the continuing rapid decrem of the purchasing power of the mark,that is the unin- terupted increase of all prices,will be the reason for increasing wages and salaries and expenses for material. Dien the whole reparation budget of 187,5 milliards Mark remains completely uncovered. The cal- culation of this sum is based upon a mark- exchange of 1 : 45 ( 1 g ca.190 E. The sum may he reduced according to the possibility,that the decision of the Reparation Committee consents to a reduction of the reparations reparations burdens in cash and kind for 1922,and on the other hand it may be still raised if the German ontinues to fall;at present one g equals In order to procure at least one part of for the reparation budget,the German Govern= in the current year,will issue a voluntary loan and,after it,a forced loan. The voluntary only be short-dated (probably treasury-bonds l years),if it should give somewhat conside= rns. Its succealcannot be estimated with inty,especially considering the danger for st and redemption rates by the Peace-treaty nex 2 to § 244 and § 248 of the Peace-treaty). a return for 5 to 15 milliards to be possible. stimating the proceeds of the forced loan scertained supports are missing;round 40 are expected. 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Yre ere6 Y12 yfl vr-r (14-frstit-r-c,e4-tre .zet ,f0-1-6t.e 464 ildp-eA-f-ed oats `ei...s..s*Lt41,4' de/ 2. vev4s-g4; tr,9 V ce.4 .z 41,q f_3 5, 77, ve9,1,74- ivy z N:te,e2&J &c..-CeGi le,,ti 4.4444.4..n.,(1-14,414.0 c/ -c)--ptif.-14-C-tkt,t : ,Vi-eeri P(f/cari,f 16, 17/ e-3/1 e-ev, (fbLL i/y63i o(p .z 40/";/zz,s-f44 --t/L-P- e-trir 6 e-,Y* tiff(' te_kto 1a-19- ca?, cia;ted_e,5 fA-7-jeea iteA 7ter..162 Sl _at --e-Pi-e&;Avett-e-ea* ea e-rteat-f-12(;4-& f;',-rta lad 14r Gre4-ed s,Y of/Y./6r of ,r5151.5-21" 0-7* ft 69* i-,X0 c4y3 Ab8chri:t. Annexe II . Apvreu conoernant la cl6ture du budget pour 1922. Afin de faciliter un coup d'oeil d'ensemble, le b4dget de l'exerctce 1922 a ete divise en trots parties prineipales: 1. Administration gimg,rale du Retch, 2. Admintstrattons d'explottatton, 3. Exboutton du Trattg, de rersailles. Dans Chaoune de ces trots divisions, l'On distingue le budget ordinaire du.budget extraordtnaire. Le budget ordtnatre conttent les recettes et d6penses permanentes et unt4buee, n6cessaires d couurir les besoins courants. Le budget extraordtnatre comprend: a) les reoettes extraordinatres, b) lee d6pemii,es untques dans des buts d'acquisttion, o) les capenses untques, kant la consequence inevitable de la guerre d) celles des d6penses resultant de 1'ex6cutton du Trait& de rerSallles et que l'on ne prevott pas,debotr se reporter sur une longue p6rtode.. 5465. Les chiffres indiaug's ci-desrus correspondent a ceux du devis budgtaire de l'excrcice 7922, modifte Butvant les d6cisions du Reichsrat et actuellement soumis au Reichstag. al est possible que d'autres modifications sultent des dg,librations du ReichaAag. - Les votes g,mis au sujet des propositions ficcales amenrent des changementt. a quelques articles des recettes, lesquels n'auront d'ailleurs pas d'influence sur le resultat final. w Mi1r.3.1.901111120 1 FEDERAL F _,ERVE BANK OF NEW YORK f dalpicE CORRESPONDENCE TO FROM A.r. Case J. L. Crane DATE SUBJECT December 8, 1921 Relations with Reichsbank. I attach a proposed reply to the let jV1,''y Reichsbank. Owing to the fact that the Aeichsba credited in Germany because it has yielded to po there have been rumors in uermany of a new gover tnere appears to be very uncertain at the presen woula be wise to enter into close reciprocal rel such as we have with some of the other foreign b to leave the matter of negotiating a formal agre ments for future consideration and merely indicat we are willing to open a current account for the account, but not extend credit. I understand fr Governor Norman that he believes any arrangement be predicated on a clear understanding that we w reparation account as Governor Strong would be op resources to be used in furthering and continuin You will note that in my proposed re reasons for declining to extend credit, and as it to explain in any detail, I thou-ht it might be d in a personal letter frolGovernor Strong to Pre the latter's personal note to Governor Strong, r reasons in the formal letter to the Reichsbank. 0 s t Ext.ract from a letter written by Governor Strong to Governor Norman, Bank of Bne1AJaiL, under date of November 25, 1921. "First ae to your visit from President Havenstein and Mr. Kauffmann. very much impressed indeed by what you write. I am It may be that this is partly senti- mental for your letter indeed presents a sad picture of an old man heart broken and disappointed and a,-)parently helpless in the face of events. I have been told that he is a most reliable and conscientious banker, but that he has lost his prestige in Germany because of the failure of the Reichebank to withstand the pressure of political domination. This seems to agree with that he himself stated of conditions in Germany. "It is difficult to comment upon the contents of your letter, excepting to add that it seems to add a few more strokes of the brush to a desperate and hopeless picture. I am very much discouraged ty recent developments in Germany, and by that has been told me by Herr Bergmann of the Deutsche Bank, who has been here discussing the possibilities of a loan for the purpose of protecting the position of the mark vis-a-vis the dollar. "Of course we will be most pleased to correspond with the Reichsbank. I would like to establish relations with them of the right character and do everything that we can for them in a helpful and constructive way, but it is an arrangement which, it seems to me, should be predicated upon a very clear preliminary understanding that we will be unable to interpose with credits for reparations account. I would indeed feel shaken in my confidence in my own judgment if we permitted our resources to be employed in furthering and continuing the impossible situation which has developed out of the reparations muddle. It is better to have the break promptly, in my opinion, rather than to promote indefinite post- ponements with an ultimately more serious breakdown than would occur it reconsideration of the matter were forced in the near future by realization of Germany's inability to continue payments at the proposed rate. dr ilvgv,4e-;.pt "If Presiakn t us, as I presume he .ill, I shall endeavor to send him as definite a reply as possible and one which will be satisfactory up to the point of extending credits, which I do not think we should do at the present time; nor in fact do I feel that he is likely to solicit them. "Herr Bergmann has in mind a loan of t25 to f50 millions for six months to be furnished by a strong group of American banks with the sole object of buying marks, in an effort to restore them to a value of about 1 1/2 to 20. He thinks the sentimental effect of the announcement of such a loan will drive the German speculator or hoarder of foreign currencies to selling them, and that the German Government can acquire this foreign currency throUghthe instrument of a large gold mark loan, which would in effect be a domestic dollar loan, subscriptions to which vould be made in dollars, or any other foreign currency now held by German citizens, at rates of conversion to be fixed by the German Government. "I doubt if the project can be carried out. of it anyway, upon the same grounds mentioned above. In fact doubt the wisdom I have told Herr Bergmann that our attitude towards promoting such a transaction would be governed attitude of some of our officials in Washington. by the There seems to be too much transpiring just now to risk complications, which would defeat other matters of major importance." December 14, 1921. she Reichsbank Direction, Berlin, Germany. Dear Sirs: We have your estoemeu favor of November 9, which interests u very much. SIC hate particularly tne considerations which have led to th tablishment of relations between you and the Bank of Enrinnd and the ext these relations as described by you. In reply to your first question, w pleased to assure you thit we would be clad to enter into a similar rela "ith you. Like the Bank of Encland, we are not in a position to Crant on deposits; we also would hve to undertake to make interest bearinr in for you in order that your balances maintained in this country mic,ht not unproductive. 3ucn investments would be in bankers bills or United 3tnt treasury Uertificates of Indebtedness or other United States Government ties, such as we micht ourselves invest in. It would be agreeable to us cow ree,ive comi,ensation for this service either iv the maintenance of balance in current account or by payment of a nominal commission for our in making such investments which would be taken and yield for your accoun risk with the 81kAU care which we five to our own investments. If, however, it would be more agreeable to you to have our of ,,ayment Lt maturity on any such investments which mipht be taken for account, and further agreeLlent to take them back from urity upon ou prior to their matto do the t for you Pectoral iieserve bank of Lew York The Reichsbank Direction S 12/14/21. within such limits as might be mutually agreeable, and with suitable urovision for compens;:tion say, a comAssion of 1/4 of 1 percent. per arum= on the face a.nount of bankers bills and 1/8 of 1 percent. per annum on the amount invested in Treasury certificates. With reference tu the second question raiseu in your letter of November 9, relating to possible advances by this bank against fold deposited with a foreitp bunk, we scarcely need assure you of our desire to cooper; to witn your institution in Lnese iabtters but we shoulu prefer that you do not raise tnis question at tnis time. /11AVE: the honor to remain, Very trul7 yours, 3ei f. Strong, 4yve:-nor. December 14, 1921. Rudolph Havenstein, Esq., President, The Reichsbank, Berlin, Germany. My dear President Hhvenstein: was gled to receive r_ur personal letter of Noveeber 9, sccompagr the letter of that date from the Reich:011;fmk Direction to the Federal Reserve of New York, and to note y.)ur cbeervations with respect to the matters disco by you mith Mr. Norman on the occasion of your recent visit with him in Lond You are correct in your assumption thf.t his viee, which are well t/ to ue, are shared in by me and my associates in this bank. A formal lette this bank has to-day been addressed to the Reichsbank Direction in reply t letter of Movesiber 9, but 1 dish to state to y u th/t me shall be most correspond with tha ReichebanK, end to establish reitions character and do everything that we can for them in a helpf elttricstiv t I feel it ah.mild be mutually understood that such arra ty at the prevent time be predicated upon a very clear recognition that unable to interpose with credits for reparations account, and you *ill better understand the reference thereto in cur formal letter addres ichsbanir Direction. I venture to 217.,e with you thrt a close connection of the banks Germany, England and this country may be helpful in developing broader etional cooperation of the central banksef all important countries and t hope also that happier times will presently permit of broader r.nd ful I ;vperation between us. With kindest assurances of my high personal esteem, I Very sincerely, 1-. =-; '"-'"" ORRESP TO. Mr. Vase Benj. Etroni ui7on the Treasury prod; ram. he matter, but it does seem to t:r, the opportunity may have e of 'Pr. Gilbert's sst year is the comparatively hould have been retired in ghteen months hence. nce and memoranda which I he personL1 letter to Presiden evelop the right kind of re- I would like to have the pap President Havenstein a .10.11111111141111111pWargli. 341. htti-2 , a Lkt f, 271/ e?; (;r: r 1)A,14.(1,, (11A Cji (('1 it 444 ff o i),..t.,tt ton 01- 1,4rpyge 1, :tit let ' ' /"1.) co 00 /..t 7 /1 act tcAirt kdowto . 14,1 , . I , , Translated by K. D. Frankenstein Statistics Dept. 7ebruary 8, 1922 The President of the eichsbqnk Direction No. 101/I Berlin, S. W. 19, January 19, 1922 Lr. Benjamin Strong, Governor, Federal Reserve Bank of New York New York Sir: I am glad to acknowledge the receipt of your kind letter of the 14th of ls<st month, and beg to refer to the letter of the Reichsbank-Direction of the 9th of this month to the Federal Reserve Bank of New York, through which the opening of an account is by this time under way. In regard to the question of the gold loan, I beg to call to your attention the fact that in relation to the Federal Reserve Bank as well as to the Bank of England and the Bank of the Netherlands it has been far from our intention to Wish to use a gold deposit in England for creating rseParation credits; that, in the interest i of as safe and normal a development as possible of the German and the international money market, and in the interests of checking speculation in foreign exchange, it is, rather, for us simply a matter of airecting our transactions in money and exchange uniformly from one place; also, that the sums in question, which might, at the most, amount to perhaps 10 million dollars, are to be drawn upon only temporarily and would not bear any relation to credits for meeting reparation payments;,and that, on this account also, the Bank of the Netherlands, in agreement with the Governor of the Bank of England, has declared itself ready for these transactions. I should, therefore, lib, re to ask you to/consider the question of the gold loan from this standpoint, and to be so kind as to let me know whether, in view of this aspect of the situation, a renewal of the Reichsbankls suggestion would meet with your approval. Assuring you of my esteem, I am Very truly yours, (1 signature) cr Vraftocnt ferlin SW. 19, oat 19.Januar 1922. b,s iriObanh.Dittefitoriumo. lir. 101/ I. Sehr geehrter Herr Gouverneur! Mit verbindliehstem Dank besteitige ieh den Erpfang des gefalligen Sehreibens vox 14.v.Mts. und nehme ergebenst Bezug auf das Sehreiben des Reiehsbank-Direktoriums von 9.d.M. an die Federal Reserve Bank of New York, dureh das die Eroffnung eines Kontos nunmehr in die ?lege gel eitet worden ist. Hinsiehtlieh der Frage der Goldbeleihung erlaube ieh rir, darauf aufrerksam zu maehen, dag es uns der Federal Reserve Bank ebenso wie der Bank von England und der Niederlandisehen Bank gegenziber vbllig ferngelegen hat, ein Golddepot in England zur Besehaffung von Reparationskrediten benutzen zu wol- len, dag es uns vielmehr ledilich darauf ankommt, im Interesse einer m6gliehst ruhigen und gesunden Entwieklung des deutschen und des internationalen Geldmarkts und zur Eindammung der Devisenspekulation An den Gouverneur der Federal Reserve Bank of New Pork Mr.Benjamin S t r o n g inNew York. unsere unsere Geld- und Devisentransaktionen einheitlieh von einem Punkte aus zu dirigieren, daj3 cluck die Summen, um die es sick handelt und die sick im Hochstbetrage auf vielleieht 10 Mill ionen Dollars belau fen konnten, nur vortibergehend in Anspruch genommen werden rtollen und auger Verhdltnis zu Krediten fur die Aufbringung der Reparations1eistungen stehen- wiirden, und dal deshaib aueh die Niederldndisehe Bank sick im Einverstandnis it dem Herrn Gouverneur der Bank von England zu diesen Transaktionen bereiterklart hat. Ieh rdehte daher bitten, die Frage der Goldbeleihungen noehmal s von diesem aesich tspunkte aus zu prilfen und mir gefdlligst mitteilen zu wollen, ob gegeniiber dieser Sachlage eine erneute Anregung der Reiehsbank dortseitige Zustimffung linden Wirde. Nit der Versieherung meiner ausgezeiehneten Hochaehtung Ihr sehr ergebener y dear President Havenstein: At the time of receipt of your kind letter of November 9, it 4as my sfortune to be incapacitated from giving much personal attention to that and ther matters, as I was obliged to go to the hospital for a sli7ht oeration, an is ie my first opportunity to send you a personal =.:nd confidential letter, su I had hoped tc write at the time my lettere of December 14 mere prepared by e of my associates for my signature. 4hile you mey regardthose ast"narmal expression of the attitude o k, I am now writing to explain that my friend, Governor Norman cf the Bank o g' and, has kept me personally fully inforred of his meetings and his corres- ndence with you and,as he has doubtless advised you, I am very much in sympat th the general purpose .which he exreesed, of bringing about a more intimate d sympathetic relationship between the various banks of issue than has hereto`17 e eted, or been possible. Such relationships I have allays regarded as depending more upon perontil uaintance, understanding, and mutual res2ect and confidence, than u2on the to formal understandings that can be arrived at by correspondence. It .sill ns cessary, according to my view, to await opportunity for a meeting with you whet' ,ay have the pleasure of discussing sor:,e program of accord, and I am looking ward to an occasion when that may be done. In the meantime, this is simply, eneral, and quite personal letter of assurance to you for the :air:ose of ex- my belief that, within the limits imposed upon us by the Federal Reserv and those required by good business judgment, (.ur minds are open to prop° , such a relationship as will be to our mutual advantage and profit, and in rat of years viii develop a good understanding between your institution anc e. t ANinekr.:114tIRMIW - -2.1a af4Paks,,4 Rseelon gem' The Federal heserve System is such a complicated and has now become :la a. vast organization that I do no think it is always possible for our frienol other lends to understand its many ramifications, and why certain policies aro ;eesary. lie have, as you know, twelve so- called regional 'ranks, each serving a. atinot geographical division of the United States. Such a regional system, as otinguished from a branch system, is not only possible but necessary in a entry as large as ours and with so many diversified interests; and is in fact etter system than a branch system in practically all respects but one; namely, the conduct of such foreign business as the system undertakes. To overcome it defect in the Federal Reserve Act as originally passed, it .vas azlended some ire ago so that it nos provides that, with the approval of the Federal Reserve rd, which is the, supervising body appointed by the President, one Federal terve Bank may act in behalf-of all twelve Federal Reserve Bionics in that divertit of the System's business. Nora such a plan not adopted, all sorts of con- .nations would be likely to arise. The Federal Reeerre Bank of New York has in designated by the Federal Reserve Board to conduct business of that character 1 acts in behalf of all of the ?ederol :lesarve 3anks. eon that I have invited this correspondence with you. It is in fact for that But you nay properly from what I have noz written to you that whatever 4-0 do is in behalf of System as a whole rather than the Federal neserva Bank of New York alone. 'ean, of course, so far as concerns any actual business wnich may develop. It should further be explained that the Federal Reserve Loard, which t its offices in the Treasury Puilding in Washington, is not an eoerating body, a suerviein6 body, and tho conduct of such business as IS ma, undertake with i will be based upon uncerstendfngs which we may arrive at, subject to the sub- istwent approval of that Board, and of the carticipation authorized by the respect: rds of directors of the other eleveo reserve banks. This a:.eers to make the 4 -iftau6uratioa of net business connections a rather formidable and cumbersome matter, http://fraser.stlouisfed.org/ wit in practice se have Federal Reserve Bank of St. Louis found that the:afrangemente-csn he preliminary understandings are definitely set out; so that I vculd not hal 0u regard this as an obstacle in the acoomeliehment of the purpose which NO utually have in mind. As Governor Norman doubtless has explained to you, cne of the import osults of the understandings already concluded between certain of the banks c E! sue, has been the exchange of information in regard to conditions and develc ents in our respective countries, which is of interest and importance. pe that you gill find this in accord with our purpose to develop such a lationship. re 9 I she ee are just now especia ly interested in the discussions which taking place in Germany (according to press dispatches) respecting e posei ange in the statue of the Reichabank. If you feel at liberty free time tl into me on this trio similar eattere, viii you not to good enough to do so, d indicate to me in like fashion say matters concerning *high you would like ar from me. ?lease acceet my ecologies for this long latter. is my fir et co; pity to dictate it, and I have eritienye4 gitti eeeeiierabla freedem in order at you may understaad the friendly seirit in ghioh le are eer)roaohing this .ter, and gith which we boos to see e mutually valuable relationship ultinat veloped. Pith eesurance of ty high eereonal esteee, I !_)(7 t3 remain, Faithfully yours, dolph Havenstein, Esq., esident, The Reichebank, rlin, Germany. dear President Hovenstein: It occurs to me to suggest that the facilities of you Jc might enable you to write me personal communications of thi Lracter in English. It will be preferable if that can be do it avoids a certain amount of translation and copying. This, however, is only a, suggestion, and made subject drely to your own convenience. Yours sincerely, lolph Havenetein, Esq., isident, The Reichsbank, -lin, Germany, 1;4721 :SERVE BANK 117":'CNIYW YORK COPY OF TELEGRAM SENT IN CIPHER CASH DEPARTMENT CODES & TESTS SEC. viE DICTATED BY TIME COPY FOR WIRE TRANSFER DIVISION February 20, 1922. enstein, Reichsbank, Berlin, Gerrany. ention to yo.x letter January nineteenth has been delayed by our holida;s. er full consideration we believe it will be inadvisable for you to renew posal for gold loan at the present time. This need rot be construed as icating a permanent policy regnrding our relations. ';:e hal1 write you ly by an early mail. Federal :ieserve Fank of New York. February ?:, 19?-5.!. dear ?resident Havenetein: Your kind letter of January 10 arrived at a time then becaure :)f the pence of some of my colleagues during the holidays of this month, it vas in order that you night not cf. :%ry for me to delay a reply until this week. nconveniencto 1 cabled you yesterday as foliate: "Attention to your letter January nineteenth has been deleynd After full consideration 4e believe it. will be by cur holidays. Inadvitable for you to renew proposal fur gold loan at the ,:sreeent This need not be oorstrued as indicatin a permanent policy le ehell write you fully by an early mail." regarding our relntione. time. The circumetancee to which our earlier lettere had re'erence, and 1, led to our .riling you in the terms herein ex;:.reseed, still impel us to to the rolicy therein indicated in regard to credits >f tho character rcrixt 'iited in your letter. to do not wish you to underrtand that le are un- ai,e4istic in the difficulties with thich you are necessarily confronted, m-r ,.,uld not desire, .411, 4 Tore it In our poser, tc facilitate their Solution. It has, hotever, seemed to me, and tc, my aseocitter as tell, that such I cream, as thct indicated in your letter can not be dissociated from the whole pubject of reparations, the ar!juetment of which aels.re to us at this distance Lo te, at the -resent time, a subject of 17portence to the whole morld. Is lay isaphaeis upon the i:oint that this small credit of flOmillions can hardly be ex- pected to bring about any stability in the exchanges, the erfect would be .cmporary, and the amount inedequate to accomplish the object sought to be attained. In an academic eenen to can hardly overlook the fact that the aeakening Digitized FRASER of thefor Reichsbank as a bank of issue, on the one hand, by continually enlarged February IE sues of' notes, and on the other hand, by the dissiration or pledging of ita Id reserve, must in it6elf be a influence towards unsettling the exobaosee, and t the subject requires a more thorough -going and fundamental trb,atment than to be 7meeible by the establishment of !N credit ,f this ch%racter. It is my earnest hope that you sill understand the friendly spirit hich mpta me to dictate a reply or considerable frankness to your courteous; letter January lg. lith aseurance of my esteem, I be to remain, Faithfully yours, ph Havenetein, Ea.", ident, The Reichatank, tin, Germany. r . . - On? Vrafihnt lak Perlin SW. 19, ben rl th of March 1922. be_ Setr456attli.Direfitoritmui. Hr. APR 14 Private and confidential. Dear Mr.Governor ! I have the honour to acknowledge the rece.ipt rd of pour kind lett=;rs of the 3 21St of-Nrre* and and 21 have taken much interest in your deductions concerning the system of the Federal Reserve Ranks. You will surely believe, that I would be very glad to have a conversation with you about the matters interesting us both, if I had a proper occasion for meeting you. I assure from ?roar kind letter, that your B,,nk out of certain reasons for the beginning is not in the case to pay attention to our suggestions of gold loans. But nevertheless I would like to point out, that the Reiahsbank too,of course, does not expect "a sttibilising of the rates of exchange" by o temporary loan of a comparatively small amount of gold, but only thinks about a factl:Yation for its own dispositions and together with with it hopes, that tOo vivid oscillations of the daily rates could somewhat be moderated. The changement of the Bill of the Reiehsbank and the rules of the Roichsbank in the sense cf on autonomous position of the REi2hsbank has in the meantime considerably been furthered. I took the oppon!unity, to write about it more amply to Pr.Norman, and beg to Join a copy of the points relating to it in my letter for your information. It can be expected that the bill in short will pass the R2ichstag. Your kind suggestion as to a mutual exchange of opinions I am only toohappy to accept, and will not forget about it occasionally. I remain most respectfully yours 64, Mr. President: Your kind letter of :larch ?I reached the office during my absence in dngton, and only to-day have I been able to read it carefully, as well as the osures. You have not, I a:: Hosed advances upon gold. sure, misunderstood our attitude in regard to the This letter you may oonsider as a confidential ox- Ision of my personal views, as I think you should know them in view of what I already written you on the subject of our future relations. It has appeared to me that the formula applicable to the establishment of x.eparatione schedules of ,;ayments must ultimately in some form provide that r total shall be within the capacity of the Gorman pooplo to ,my reparations. icheme not conforming to this formula must ultimately break down. Ln the ir band, I cannot help but recognize, as I am sure that you do, that it is within polar of the German Governn:ent to enlarge or impair its capacity to make ration payments, according as it may pursue ft sound or unsound polio' in finance I am frank to say to you, quite rrivately and personally, sonetary matters. in general, my own view has also been that thu earlier schedules were excessive, possibly because they were excessive, or due to some other cause, reforr in nce in Germany has not progressed to the point daere it might have -drogressod the schedules been more moderate. This, of course, is a rather broad statement azard, and I shall not undertake to cite any supporting data, cr ma '._e any silent in detail. These comments are called forth, however, in response to your own most venting Ls...orandem respe ^ting the e fluacy of a more wap3otaAamtonome an tile, mi." -Nur April 14, 19??. Rudolph Havenstein, Esq. 2 'eanagement of the Reichabank resulting in anything in the nature of control of emissions of currency. As I took the liberty of writi:Ig to Governor Norman some months ago, the proposal for more autonomous eanagemee.gt of t1..1 Reichebank would seem to put you personally in po-Jition to exert an influence upon your Governmentle financial and monetary policies, but bele-ie.:1 thet, if tra hydset cannot in fact be brought into balance, or reasonably into balance, there is simply the choice between further emissions of bank notes, issues of some other currency directly by the Government, or suspension of payments. I hope you will not mind my asking you rather frankly a personal question which is nuzzling me very much. It bears directly tr:son the subject of reparations, and upon the ability of your Government tc clover even a reasonable schedule of eayments within a reasonable period of time. le read many oomnente in the press upon the rather panicky scramble of the German people to buy property and by those of large incomes to convert their bank balances and currency into physical properties. This it is reported has extended to those of very large means who seem to be acquiring very large industrial and other interests to such extent in fact that there seems to be a concentration ()I' the instruments of production in Germany into a comparatively few hands. That I mould just now be interested in learning is what type of financing the proprietors of these enterprises undertake in acquiring their properties. Are they issuing obligations bearing fixed interest with fixed maturity? Or are they acquiring these properties by the issue of stocks or other instruments, which have no fixed maturity and upon which interest payments depend upon earnings? The point is, of course, that profits acouired under the existing conditions in Germany, which are somewhat artificial because they represent enhancements in value growing out of depreciated currencies, must nevertheless be taxed, and very heavily taxed if the constant currency depreciation and consequent onhanementein property http://fraser.stlouisfed.org/ values toSt. find Federal Reserve are Bank of Louis reflection in enlarged government revenues. 13 ee ehile it goee without saying that even our own government has suffe: some inconvenience in balancing its own budget, due to the appreciation in the velue of the currency and the corresieonding decline in ODMTN, being reflected in its income, I can well apprehend the seri which the German Government till be confronted if its systee provide means for enlarged revenues, which vould conrensate for the dec value of the mark. Those of us 'rho are earnebtly considering whet means may be adopted ilitating world recovery art here, in the case of the German position, con. nted with a type of criticism which it ie very difficult to answer,end it ld indeed is illuminating to me were you able to eend Ms some tiectieeion o feature of your Gevernment's ,e.ogrem of taxation. You will, I an very sure, ;4.. President, understand that I frankly in a most friendly spirit, but f.tiite confidentially, in my personal vieve, in the hope thet you will reciprocate in qui ion, r,nd with equal freedom. &at you trite me fall, of cours information. Again thanking yeu for your courtesy in sending me the eats accompanying your letter, and with assurance of my eats Benj. Strong, Governor. Rudolph Havenstein, Esq., President, The Reicbsbank, perlin, Germany. iniesvoinkgram. er Prafibent Fortin sw. 19, ben &1st of be5 May 192Y. cid)sfianfi.Direfitorittin5. ACOCNOWLEMED lir. 7 geh. Private and confidential. neT 2 1'.322 Dear Mr. Governor! I have the pleasure of expressing you my sincere thanks for your kind letter from April the 14th a.c. , which I received on the 28th of April. Especially I am grateful to you for writing to me personally and confidentially and quite openly, and I for my part will also openly and freely answer the questions you put me. I am much pleased to understand from your words, Asza that you personally think the amount of the deliveries charged upon the German Nation in accordance to the schedules of ,4( payments made up .itherto to be looegeg-ge-- ,rat-ed. According to a most careful examination and a thorough knowledge of Germany's conditions I must absolutely testify this your opinion as a true one. The amount, Germany has to pay in cash and in comodities, asa fact far superates her financial and economic capacity of pay2ent. This capacity of payment chiefly depends upon the situation of Germany's balance of payment. As you probably will know the ice-President of the Reichsbank, Dr. To the Governor of the Federal Reserve Bank of New York, kr. Benjamin Strong, New York. Dr.o.Glasenapp, in the first Reconstructionnumber of the Idanchester Guardian Commercial of the 20th of April has discussed the question of the German balance of payment , which in its details and results perfectly agrees with my oiews and convictions. Therefore I would like to recur Annex A. upon this article, which I here beg to join in a photoyraphica1._gDpy. The figures concerning the German (visibJ4 balarr6e of trade shown in this article finish with the and of the past year, because, while writing the article,more 1094o in 110, recent fi gures were not yet available. In the meantime the figures for the first 4 months of 1922 have been statistically fixed; they amount to (in million goidmarks) for January February Larch April imports 282,4 245,9 338,4 407,6 exports 321,6 296,7 323,4 330,8 that is an excess of exports of: 39,z Excess of (40,8 L7xces3 of exports of) imports 5,0 Excess of ?6, 8 imports of) The first two months showing an active balance of trade, this is to be explained by the decrease of imports, especially by the fact, that the import of necessary food stuffs having already at the :nd of the past year much de. creased had still more to be pushed back in the two first months of 1922. But then in .arch and April imports show a considerable increase, because we could no longer renounce sufficient imports of foodstuffs/if we would pregent a dangerous reduction of the standard of life and th e productive power of the German people. The consequence was a pass44-e balance of trade for these months, which proves the opinion expressed in the article, that it can not be hoped ck iC lArtPr 1411 hoped for au...air...ace trade balance as a total for the cur- rent year. So-called invisible exports, which might wipe trade balance, are not at the out the disposal of Germany to a large amount, and as far as they exist - purchase of German property, enterprises, stocks by foreigners - they reduce the substance of Germany's national property and increase the German foreign debt; only the travelling of foreigners in Germany :406s a moderate asset, to be estimated to a few hundred millions goldmarks at the highest. On the contrary, as the article describes more detailed, for paying interests and amortisation of credits taken up abroad Germany has to pay about 750 millions goldmarks a year and large amounts for foreign shipfreights, as she has lost nearly her whole merchant navy; to this must be added the enormous payments according to the peace treaty, the cost for the occupation army, payments for clearing purposes and above all the reparation payments in cash and kind. For so-called internal payments (that is payable in papermarks) for occupation purposes up to the end of March, 1922, about 14 000 millions hcd to be paiC. To what okount the much higher external payments for occupation purposes (that is payable in gojdmarks) have to be summed, can not yet exactly ixed, as a final account is missing. The German government has estimated them,4v /about 5 500 millions goldmarks up to the end of March, 192k. The reduction of the costs of occupation - resolved by the All according to newspaper re- ports - to a total of 240 millions c;oldmarks yearly has not yet been realised. For clearing purposes 468 millions goldmarks A goldmarks had to be paid until the end of 1921, at the end of April 1922 the whole amount will have reached about 550 millions goldmarks. According to the so-called London Ultimatum Germany is obliged to pay for reparations 2000 millions gold- marks a year as a fixed pay lent and besides 26% of the whole German exports as a variable payment. The total ex- ports then being estimated to 5000 millions goldmarks, a total annual payment of 2000 + 1300 = 3300 millions goldmarks would hereafter be the result. Already in 1921 it was proved impossible to bring up this total amount,and at the same time it also was proved, that the only endeavour to bring it up had the most disastrous economic consequences not only for Germany, but for the countries connected with 4-4-by commercial interests. ;nth regard to this it was settled in Cannes to call in as the total amount of payment until ,farther notice 7,0 millions gold- marks in cash and 1450 millions goldmarks in payments of kind. In order to put the signification of these figures for Germany's capacity to pay into the right light, I would like to show you two other figures: he rBefore the war the 4.9,944s of the whole of Germany,z . balance of payment amounted to about 700 - 800 millions- goldmarks. One ought not to for that then Germany owned the colonies furnishing with raw materials, the provinces of Posnania and 17est-Prussia providing ft- with agricultural products, a large merchant navy, many m4-1 gold in foreign securities, many ni4-1---14-7German German private property in the countries of her enemies, the industrial enterprises and the rich ore- and coaldeposits in Lorrain, in the Saar-district, and in Upper- Silesia etc. and was unrestricted in her commerce. Today all these values, with which she could have paid her foreign debts, have been taken from her; the annual reparation payments nevertheless required however amount to the 5 - j fold of the said whole previous assets. Further: England's war -debt to the U.S. amounts to about4500 millions 0, that of France to about 3500 mil- lions $. The annual payment of interest therefrom would be, reckoned with 4 42 %, about 800 and 640 millions in gold, that is only a fraction (1/5 - 1/3) of the burden exacted from Germany. Both of the countries have in the pas Li three years declared to be unable to bear this burden, and Prance does so until today. It is obvious, that the German national economy hereafter is not nearly able to bring up these enormous amounts of interests, of clearing payments, of payments for occupation and reparation purposes, which - according to the moderated reparation figures settled in Cannes and the above mentioned reduction of the costs of occupation, probably intended but not yet realised - would amount to 3500 millions goldmarks every year. Such sum of indebted- ness can after all definitively be brought up only by way of excess of exports. This, in the discussions at the con- ference of Genoa, has generally been acknowledged. In the unanimously accepted introduction of the Report made by the comission of financial experts of the Genoa conference it it is said as follows: "Foreign obligation by one country must be balanc -Si by a capacity in other countries to absorb the surplus production with which alone those obligations can be met. the burden of any country's external obligations is beyond its capacity to pay, and it cannot be assisted by foreign loans, the effort to meet those obligations must accordingly result on the one hand in dislocation of markets in other countries, and on the other hand in a continuous depreciation of the currency of the debtor country, which will entirely prevent it from making any start whateoer in the direction of stabilisation." Judging after the pe&e4ive trade balance and the smallness of so-called invisible exports Germany, as a ... matter of fact, only was able to pay the enormous amounts abroad by taking up credits, by selling German securities or other parts of German national property or by selling marks. It is clear, that, especially the continuous sellinc of the mark was apt to depreciate more and more the rate of the mark exchange and it is evident, that this depreciation will in ever growing measure continue in future, if the burden forced upon Germany will not be diminished to a bearable degree. Finally the German mark would become unsellable abroad, and by this fact a complete collapse of Germany's national economy would be the consequence. This development can not be avoided by an ever so skilful and sound financial and currency policy of the German government. Because also by straining to the utmost the taxation of the German people only amounts in papermark mark can be got in, whose change into foreign currencies in order to execute payments abroad, only could be effected by a continuously growing sale of papermarks. This continuous sale must, as it was already said, devaluate the mark ever more and the necessary amount in papermarks must increase on and on. Of course I am of your opinion, that the German government is able to have an influence upon the capacity for effecting the reparation payments, according as it may pursue a sound or unsound policy in finance and monetary matters. But nevertheless it can not be doubted, that in front of the reparation payments, which equally overcharge the German balance of payment and the budget of the Reich, even by the most suitable financial measures, especially in taxation and currency questions, the imminent collapse can not be hindered. Concerning the development of Germany's taxationsystem and the reform of the finances of the Reich, I re- cur to the statements given in the memorandum of the Reichskanzler in date of January the 28th a.c., which I join in a copy together with all its annexes; some of the Annex B. f i figures given in the annex II, having altered in the meantime, I ordered to be corrected. The statements give Loos° i a conception of the extraordinary difficulties, with which the changement of the whole taxation-system was connected, in order to get an adequate income for rising such enormous SUNS. The collection of taxes had, until the end of the war, been executed by the "Bundesstaaten" of the Reich, whose officials worked after quite different methods. In front of the large debt service of the Reich the financial reform reform in Germany had to begin with unifying the financial administration and taking it ooer to the Reich in order to equally distribute taxation. One was conscious about it, that the speed of getting in the wanted taxes would suffer temporarily under these changements and developments of the administration. But these difficulties had to be taken into account a way financial disorder should be found. Besides I would like to point out, that the finances of the Reich were for a long time charged with great amounts of unproductive expenses - help for unemployed, allowances for foodstuffs etc. - which were necessary to avoid a deviation of the broad masses of the population, after the military collapse of the Reich, into the most radical political directions and a social dissolution of Germany. The financial reform began with a strong grip on the fortunes grown or originated during the war by extraordinary wartaxes from the property and with a large offer, taken only once, from the property, the so-called "Reichsnotopfer" (emergency tax). Besides a general, partly very seoere increase of current taxes took place and a large number of new taxes were introduced. The annex I of the here joined memorandum of the Reichskanzler from Ja77.uary the 28th a. c. offers more details for the deve7 lopment of the taxationeystem. On the results, which these taxes have already brought in and on the further develop- ment in the last months, I would like to extract some notices out of an article of the secretary of state Dr. SchrOder, going soon to be published in one of the Reconstruction-nupbers struction-numbers of the "Manchester Guardian": "The effects of the financial reform are clearly shown by the effectioe receipts of the Reich since 1919. They were in 1919 10.543 millions marks " 1920 50.801 " 1921 87.374 (The receipts during the final year 1921 are specified in the Annex O. added suroey of the financial board of the Reich.) Loose in. rile The increased of the German taxation-burden is eoident hereafter. It is to be owed to the collective effect of direct and indirect taxes, which only as a whole are to be considered as the burden of a people. They would haoe wholly sufficed to cooer the states needs, if the constant fall of the German exchange had not increased the expenses of the Reich all along. The experts of the Allies on the Conference at Bruxelles in 1920 haoe expressed, that Germany's "actual tariffs for the direct taxes seemed to haoe been driven to the utmost, and that, if the assessment was brought in order again and the taxes yielded the Ain return, one perhaps eoen would come to the conclusion, that concerning the fiscal results, being so nearly connected with Germany's economical wealth, a reduction of certain direct taxes had to be taken into consideration, especially of those laying heavily on trade and industry. Zeoertheless Germany resoloed already in 1921 a further strain of taxes. The taxationsbills haoing passed the Reichstag in the third reading at the end of Larch till the beginning of April 19 2 increac3 the rates of taxes for corporations to about 35 % for industrial companies They introduce a continuous property-tax, rising up to 1 %a year and of which for the time of 15 years additiotic up to z00 are are raised, taking the place of a part of the "Reichsnotopfer" not yet raised. The old property-tax is replaced by an increased tax for additional property with rates up to 10%. The property is further more charged by a number of stampduttes (for establishment of companies, for turnover of stock exchange, for the issue of securities) being achieved in a "Kapitalverkehrssteuergesetz" by independent taxes with higher rates. Also the taxes for automobiles, for insurance and totalisator have been increased. But above all the rate of the general duty on mercan- Vle transactions has been raised up to 54 The coal-tax having increased from 20 % to 40 % of the coalprice the burden for the whole production and consumption has become heavier. Also the customduties fixed on the goldrate have been considerably enhanced, among them especially the taxes for objects of luxury. ;That signification for the economy the increase of customs ne- cessarily has, is understood by the statement, that by paying in paper money the actual rate is 5900 % to be added to the custom. rate. The rates of the most of the internal consumption duties have pertly been recently increased to a manifold of the previous rates. Also the receipts from hectolitres of the monopoly of spirits has been raised to a manifold amount." P Of course the qbtfct increase of the receipts of the Reich since 1919 must partly be explained by the progressive devaluation of the papermark. For the rest it must be taken into consideration, that it takes some time - the Belgian ;:inister Theunis reckons to 3 years for it - until the assessment and the collection a new tax smoothly act. At any rate the reproach made occasionally to Germany, that she does not really carry through her bills 0 bills of taxation, is not justified, as I surely can af- firm, knowing the situation. The assertion that the charge of taxation in Germany is less high, than in the victorious countries is refuted in the subannex 2 of the Reichskanzler-Memorandum. Recent investigations made by Englishmen came to the conclusion, that as well the indirect, as the direct taxes in Germany were much harder to bear, than in France and England. The "Daily News" of 1,:arch znd a.c. state about the two largest indirect taxes of Germany, viz. the taxes for turnover and coal, that the tax for turnover in the amount of 2 * charges every exchange of goods with 8 *, if the commodities from raw material to manufactured goods only pass as an average through 4 hands (the consumption of luxurygoods is charged with even higher amounts), and that the coal-tax of 40 qb must naturally be added to the price of manufactures proceeding out of every industrial process of manufacturing. After the same Lhglish source from the revenue has to be paid by: in Germany a bachelor with a labourincome of 20 000' 11 (= 4000 Fr. = 90 4) 8, 8 man and wife with z children and with a labourincome of 250 000 marks 25, (= 50 000 Fr. = 1125 4) z France England 3,25 % 0 7,8 a bachelor with a rent of 250 000 marks (= 50 000 Fr. = 1125 4) 31,7 9 14,2 the same with a rent of 10 000 000 marks ( = 2 000 000 Fr. = 45 0004) 61,1 * 59,7 * * 16,3 90 23,4 96 54,7 *. These calculations are based upon a rate of 1 Fr. - 5 II, 1 = 2201W; meanwhile the purchasing power has fallen again again to 1 Fr. = 25 1.4r, 1 = 1200 Ar, and consequently the per-cent charge of taxes of German revenues has become essentially heavier. It need not be mentioned, that all such parallels between direct and indirect impositions of taxes in different countries relating to the average incomes of people liable to pay taxes of course can not claim to be scientifically blameless, essentially for the reason, that the average-income can not be ascertained with absolute trustworthiness. It may also be admitted, that some indirect taxes and customs in Germany have still lower rates than in other countries - so e.g. spirits and sugar are heavier charged in ,ngland and France, than in Germany. But one will always be lead wrong, to compare the charge with consumption-taxes for themselves, if you at the same time do not consider, that the revenue also of the lowest classes in Germany is charged heavily with direct taxes, while that is not the case with the broad masses in France and England, and that besides the con- sumption power of the German population has considerably diminished; a low revenue out of consumption-taxes per head does not prove a lower charge of taxes in an im- poverished country like Germany, but even more a slackened consumption power. It has however nowhere been considered, what means a disastrous indirect tax like the continuously growing inflation of papermoney. The statement of a fixed budget for the Reich naturally, for a longer period to come, is made perfectly impossible by the fluctuations of the exchanges, which could not be restrained, and the devaluation of the ]ark. For For it is technically impracticable, to increase the receipts in all items of the budget at the same speed, as the expenditure increase, because, as already mentioned above, the growing enhancement of prices, a consequence of the continually decreasing purchasing power of the mark, continually moves the total base of Germany's national economy. Duties on mercantile transactions and traf- fic taxes, customs and consumption-duties are more movable and partly automatically get hold of the inflation of the amounts of mark, liable to paying the taxes; also the institutions of the Reich, especially Post and Railways, allow a more shifting tariff-policy. It must however be considered, that a mechanical rise of tariff- rates, cu- stoms etc. mathematically corresponding the devaluation of the papermark at home or abroad, not sufficiently regarding the special condition of the object for the as- sessment, does in no means warrant equal amounts of gold for the receiptof the Reich; so for instance the large rise of tariffs with the post and railways has had as a consequence a considerable reduction of traffic. The taxes on property which are a chief source of revenue for the Reich, can practically not be adapted so quickly to the devaluation of the money, because the dislocations connected with the devaluation of money in the state of income and property of the different classes of population take place in way wholly different from one another.There- fore a change in the amount of property taxes fixed for the mass of liable tax-payers must every time be preceded by a new assessment for taxation, what merely on the technical nical side would meet the greatest difficulties regarding the necessary expenses for the new officials, if this would be repeated at short intervals. The budget for the running financial year proposed to the Reichstag in April a.c. in a revised form is shown by figures in Annex II. The budgetitems, as I subsequently may adduce from the mentioned article of the Dr.Schrdder, show the following for judging the financial condition of the Reich: The administrations for traffic (i.e.Post, Railways etc.) cover their running expenses out of own revenues; but for re- novation and suppletion of constructions they need an amount of loan of 19 442 millions mar4 The amount at first may seem high. But, taking the devaluation of money and the rise of all prices into consideration, it is lower, than the normal needs for ma.nagement befor the war (17,7 of total expenses against 31,1 % in 1913). The amount appears even smaller, considering the great deterioration of the constructions by the war. It has been given up as a principle to build new railway lines. It is really to be doubted, if it is possible to get 19 442 millions by way of a longtermed loan already in 1922. The receipts of the general administration of the Reich in the ordinary budget exceed the expenses with 16 500 millions marks. The expenses of 90 000 millions contain 29 000 millions marks for the debt service and 22 000 millions murks for transfers to the countries and communes. To the countries portions of the new Reichs-taxes are assigned, belon,ing to them as a compensation for the great taxes taken away from them and which they need for payment of the most urgent expenses. For pensions and maintenance of relicts of sol diers diers further 1C 800 millions marks have to be spent. The resting amount of about 28 CCO millions marks serves as a payment for the running expenses for all the branches of administration of the Ketch. In 1913 100 millions marks were payed for these purposes. If you take into consideration, that the general dearth, the rising of the prices of all materials and the cost for the standard of life for the functionaries as an average has arrived to the 25 fold at least, the calculation of 28 000 millions marks, equalling to an expense of 1100 millions goldmarks, proves an economical management. The needs for loans for the extraordinary budget of the general administration amounts to 3110 millions marks. They have essentially been provoked by the consequences of the war and must in the following years disappear or be redUced to a low sum. The excess of the ordinary budget of the general admini- stration amounting to 16 500 millions marks shall be used for carrying out the peacetreaty. But only to a small degree it can cover the necessary expenses for the same. And here we come to the source of the whole misery of the German finances. The expenses for the peacetreaty have to a considerable part to be paid in foreign values. They are therefore immediately dependent on the rate of the mark. The 720 millions goldmarks fixed at Cannes for 1922 require 34 400 millions papermarks, the dollarf rate being ZOO marks; 51 400 millions papermarks, the rate of the dollar being i00 marks. For the payment of this burden the measures of taxation do not suffice. Even if it was possible to rise the proceeds from taxes so that the amount wanted for the moment could be covered wholly that would not mean a real covering, I part of Germany in order to fulfill the assumed liabilities; occasional mistakes in the financial measures are, of course, admitted. Special difficulties have arisen for the financial department by the flight of German capital from taxation also mentioned in your letter. All possible measures have been undertaken by the German Government to counteract it. Notwithstanding serious doubts Gemany has suspended the banksecrecy and has introduced the obli- gation for depositing securities with banks; further the transfer of balances, means of payment and securities abroad has to be announced to the financial authorities, that is, the board of assessment has a control over the moving capital and its transactions with foreign countries, as far as measures from the German side are efficacious enough; the sub-annex IV of the joined memorandum of the Heichskanzler gives special explanations about it. Besides there has been concluded an agreement with Tshechoslovakia about reciprocal legal protection and redress concerning taxation affaires. It was Germany's endeavour during the Genoa conference to give the legal protection an international character; the proposition has by the financial commission in Genoa been passed to the league of nations, while the comr:ission itself stood on the standpoint, that the liberty of the exchange-market and th bank-secrecy ought not to be injured. The mention- ed measures of the government have, adapted to Germany, naturally only limited effects and can, if not supported by the neighbouring countries, only be insufficient.Zoreover V over the flight abroad of capital liable to taxes is cow mon to all countries charged with impaired currency and high taxes. It also seems to me, that the flight of capi tat from Germany abroad is exceedingly overtaxed. As far as the flight of capital takes the form of proceeds of exports left abroad and not put at the disposal of Germany's national economy, it is confined to very narrow limit4 because the control of exports and the duty of delivering foreign bills on a large scale ;et hold of the accumulat ing proceeds of exports. The flight of German capital abroad essentially is but one side of the fact called the "Flucht aus der Lark" (flight from the mark), stimulated with every new fall of the mark exchange; the other more important side remarked by you, is the panic purchasing of goods of every kind and also the hoarding of foreign currencies. Both facts are resulting from the inconsistency of the value of the papermark and the shifting changes between the purchasing power of the mark abroad and at home. The shifting changes according to the extent of the fluctuations keep the German economic life under a feverish up and down of quickly changing conjunctures and are the reason of temporarily to be observed excesses of selling out. At the same time by means of the fluctuations of the foreignand inland-value of the mark we see the deplorable process of Germany's empoverishment going on. :7ith the false splendour from the inflation with its increasing numbers of nominal value this process threatens also the German productive capital. In many cases enterprises enterprises show fictitioUs profits, because incomes from deliveries of kind in papermarks are booked as profits, though they do not cover the corresponding sale of kind according to its gold-value, so that by and by the proceeds do not any longer suffice to ascertain the original supply of capital for business purposes. To a greater extent the considerably enhanced providing of capital for the industrial and commercial enterprises is to be taken as an absolutly necessary filling up of the original bu- siness property; the joint stock companies, and the other companies of shareholders with limited liability (Aktiengesellschaften , Kommanditgesellschaften auf Aktien and Gesellschaften mit beschrankter Haftung) in Germany claimed in 1921 for fresh establishments 5 947 millions papermarks, while for the increase of capital were claimed 22 772 millions papermarks (in 1920 the figures were 1808 millions and 8947 millions). The need of capital for enterprises is partly covered by shorttermed bankcredits, partly t participat- ing outsiders, also foreigners, but especially by issuing stock and bonds, or both combined, will say, preferred shares bearing fixed interest. It is obvious, that during a period of desultory money devaluation the juridical form of the joint stock companu is preferred because of its greater movableness on the money- 'zarket. The admissibility of the money- and capital-market of course was especially large for stocks not only as a consequence of the lasting abundance of money, but also in connection with the mentioned efforts to V to purchase physical property or shares of such. Consequently the getting of capital in commerce and industry by means of stocks is predominant; and in 1921 the issue of dividend values amounted to 21 712 millions papermarks, the issue of bonds bearing fixed interest to 5 415 millions papermarks. In such times, when the tanks must be very cautious with granting longtermed credits, smaller firms being more or less dependent upon bank credit, often are pushed aside by the large enterprises, having immediate connection with the capitalmarket by means of issuing stocks and bonds. Such a development necessarily leads to a chan,gement of private firms to joint stock companies, to fusions of undertakings and to joining with rich enterprises of the same or a related branch of business. The continuing changements of German private enterprises into joint stock companies and the fusions of enterprises thus are a natural consequence of the changed economic conditions. Besides it must be considered, that Germany has lost very valuable districts of economic excess, which also was the reason for a fargoing reversing of some industries (only in the l'est of there were lost 75 the output of coal, zA3 the output of ironore, 9 5) of 56 of the German flattening-mills, dl 501 of the blastfurnaces, of the textile industry; in Upper -Silesia among others had to be abandoned 77,5 % of the tgrri-- output of coals, all the ironore mines with an output of 61 000 tons a year, z2 blastfurnaces out of 37 in all; further 77 86 512 of 57 of the output of lead-ore and the output of zinc-ore, that will say 75 To of the the whole German output of zinc-ore). Similar reversings were necessary with numerous enterprises by the liquidation of establishments, participations and rights abroad It is in the following forms, that industrial ,fusions chiefly take place: companies, connected with on e another on the base of interests, increase their capital and exchange the new amounts of stocks reciprocally. Wit h the absorption of joint stock companies the same measure of increasing the capital is mostly adapted, in order to satisfy the shareholders of the absorbed company by fres issued stocks. In Germany rarely one chooses to get hold of an enterprise by means of purchasing the majority of stocks at the stock exchange, while the entering of foreign capi tal into the economy of Germany more often goes this way. But also without such financial transactions relations between companies are installed by placing representatives of one firm in the board of directors or the administration of the other. As for the large capitalists whose .ftnancing methods you wanted to be informed about, the development is in some regards different. They themselves issue nett her stocks, nor bonds, but are used to take up a bank-credit at first, if their current means do not suffice for purchasing a business or for participating in a such, a cre dii 'a which as a rule, judging their special trustworthiness, is without any difficulty to be got and which they in a normal way will repay out of profits or with the liquida tion of former investments. If they haoe a deciding.inIluence in an enterprise they have the possibility to make make the enterprise to claim to the money market directly by issue of shares or bonds or by performing other transactions as above mentioned, in order to procure new means. Occasionally the financing operation is performed in the way, that a chief shareholder induces the company in- fluenced by him to rise the capital by issuing stocks, giving him a profit by his purchasing the new shares at a very low rate. The chief shareholder then, as far as it does not interfere with his influence in the enterprise, can partly realise the profit he has recetoed by the cheap purchase by selling the new stocks at the stock exchange in order to invest the profit in new enterprises. Naturally such profits are due to taxation, though the real value of the invested', capital as a rule has not essen- tially changed by such. transactions; because if, for instance, an enterprise representing a ;;old oalue, weakens its capital by issuing new stocks too cheaply, not pro - viding it with corresponding fresh means of production, the shares of this enterprise left in the hand of the ca- pitalist loose in value, and if also the shareholder uses the realised profit for purchasing other gold- values, he mostly by such operations only fills up his property in gol,d-values to the original amount. If a large capitalist joins all shares of an enterprise in his hand (e.g. the stocks of the Friedrich Krupp joint stock company are held by lirs.Krupp v. Bohlen and Halbuch _ind the shards of the mining-company of the Thyssen-concern are in the possession of the mining-industrial August Thyssen) he will not procure new means by issuing shares, being herewith obliged ed to accept other sh'reholders into his business, but he will issue bonds. The energies in the economic life of Germany those inducing to perform /fusions essentially result out of the obligation to keep the productive apparatus in a possiJle good state of health just as in such a period of fluctuat ing crises in business and money affairs, during which .all affairs relating to valuation and production have turned topsy-turvey. But the partly accumulated capital employed in business, however high the amount may be in papermarks, must be reduced to their gold-value if one desires to estimate their real signification; because the German base of production has, as already mentioned, undergone a severe restriction. It is natural, that the wealthiest enterprises hereby have got aheua 0.1- the weaker oneo, partly this natural preponaerance of the leading enterprises results from the fact of their pos- sessing coal, around which ndustries of semimanufactured and manufactured goods widely are spread. Nevertheless the tendency of the German people do not as a general and in continued custom rule/aim at changing their bank-balances and their cash into goods, though it temporarily was the case in a pant sort of way, and especially as for the large capitalist it remains in certain limits. The balances with the banks and saving-banks are growing continually, and the increa sed rates of shares - the increasing of the quotations ha been caused not only by the devaluation of money and the purchases by foreigners, but temporarily also by that above mentioned tendency of getting hold of physical property - p perty - have in the meantime considerably been reduced and every slight improvement of the mark lowers the quotations. So it is evident, that the market is not lacking for securities. The reports you have received, saying that those of very large means are acquiring industrial and similar shares to such extent, that the whole production in Germany seems to be concentrated into comparatioly few hands, show a perfect lack of practical knowledge on the subject. It can not be spoken of such a dimension of. lurchases of physical property, and the danger of such a concentration is not nearly existing.On the contrary as a consequence of the devaluation of the mark in recent times many a large industrial enterprise and concern feels so much the lack of capital, that they are forced partly to sell the shares of other enterprises being in their hands. I already mentioned above, that the capacity for paying taxes of the commercial and industrial enterprises in Germany is very highly strained. And I fear, that the direct taxes are overstrained already, as the German eco- nomy as a whole continually consumes the substance of its productive power; unfortunately the profits in paperLarks resulting from the devaluation are apt to veil these real losses to a superficial critic. The more the nation is in danger to succumb under the exceeding burden, the more its view is troubled about the limits really existing in the working-energy of Germany's national economy. The colletting of the heavy taxes prescribed by the German t axalion system, and the compulsory loan (Zwangsanleihe) decided 4 According to Germany's situation the ReichsbankDirektorium did not feel able to refuse the discounting of the treasury certificates offered by the Reich however sharply it may condemn the increase of the float ing debt in its effects to an increase of the circulatio n of bank-notes. It had to act in this way understanding, that the Reich until now had no other way open, than by taking upfloating debts, in order to cover the expenses not to be covered by ordinary receipts, and to a great part connected with the peacetreaty. A suspension of pay vent would paralyse the whole administration of the Reic and would lead to an anarchic state of things, which wou ld have as a consequence the ruin of the German national economy and the perfect devaluation of the mark, with al 1 the consequences also for the international trade. In fact, as you yourself express, if the German budget cannot be brought into balance, there is simply the choice between further emissions of bank-notes, issues of paper money directly by the Reich, or suspension of payments. I hope to have answered the questions put by you and to have illustrated the problems mentioned in your letter, but I still add to your further information abou our money and exchange situation three memorandums, concc-kio,i, posed in the Reichsbank on 'The Germany "Centr f Annex and e ssuing- banks" and "Exchange-Questions". As I am not sure, that the English translation of my letter exactly meets the meaning of the German tea t, I also join it. I should be very much pleased to meet you soon at 4 at the conference for Central Banks in London, it being then possible for me to gibe you further information by talking it o'er with you. With the Assurance of my Yours esteem I beg to remain 'ncerely Vat Virdlibent Devlin SW. 19, ben ocs, cif Shan ttr. 31. Mat 1922. trefitorium. 7 geh. Prioat und certraulich. 3n ber 2Intwort ift bie 2Inabe vorftet?enber linnnner ermiinfd?t. Sehr geehrter Uerr Gouverneur! Kir Ihr freundliches Schreiben corn 14. April d. Js., das ich am 28. April erhielt, beehre ich mich, Ihnen meinen aufrichtigen Dank auszusprechen. Ich bin Ihnen besond.ers dankbar daffir, daS Sic mir mit ooller Offenheit persdnlich und vertraul ich geschrieben haben, und ich werde Ih- nen enso offers und freimfitig auf die con Ihnen gestellten Fragen antJorten. Zu meiner groBen Freude entnehAe ich aus Ihren iiusfihrungen, daLi Ste persJnlich die in Ge mdi3heit der bisherigen Zahlungspldne dem deutschen Volke auferlegten Leistungen f:r zu weitgehend erachten. Au' r:rund Pri und genau ester Kenntnis der deutschen Verhdltnisse kann ich die ichtigkeit dieser 4uffassung unbedingt be- stdtigen. Das, was Deutschland an L:arzahlungen und an Sachleistungen aufbringen soil, 9eht in der Tat liber seine finanzielle und wirtschaftliche Leistungsfdhigkeit hinaus. .Die -se Leistungsfdhigkeit hdngt in der Hauptsache An den Gouverneur der Federal Reserve Bank of New York .7.. Benjamin Jtrong in Vero fork. a Hauptsache von dem Stande der deutschen Zahlungsbilanz ab. Wie Ihnen pielletcht bekannt geworden 1st, hit der Vizeprdsident der Reichsbank, Herr Br. v. Glasenapp, in der ersten liederaufbaunummer des Manchester Guardian Commercial oonz 20.o.,,ls. die deutsche Zahlung, bilanz einer Erdrterung unterzogen, deren AusfUhrungen und Ergebnisse sick mit meinen ,chauungen und Uberzeugungen oallkommen decken. Ich mdchte daher auf den Artikel Bezug nehmen, den ich in photographischer 112aoh- bildung beizu1egen mir erlaube. 3ie in dem Artika geO. gebenen Ziffern fiber die deutsche (sichtbare) Handelsbilanz enden mit AbschluB des abgelaufenen Jahres, weil zur Zeit der Abfassung des Artikels neuere Angaben noch nicht zur VerfUgung standen. Inzwischen sind die ZUfer) das erste Tertial des Jahres 1922 statistisch fest- gestellt; sie ergeben in lallionen Goldmark fur den einen Import von " Export " Januar Februar idarz April 282,4 245, 9 338, 4 407, 6 321, 6 296, 7 323, 4 330, 8 15, 0 7(3, 8 mithin einen Export iberschuB von - Export- 39,2 2berschul3 40, 8 iibeit-C-huB Ann die ersten beiden Monate eine Aktioitdt der .7arenbilanz nachweisen, so 1st dies auf die Abnahme des Imports, insbesondere darauf zuriickzufUhren, dal die schon zu Ende des Vorjahres stark rUckgdngige Einfuhr notwendiger Lebensmitte1 in den ersten beiden Zonaten des Jahres 1922 noch wetter zurUckgedrdngt werden Die l'onate ;;.rz und April zeigen dann aber ein erheb- liches Anschwellen des Imports, da ohne starke Beeintrdchtigung der Lebenshaltung und damit der Produktioitdt der deutschen aeodlkerung auf eine ausreichende Lebensmitteleinjuhr nicht ldnger verzichtet werden konnte. Die Folge oar eine passioe ,iarenbilanz fur diese .zona- te, welche die in dem Artikel zum Ausdruck gebrachte Auffassung bestdtigt, daB eine Aktioitdt der larenbilarrz fur den Jahresdurchschnitt nicht zu erhoffen steht. Sogenannte unsichtbare ExiJorte, welche die Passioitdt der darenbilanz auszugleichen oermdchten, stehen Deutschland in grdl3erern Umfange nicht zur Verfdgung, und so-. weit sie oorhanden sind - Ankauf deutscher Orundsti.icke, Unternehmungen, Aktien durch das Ausland - mindern sie die Substanz des deutschen Vo1ksoermdgens und oermehren die deutsche Verschu1dung an das Aus1and; nur der Reise- verkehr der Aus1nder in Deutschland bringt einen md2igen Aktioposten, der aber im gi4!nstigsten Fall nur auf wenige hundert 11ionen Go1dmark oeranschlagt werden kann. Vie1mehr hat Deutschland, vie der Artike1 des ndheren ausfdhrt, zwecks Verzinsung und Amortisation der in dusland aufgenommenen Kredite jdhrlich rund 750 Go1dmark aufzubringen und infolge des Verlustes fast der gesamten Handelsflotte sehr hohe Betrdge fur ausldndische Seefrachten zu zah1en; dazu treten die gewaltigen Zahlungsoerpflichtungen auf Grund des Friedensoertrages, die Besatzungskosten, die Zah1ungen im Ausg1eichsperfahren und oor allem die Reparationsbarzahlungen und Sachleistungen. An sogenannten internen (d.h. in Papiermark zu leistenden) Besatzungskosten muBten bis Ende iJdrz 1922 rund 14 000 L'illionen Lark gezahlt werden. Telchen Betrag die weit hneren externen (d.h. die in Go1dmark zu leistenden) Besatzungskosten erreichen, steht in Ermangelung etner oollstdndigen Abrechnung noch nicht genau fest, Die deutsche Regierung hat sie bis Nnde 124rz 1922 auf rund 5 500 ,,111ionen Goldmark oeranschlagt. Die oon der 3ntente Zeitungsnachrichten zufolge - beschlossene Herabsetzung zung der Besatzungskosten auf insgesamt 240 Zillionen Go1dmark jdhrlich ist bisher noch nicht praktisch geworden. Im Ausleichscerfahren waren bis L'nde 1921 468 iillionen Goldaark aufzubringen, bis Ende April 1922 wird die Summe insgesamt etwa 550 Liillionen Goldmark erreicht haben. An Re)arationszahlungen sind durch das sogenannte Londoner Ultimatum Deutschland jdhrlich 2000 Mlionen Goldmark als feste und au2erdem 26i) der gesamten deutschen Ausfuhr als variable Leistung auferlegt. Bei einer damals auf 5000 Goldmark ge- schdtzten Gesamtaus,fuhr wiirde sich hiernach eine jdhr- liche Gesamtleistung con 2000 + 1300 = 3300 lallionen Goldmark ergeben. Bereits im jahre 1921 erwies sich die Unmdglichkeit, diese Gesaatleistung aufzubringen, and erwies sich zugleich, dal:3 schon der Versuch, sie aufzubringen, die schwerwiegendsten wirtschaftlichen Folgen nicht nur fur Deutschland selbst, sondern auch fur die mit Deutschland in Verkehrsbeziehungen stehenden Lander zur Folge haben muBte. -it aicksicht hierauf wurde dann in Cannes beschlossen, diese Gesamt1eistung corldufig nur in ildhe con 720 i,illionen Goldmark bar und con 1450 irillionan Goldmark in Jachleistungen einzufordern. Um die Bedeutung dieser Zahlen fur Deutschlands Zdhlungskraft ins rechte Licht zu setzen, mdchte ich thnen zwei andere Ziffern gegenfiberstell3n: Vor dem Kriege betrug das Aktiosaldo der gesamten Zahlungsbilanz Deutschlands, das damals die ;ioh- stoffe liefernden Kolonien, die landwirtschaftliche trodukte liefernden '1.so-oinzen Posen and WestpreuBen, eine groBe Handels,flotte, otele i tlliarden (Goldmark) ausldndischer 4'ertpapiere, stele :Alliarden deutschen Prioat- - 5 - Privateigentums in den Lindern seiner Kriegsgegner, die Industrieunternehmen und reichen Srz- und Kohlenlager in Lothringen, an der Saar und in Oberschlesien pp. besa[3 und in seined Handel unbeschrdnkt war - ca. 700 - 800 (Goldmark). Heute sind alle diese Ye rte, mit deren Hilfe es Auslandsschulden bezahlen kdnnte, thin genommen; die gleichwohl von ihm gefordertc jdhrliche Reparationsleistung aber betrdgt das 5 3fache jenes gesamten frUheren Aktiosaldos. Ferner: Die Kriegsschuld 3nglands an die Vereinigten Staaten betrdgt etwa 4500 lallionen 4 die Frankreichs ca. 3500 lulllionen O. Die Jahresleistung daraus wiirde - zu 41/2 % berechnet - ca. 800 und 640 011.Goldmark betragen, also nur einen Druchteil (1/5 - :3) der von Deutschland gejorderten Last. Beide Lander haben sich aber in den oergangenen drei Jahren und Frankreich noct, heute Jr ti unfdhig erkldrt, diese Last zu tragen. Es liegt auf der viand, dal die deutsche Yolks- wirtschaft die ihr hiernach zur Last fallenden Betrdge an 7insen, an Zahlungen im Ausgleichsoerfahren, an Besatzungskosten und an Reparationsleistungen, die sich - unter Zugrundelegung der ermdeigten Reparationsziffern von Cannes und der oben erwihnten ;,:inderung der Besatzungskosten, die wohl beabsichtigt aber noch nicht veroiriflicht ist - ins; esaat auf mindestens 3500 1;:il- lionen ijoldmark jahrlich belaufen, auch nur entfernt aufzubringen auBerstande 1st. Aufgebracht werden kdnnen derartige Schuldsummen endgilltig nur tm :ege eines Ex- portUberschusses. Dies ist im Laufe der Verhandlungen in Oenua aliseitig anerkannt worden. In der einstimmig beschlossenen Introduktion des Rapports der Finanzexperten-Kommission der Genua-Zonferenz heiBt es wdrtlicr, "Foreign obligation bg one country must be balanced - 7- piermark einbringen, deren Umwandlung in Deuisen zum Zwecke der Zahlungen an das Ausland sich allein durch fort und fort gesteigerten Verkauf oon Papiermark bewirken lie2e. Dieser unausgesetzte Verkauf mu20 wie oben ausgefdhrt, fortschreitend die Lark entwerten und daait den in Papiermark aufzubringenden Betrag Lamer wieder aufs neue erhdhen. Gewi2 pflichte ich Ihnen darin bet, daB die deutsche Regierung die nihigkeit, Reparationszahlungen zu leisten, zu beeinjlussen oer- mag, je nachdem see gesunde oder ungesunde Finanz- und 'YdhrungsmaL3nahmen ergreift. Indes steht es leider auger Zweifel, daB gegenLber den die deutsche Zahlungsbilanz und den Reichshaushalt gleicherweise erdrdckenden Reparationsoerpflicht'ingen der drohende Zusammenbruch auch durch die zweckmaBigsten A2nahmen auf dem Gebiete der Finanz-, insbesondere der Steuer- und der Jdhrungspolitik nicht verhindert werden kann. das die Ausgestaltung des deutschen Steuersystems und die Reform der deutschen Reichsfinanzen anlangt, so beziehe ich mich auf die der Reparationskommission mit Schreiben des Reichskanzlers oom 28. Januar d.Js. gegebenen Aufschlusse, die ich mit alien Anlagen in einem Abdruck beildge; einige der darin in An1 lage II gegebenen qffern, die inzischen Uberholt sired und bereits berichtigt werden konnten, habe ich berichtigen Lassen. Die Ausidhrungen geben eine Vorstellung oon den auBerordentl ich groBen Schwierigkeiten, mit de- nen die Umstellung des gesamten Steuersystems auf die Erhebung einer den ins Riewnhafte gewachsenen Lasten einigerma2en nachkommenden Einnahme notwendig perkndpft war. Die Steererhebung hatte pis zum iiusgang des Krieges in den Handen der Bundesstaaten des Reichsgelegen, deren Finanzverwaltungen nach obllig oerschiedenen Grund- 8 Grundsdtzen arbetteten. jegenaber dem groBen Schuldendienst des Retches mu2te die Finanzreform in Deutschland damtt beginnen, zwecks gleichmdBigkeit der Be- steuerung die Finanzoerwaltung zu oereinheitlichen und auf das Reich zu iibernehmen. 1,-an war sich dessen beou3t, dad die Schnelligkeit der Erhebung der beschlcssenen Steuern unter dieser (Leistellung und dem Ausbau der Ver- waltung oordbergehend leiden wurde. Diese Schwierigkeiten mueten aber wohl in Eauf genommen werden, wenn Uber- haupt ein Ausweg aus der finanziellen 7irrnis gefunden werden sollte. Au2erdem mdchte ich darauf hinweisenlda8 ldngere Zeit hindurch auf den Reichsfinanzen sehr erhebliche unprodukttoe .4usgaben - fur Erwerbslosenunter- stutzung, Lebensmittelzuschsse u. dergl. - lasteten, die notwendig waren, um nach dem militdrischen Zusammen bruch des Reichs ein Abgletten der breiten Liassen der Beodlkerung in die radikalsten politischen Richtungen zu perhindern und eine soziale Aufldsung oon Deutschland abzuwenden. Die Finanzreform begann mit einem krdftigen Erfassen der im Kriege gewachsenen oder entstandenen Veradgen lurch Erhebung auerordentlicher Kriegsabgaben oom Vermdgen sowie mit einem einmaligen grolden Opfer oom Veradgen, dem "Reichsnotopfer". Daneben wurde zu einer allgemeinen z.T. sehr rigorosen Erhdhung der laufenden Steuern und zur Einfahrung einer gro2en Zahl newer Steuern geschritten. Die Anlage I der beiliegenden Denkschrift des Reichskanzlers tom 28. Januar d.Js. geht auf den Ausbau des deutschen Steuersystems ndher ein. Uber das Ergebnis, das diese Steuern bisher gebracht haben, und fiber ihren weiteren Ausbau in den letzten Jonaten gestatte ich mtr, einem demndchst in einer diederaufbaunummer des %lanchester Guardian" erscheinenden herrn scheinenden Aufsatz des Staatssekretdrs/Dr. chrdder einige Ausfdhrungen zu entnehrnen: "Die lirkungen der Ananzreform zeigen sich deutlich in den tatsdchlichen Einnahmen des Retches seit 1919. Sic betrugen: im Jahre 1919 10.543 lallionen " 1920 50.801 " 1921 87.374 " (Die Einnahmen wdhrend des Rechnunosjahres 1921 rind in der beigefdgten ubersicht des Reichsfinanzministeri- 1- ums spezialisiert). Die Steigerung der deutschcn Steuerbclastung ist hiernach offenbar. Ste wird del Zusamnenwirken von direkten and indirekten Steuern oerdankt, die fur die Belastung eines Volkes nur in ihrer Gesamtheit betrachtet worden ddrfen. Ste hdtte ooll ausgereicht, die Staatsbeddrfnisse zu befriedigen, wenn nicht der stdndige Fall der deutschen sidhrun4; die Ausgaben des Ret- ches dauernd hdtte wachsen lassen. Die Sachoerstdndigen der .;11iierten haben auf der Brdsseler Konferenz des Jahres 1920 zum Ausdruck gebracht, da2 in Deutschland "die gegenwdrticen Tarife filr die direkten Steuern bis auf das HdchstmaS gesteigert worden zu sein schienen, and daB man otelleicht sogar, wenn die Veranlagung wieder in Ordnung set unit die Steuern vollen Ertrag brdch- ten, zu der Feststellung komnen wdrde, da13 in Interesse des fiskalischen Ergebnisses, welches mit dem wirtschaftlichen :ionlstande Deutschlands eng oerbunden sei, eine Ermd2igung gewisser direkten Steuern zu erwdgen sei, besonders derjenigen, die auf Handel and Industrie lasteten. Dennoch hat Deutschland sich bereits im Jahre 1921 zu einer weiteren Anspannung der steuerlichen Leistungen entschlossen. Die Steuergesetze, die Ende drz - 10 kdrz/Anfang April 1922 room ,eichstag in. dritter Lesung angenommen worden sind, erhdhen die Sdtze der Ejrperschaftssteuern fdr Erwerbsgesellschaften auf etwa 35 Sie fiihren eine laufende Veradgenssteuer ein, die bis zu 1 jdhr1ich ansteigt und zu der auf die Dauer on 15 Jahren Zuschldge bis zu 200 % erhoben worden, die an die 3telle eines noch nicht erhobenen reties des Reichsnotopfers treten. fie bisherige Besitzsteuer wird durch eine erhdhte Vermbgenszuoachssteuer mit Sdtzen bis zu 10 o ersetzt. Der Besitz wird wetter dadurch Delastet, dati eine aeihe oon Stempelsteuern (auf die Errichtung der Gesellschaften, auf die Bdrsenumsdtze, die 3mission on lertpapieren) in einem Kapitaloerkehrs, steuergesetz durch selbstdndige 7teuern mit hdheren Sdtzen ausgebaut sind, 3ie 3teuern auf Kraftfahrzeuge, die Ver.sicherungssteuern und die Rennwettsteuern sind gleichfalls erhdht. Vor alle allgemeinen Umsatzsteuer auf 2 aber ist der Satz der heraufgesetzt. Die Be- lastung der gesamten Produktion und des gesamten V6rbrauchs ist dadurch oerschdrft, daB die Kohlensteuer oon 20 5) auf 40 Vii des Zohlenpreises erhdht worden ist. Aluch die auf der goldbasis festgelegten Zdlle sind in ihren Sdtzen betrdchtlich gesteigert, unter ihren namentlich die :1511e auf Gegenstdnde des Luxusoerbrauchs. :7elche Bedeutung die Zollerhdhung fur die .Jirtschaft notwendig hat, ergibt sich aus der Feststellung, da3 der j=oldaufSchlag zurzeit 5900 cio des Zollsatzes betKigt Die Sdtze der meisten inneren Verbrauchsabgaben sind on neuem zum Teti auf ein Vielfaches des bis dahin geltenden Satzes erhdht. uch die Hektc1itereinnahme beim Branntweinmonopol ist um ein Mehrfaches heraufgesetzt." Die oben wiedergegebene schnelle Steigerunc der der Reichseinnahnen sett 1919 mu2 zun Teil natUritch ouch auf die fortschreitende Entwertung der Papiermark zurckgePihrt werden. Im Ubrigen ist in Betracht zu ziehen, dal es eine ldngere Zeit dauert - der belgische .Minister Theunis bemlBt die Frist auf 2 - 3 Jahre bis die Veranlagung und die Erhebung einer neuen 3teuer reibungslos funktioniert. Jedenfalls 1st, wie ich each meinem 3inblick in die Verhdltnisse bestimmt versichern kann, der gele2entlich gegen Deutschland erhobene VorwurL es fiihre seine Steuergesetze nicht wirkitch durch, unberechtigt. Der 2ehauptung, die Steuerbelastung in Deutschland bleibe hinter der in den Siegerstaaten zuruck, wird in der Unteranlage 2 der beigefugten Denkschrift des Reichskanz- lers begegnet. Untersuchungen, die neuerdings auf englischer Seite angestellt sind, gelangten zu der Feststellung, daB s000hl die indirekten als die direkten Steuern in Deutschland weft hdrter sind als in Frankreich und Sngland. Die "Daily :yews" vom 2. ..drz d.J8. konstatiert von den beiden gr52- ten indirekten Steuern Deutschlands, von-der Umsatz- und der Kohlensteuer, daB die Umsatzsteuer in Udhe von 2 4 wenn die rare vom Rohstoff bis zum Fertigfabrikat durchschnittlich nur durch 4 Hdnde geht, jeden ;7arenaustausch mit 8 besteuert (der Luxusoerbrauch wird mit noch wesentlich hdhe- ren Sdtzen belastet), und dal die Kohlensteuer von 40 ';,; ebenfalls in jedem industriellen 7eiteroer- arbeitungsproze2 zusdtzlich auf den Preis der Fabrikate umgelegt wird. Von Einkommen hat nach der gleichen englischen vuelle zu zahlen in - 12 - - 13 - allein in Vergleich zu stellen, wenn nicht zugleich berucksichtigt wird, daB in Deutschland das Sinkommen auch der untersten Schichten durch direkte Steuern stark belastet ist, wdhrend in Frankreich und England die breiten Lassen der 3eodlkerung wenig oder gar nicht mit direkten Steuern belegt sind, und daB auBerdem in Deutschland die Konsumkraft der Beodikerung erheblich gemindel ist; ein geringes Aufkommen aus Verbrauchsabgaben au! den Kopf der Beodlkerung beweist bei einem oerarmten Lande wie Deutschland nicht sowohl eine geringere steuerliche 3elastung, als oielmehr eine geschwdchte Konsumfdhiglieit. Welche oernichtende indirekte Steuer zudem in der fortschreitenden Papiergeldinflation liegt, wird fibrigens an keiner Stelle berJcksichtigt. bisher nicht einzuddmmen gewesenen Kursschwankungen und die Entwertung der :. :ark ma- chen naturgemdB die i.iufstellunQ eines festen Reichshaushalts)lanes fair einen ldngeren Zeitraum odllig unmJglich, Denn es ist technisch undus!WIrbar, die Einnahmen in alien Etatspositionen unmittelbar in dem gletchen Tempo zu steigern, chem die Ausgaben zunehmen; in wel- da, wie schon oben bemerkt, die aus der stdndig abnehaenden :ctufkraft der ...ark sich ergebende wachsende Verteuerung fortwdhrend die gesamte Jrundlage der deutschen Volkswirtschaft perschiebt. Umsatz- und Verkehrssteuern, und Verbrauchsabgaben sind beweg- licher und erfassen zum Teti die Aufbldhung der 1r'arkbetrdge, von denen die Abgabe erhoben wird, automatisch; auch die Reichsbetriebe, insbesondere die Lost und die Eisenbahnen, gestatten eine beweglichere - 14 - 1ichere Tarifpolitik. Indessen ist zu beachten, da2 ein mechanisches, der Entwertung der Papiermark im In1ande oder Aus1ande rechnerisch entspre- chendes Erhdhen der Tarifstze, usw., das die beson:dere Lace der betrellenden Veran1agungsobjekte nicht geniigend beriicksichtigt, keineswegs gleichbleibende Goldmarkbetrdge !Lir die fieichsein- nahae 9arantiert; so haben z.B. die starken Tariferhdhungen bei Post and Eisenbahn eine ganz erhebliche Einschrdnkung des Verkehrs nach sich gezogen. Bet den Besitzsteuern, die eine Haupteinnahmequelle des aeiches bilden, ist eine derartige schnel- lere Anpassung an die Geldentwertung praktisch nicht durchrihrbar, well die mit der Geldentwer- tung zusammenhangenden Verschiebungen im Einkommens- and Veradgensstande der einzelnen Beod1ke- rungsschihten sich gdnzlich abweichend ooneinandei ool1ziehen. Desha1b wird etner IdIderung der fUr das Gros der Steuerpf1ichtigen oeranlagten Besitzsteuerbetrdge jedesmal eine neue Veranlagung zur .3teuer oorhergehen mii,ssen, die bei de erf order - lichen Aufwand an Steuerpersonal rein technisch auf die grnten Schwierigkeiten stollen u,i;rde, wenn sie sich in kurzen Zeitr:iumen wiederholen adBte. )er dem aeichstag im April d. Js. oorgelegte iiberarbeitete ilaushaltsp1an fir das laufende Rechnungsjahr ist in der Anlage 2 ziffernadBig dargeste11t. :us den Budgetzahlen ergibt sich, wie ich weiterhin dem oben erwihnten Artikel des jerrn Dr. Schrdder entnehmen dart, fur die Beurteilung der Finanz1age des i2eichs folgendes: "Die 3etriebsoerwaltungen (Post- 3isenbahn decken aus eigenen 3innahmen ihre laufenden Ausgaben; sie - 15 - sie haben aber fUr 3rneuerung und Erganzung der Anla- gen etnen Anleihebear! on 19.442 Zillionen Z. Der Be- trag erscheint zundchst Koch. Er ist aber, wenn man die Entwertung des Geldes unf die 3teigerung aller Preise beKicksichtigt, ntedriger als der noraale Bedarf der Betriebe cor de; 1=riee (1717 ausgaben gegen 31,1 der gesamten Betriebs- iin Jahre 1913). Die Zahl er- scheint noch geringer, wenn man die starke .bnutzung der Anlaen durch den Zrieg bedenkt. ,iuf den Bau newer Bahnstrecken hat man grundsdtzlich cerzichtet. 01) es allerdings gelingen wird, die erforderlichen 19.442 Zi11 ionen im ;i'ege einer langfristiQen Anleihe schon inn Jahre 1922 zu beschaffen, muB bezweifelt werden. Die Einnahmen der allgemetnen Reichsperwa1tung abersteien im ordentlichen Hdushalt die Ausgaben um 16 500 Zillionen Z. In den flusgaben on 90 000 onen A: sind 29 000 iallionen L !Ur den SchLadendienst und 22 000 Zillionen L !Ur Uberweisungen an die Lander und Gemeinden enthalten. 7)en Ldnern werden Anteile an den neuen Reichssteuern iiberwiesen, die ihnen als Ersatz Itir die ihnen genommenen groBen 3teuern zustehen und die sic zur Bestreitung ihrer dringendsten Ausgaben bendtigen. Kir Pensionen und Versorgung der L'interbliebenen der Kriegsteilnehmer sired ferner 10 800 ;,:illionen Zau.fzuwenden. ,ius dem Rest con rund 28 000 lijillionen A werden die lau!enden Ausgaben aller VerwaltungszL)eige des Retches bestritten. Im Jahre 1913 wurden fur diese Zwecke 2 100 MIllionen L-ausge2eben. 3tellt man in Eechnung, daB die a1lemeine Teuerung, die Steigerung der Preise aller A:aterialien und die fosten der Lebenshaltung der Angestellten im Durchschnitt r;zindestens das 25!ache erreicht hat, so beweist der ,j1satz con 28 000 Alfillionen A, der einem Ausgabeposten con 1 10C ,...ill ionet, Goldmark - 16 - 9 Goldman- gleichkommt, dczB sparsam gewirtschaftet wird. Der Anleihebedarl des aui3erordentlichen haushalts der allgemeinen Verwaltung betrdgt 3 110 ;:ill Toner Er ist i ra wesentlichen Burch die Nachwirkungen des Krieges hervorgerufen and mug in den foloenden Jahren perschwinclen od,er doch auf eine nur geringf:igige Sumnze herabgedr.ictt werden. Der SberschuB des ordentlichen ilaushalts der allgemeinen Verwaltung chit 13 500 AJillionen AZ soli zur Durchliihrung des Friedenspertrages verwendet werden. *Er kann aber die hierfar erforderlichen Ausgaben nur zu einem ganz kleinen Teile decken. dieser Feststellung kommen wir zur Queue des ganzen Elends der deutschen Finanzen. Die auf dem Friedensvertrage beruhenden Ausgaben sind zurn erheblichen Teti in :reader Valuta zu leisten. Ste sind deshalb uninittelbar abhdngig vom :urse der .L.,-ark. Die 720 Zillionen Goldmark, die fair das Jahr 1922 in Cannes lestgesetzt sind, erjrordern bei einem Dollarkurse von 200 A:: 34 400 A;A`illionen Papiermark, bei einem Dollarkurse Don 300 i,I 51 400 Millionen Papier mark. Zur AbbUrdung dieser Last geniigen die Zittel der Steuergesetzgebung nicht. Selbst wenn es moglich ware, die Steuerertrdge so zu erhJhen, daB der im Augenblick erlorderliche Bedczr: an Tapiermark insgesaat gedeci so w-Lirde das doch noch keine wahre Deckung becleuten, solange die Zahlungsbilanz der deutschen Volks- wirtschalt nicht ausgeglichen ist. Denn Steuern erbringen nur 1-1-a,Jiermark, jr die Zahlungen mUssen aber De- visen beschafft werden. 1st der Ausfuhrii,berschua der deutschen .7irtschaft nicht so grog, dal3 die Devisen dem Reiche gegen Fapiermark zur Verfugung gestellt werden k5nnen, so bleibt dem Reiche nur die .4-dc,)lichk.eit, Devisell - 17 - sen tm Auslande anzukaufen. Das Zahlungsmittel des Retches ist wieder die i'ai)termark. !Awn de-n Grundsatz ion Angebot and iVachfrage mu2 dieser Zwang, Papiermark au! den Zarkt zu werfen, um Deoisen dafUr einzutauschen, den Kurs der Zark stetig wetter drUcken". Die stdndig anschwellenden EaptermarkzWern pflegen darijber hinwegzutduschen, daY3 trotz scheinbarer Geld- fldssigkeit and scheinbarem Reichtum eine Verarmung grdiJten Umfanges in Deutschland eingetreten ist. Von sachNundiger Seite ist berechnet worden, daf3 das gesamte deutsche Volksceradgen, was vor dem Kriege etwas Uber 300 lalliarden Goldmark betrug, seitdem eine Verainlerun; auf weniger als die Halfte erfahren hat. Den fremden Gel. Bern in fine con 30 bis 35 ,-ill iarden Joldark, die vor dem Kriege in den deutschen Geldinstituten porhanden waren, steht gegenwdrtig ein Bestand con schatzungsweise 200 _illiarden Papierark gegenUber, der einen Goldmarkwert con etwa 3 :Alliarden ...ark darstellt. An dieser weitehenden Verarmung Deutschlands, die sich in solchen ?if fern offenbart, mdssen die bisherigen Steuerleistun- gen and die aus Deutschland herausgeholten Reparationsleistungen gemessen worden, um .zu erkennen, welche ungeheuren ,instrengungen tatsdchlich on deutscher Scite zur ErPillung der Ubernommenen Verpflichtungen bis zur Stunde gei:acht worden sin:h; gelegentliche Fehlgriffe in den deutschen Finanzma2nahmen mdgen dabei zugegeben 'per- den. 3esondere Schwierigkeiten hat der deutschen Yinanzcera)altang die auch in Ihrem Schreiben berdhrte Steuerflucht des deutschen ;Capitals bereitet. Ihr entgegenzu- wir7en, sind seitens der deutschen Regierung alle erdenklichen - 18 - denklichen Schritte unternommen worden. Deutschland hat trotz schweren entgegenstehenden Bedenken das Bankgeheimnis aufgehoben und den Bepotzwang fir ]ertpapiere eingeliihrt; ferner ist die b rtragung on Outhaben, Zahluncsmitteln und 7ertpapieren nach dem Auslande den Finanzbehdrden anzqmelden, die Jteuerbehdrde iibt also eine Kontrolle des mobilen Zaitals und seiner Bewegungen im ierkehr mit dem Auslande aus, sa4;cit I,2aBnahmen oon deutscher Seite hierzu ausreichen; die Unteranlage 4 der beiliegenden Denkschrift des Reichskanzlers gibt hicrUber im einzelnen Aufschlu2. 211t der Tschechoslowa- kel 1st au2erdem ein ertrag fiber gegenseitigen Rechtsschutz und 1?echtshille in :;teuersachen abgeschlossen worden. Deutschland hat au.1 der Zonferenz zu Oenua an- gestrebt, eine derartige Rechtshilfe international zu gestalten; der Vorschlag 1st seitens der Genueser Finanzkommission dem Vdlkerbund Czbenoiesen worden, wahrend die Kommission selbst den 3tandpurkt einqahm, da3 die Freihelt des Techselmarktes nicht unterbunden und das Bankgeheimnis nicht uerletzt werden dUrfe. Dle kungen zwischen und Binnenwert der Zark der traurige Proze.8 der Verarmung Deutschlands. Unter dem Scheinglanz, den die Inflation mit ihren wachsenden Nennwertziffern ausbreitet, bringt dieser ProzeB auch das deutsche Produktionskapital in Gefahr. In oielen Fdllen weisen Unternehrnungen Schein- gewinne aus, indem Einnahmen aus Suchleistungen in Pa- piermark als Gewinne oerbucht werden, obwohl sie den entsprechenden Abgang an S'AchgUtern ihrem Goldwerte nach nicht decken, so daB die Ertrdge allndhlich nicht mehr ausreichen, um die ursprUngliche Ausstattung des Betriebes mit Kapital sicherzustellen. Zuni grdBeren Teil ist die erheblich gesteigerte Kapitalbeschaffung der deutschen Industrie- und Handelsunternehmungen als eine unbedingt notwendig gewordene AuffUllung des ursprUnglichen Betriebsoermdgens anzusehen; die Aktien- gesellschaften, KOmmanditgesellschaften auf Aktien und Gesellschaften mit beschrdnkter Raftung in Deutschland beanspruchten im Jahre 1021 fur Neugrundungen 5 947 Millionen Papiermark, odhrend fur Kapitalerhdhun- gen demgegenUber 22 772 011ionen Papiermark gefordert wurden (im Jahre 1920 batten die Ziffern 1 808 LIllionen und 8 947 &111ionen betragen). Der Eapitalbedart der Unternehmungen !Indet Eleckung tails in kurzfristigen Bunkkrediten, teils in der Kapitalbeteiligung AuBenstehender, auch des Auslandes, const oornehmlich in der Begebung oon Aktien und Obligationen oder in einer Serbindung oon beiden Formen, ndmlich oon Vorzugsaktien mit fester Verzinsung. Es liegt au! der Hand, dae wdhrend einer Periode sprunghaf ter Geldentwertung die Rechtsform der Aktiengesellschaft Gesellschaft, wegen der freieren Beweglichkeit am Finanzmarkt beoorzugt wird. Die Aufnahmeinigkeit des Geld- und Kapitalmarktcs war denn auch gerade far Aktien nicht nur infolge der anhaltenden Celdflussigkeit, sondern auch im ZUsammenhang mit dem er5rterten Bestreben, Sachwerte bezw. Anteile an Suchwerten zu erwerben, besonders grad. Dementsprechend aberwiegt die Kapital- bescha,Mng in Handel und Industrie durch Aktien; so belief sich im Jahre 1921 die Emission on Dioidenden- papieren auf 21 712 Zillionen Papiermark, die Emission festoerzinslicher 7erte auf 5 415 M,llionen Papiermark. nttlere und kleinere Firmen, die mehr oder minder auf den Bunkkredit angewiesen sind, geraten in solcher Zeit, da die Banken mit langfristiger Ereditgewdhrung zurfIck- halten mUssen, oielfach oor den groSen Unternehmungen, die durch Ausgabe oon Aktien und Obligationen unuittelbar an den Kapttalmarkt herantreten kdnnen, ins Hintertreffen. Fine derartige Entwicklung fiihrt zwangsldu- fig zur Umwand1ung von Einze1.1irmen in die Form der Aktiengesellschaft, zu Verschmelzungen oon Firmen so wie zur Anlehnung u nd zum Anschlud an kapitalkrdltigere Unternehmungen des gleichen oder eines oerwandten Gesch4ftszweiges. Die fortgesetzten Umgrilndungen deut- scher Privatbetriebe in Aktienunternehmungen und die at- samensohlUsse oon Unternehmungen sind dlso eine natUrliche Folge der oerdnderten virtschaftlichen Verhdltnisse. Es ist zudem zu berUcksichtigen, da2 Deutschland sehr wertoolle VberschuBgebiete eingebaBt hat, was ebenfalls zu einer starken Umstellung einiger Industriekreise zyang (im :esten gingen allein oerloren 75% der Eisenerzfdrderung Deutschlands, 9% der SteinkohlenfUrderung, kohlenfdrderung, 23% der deutschen Bisenwalzwerke, 31% der HOchofenwerke, 20% der Textilindustrie; Don Oberschlesten muBten u. a. abgetreten werden 77,5% der dorttgen Gesamtkohlenfdrderung, sdmtltche Etsenerzgruben mit 61 000 t jahrlicher Erzeugung, Don insgesdrat 37 HOchdfen 22, ferner, 77% der Bleterzft):rdeiung und 86% Zinkerz- f5rderung, d. h. 75% der gesamten Zinkerzfdrderung Deutschlands). Gleiche Umstellungen wurden bet zahl- rgichen Unternehmungen durch die Liuldation on Anla- gen, Betetligungen und Rechten im ,,uslande notwendig. Die Formen, in denen sich industrielle Kan_ zentrationen in der Hauptsache vollziehen, sind folgende: Gesellschaften, die in Interessengemeinschaft miteinander treten, erhdhen ihr Kapttal und tauschen die neuen Akttenbetrdge gegenseittg aus. Bet Aufsaugung von Aktienunternehmungen wird ebenfalls twist der 7eg Uber eine Kapitalerhdhung beschritten, um mit 1Mfe der neu geschaffenen Aktien die Aktiondre des zu fibernehmenden Instttuts abzu:inden. Der Neg, da3 die Herr - schaft fiber ein Unternehmen durch den Erwerb der Aktien- majoritdt am Bdrsenmarkt erreicht wird, ward oon deutscher Seite seltener geodhlt, wdhrend sich das Eindringen des ausldndtschen Kapitals in die deutsche Ntrtschaft dfter in dieser :seise abspielt. Indessen werden auch ohne solche Finanztransaktionen Verbindungen on Gesellschaften beschlossen, indem Steller tm i1ufsichts- rat oder in der Verwaltung des etnen Unternehmens mit Vertretern des andern besetzt werden. In mancher Beziehung anders stellt sich die Entoicklung hinsichtlich der Grabikapitalisten, fiber denen ot deren Finanzierungsmethoden Sie informiert zu werden ipinschen. Sie geben selbst ceder Aktien noch Obliga- tionen aus, sondern pflegen, wenn thre oorhandenen flUSsigen Mittel fur den Erwerb eines Unternehmens oder far eine Beteiligung an einem Unternehmen nicht hinreichen, zundchst Bankkredtt in Anspruch zu nehmen, der thnen in der Regel an9estchts threr besonderen Kredituilrdigkett unschwer zugdnglich 1st and den sie nor- malerwefse aus aufkommenden Gewinnen oder aus der Liquidation frilherer Kapitalanlagen abtragen werden. Besitzen sie den ausschlaggebenden Einfluls an einem Unternehmen, so haben sie die Mdglichkeit, das (Inter- nehmen selbst zwecks Beschaffung neuer Mittel durch Ausgabe Don Aktien oder Obligationen direkt an den geldmarkt herantreten oder die sonstigen oben erwdhnten Transakttonen oornehmen zu lassen. Die Finanzierung nimnt hierbei gelegentlich die Form an, dais ein Grae- aktiondr die Don ihm beetnfluBte Gesellschaft zu einer Kapitalerhdhung durch Ausgabe on Aktien Deran1a2t, die ihm bet Obernahme der neuen Aktien durch einen niedrig bemessenen Bezugskurs einen Gewinn zuwendet. Der GroBaktiondr kann alsdann, sowett es ohne Beetntrdchtigung seines Etnflusses auf das Unternehmen mdgitch 1st, den ihm mit dem billtgen Bezugsrecht zugewendeten Geotnn durch Verdui'erung Don bezcgenen neuen Aktien an der Bbrse teilueise realisieren, um den Gowinnbetrag zu neuen Beteiltgungen zu verwenden. Selbst- oerstdndlich werden derartige Geotnne steuerlich erfal3t, obwohl rich der materielle 7ert des angelegten Vermdgens trotz solcher Trcnsaktion in der Regel nicht wesjntlZCh wesentlich Derdndert hat; denn wenn 2.B. ein Unternehmen, das einen Goldwert darstellt, skin Kapital durch zu billige Ausgabe neuer Aktien, die ihm nicht entsprechende naue Produktionsmittel zufahrt, Derwdssert, so entwerten sich die in der Hand des rapitallsten verbliebenen Anteile an die sem Unternehnen, und wenn der Aktiondr auch den realisierten Gewinnbetrag zum Erwerb anderer Goldwerte benutzt, er meistens durch solche Operationen im besten Fall nur seinen Goldwertbesitz auf die urspriingliche Fdhe wieder auf. Vereinigt ein Groiskapitalist sdmtliche Ge- schdpsanteile eines Unternehmens in seiner Sand (z.B. befinden sick die Aktien der Friedr. Krupp A.-G. in den Hdnden c4er Frau Krupp v. Bohlen und Halbach und die Anteile der Gewerkschaften des Thyssen-Konzerns im Besitz des Montanindustriellen August Thyssen), so wird er die Beschaffung neulr Yittel nicht durch .1ktien- ausgabe, wobei er fremde Teilhaber in sein Institut aufnehmen muBte, bezirken, sondern er wird our Aufle- gung einer Obligationsanleihe schreen. Die Krdfte im deutschen Xirtschaftsleben, die zu der zu beobachtenden Zusammenfassung Don Unternehmen drdngen, resultieren im wesentlichen aus dem Zang, in einer Zeit wechselnder, alle Bewertungs- und Produktions- Derhdltnisse aus der Bahn werfender Ynrungs- und Ge- schdpskrisen den lroduktionsapat nach ANglichkett gesund zu erh:Aten. Die hierbei zum Tail zusammenge- hduften Betriebskapitalien, so Koch sic auch in Papiermark bez-Ufert werden mdgen, mussen jedoch au! ihren Goldwert zurfickgerechnet werden, wenn man thre wirkliche Bedeutung Bedeutung richtig einschdtzen will; denn die deutsche Produktionsbasts selbst hat ja, wie erwahnt, eine einschneidende Verengerung erfahren. ale die kapitalkrdf- tigsten Unternehmungen bei die56M KonzentrationsprozeB den weniger starken Unternehmungen den Rang ablaufen, liegt in der Aiatur der Suche begrundet; zum Tell baut sich dies natfirliche Schwergeoicht pihrender Unterneh- mungen auf dem Besttz der Kahle auf, um den sich die 7eiteroerarbeitungs- und Fertigindustrie in ettge:len- der Verdstelung gruppiert. Imm,3rhin 1st das Bestreben der deutschen Ee- odlkerung, thre Bankguthaben und thr Burgeld in Sachgater umzuwandeln, wenn es auch zeitweise fast panikartig aufgetreten 1st, keineswegs allgemein und andauernd, und insbesondere bei den GroBkapttalisten ndlt es sich in mdBigen C;renzen. Die Guthaben bei den Banken and Sparkasse'z wachsen fortgesetzt, and die Steigerung der Aktienkurse, die nicht nur durch die Geldentwertung and den Ankauf durch Ausldnder,sondern zettweise auch durch jenes Bestreben, Sachwerte zu erwerben, stark in die Line getrieben !f,(Lren, 1st inzotschen einem erhebli- chen RUckgang gewichen, und jede leise Besserung der driickt ihreIhnen Kursezugegangenen tiefer. Das zeigt, dass an tienmatera ,illsein Mark "angel 1st. Die . Berichte,wonach Grosskapitalisten, industrielle and sonstige Beteiligungen in einer AusmaBe erwerben, da2 eine Konzentration der gesamten Produktionsmittel in Deutschland in oerhdltntsmdBig wenigen Hdnden oorzuliegen scheint, beruhen auf oejlitger Verkennung der Dirge. Von eine solchen Umfange dieser Ankdufe iron Sachgfitern 1st keine Rade, and die Gefahr einer solchen Konzentra- tion tion liegt auch nicht im entferntesten oor. Infolge der Entwertung der Hark wird in neuerer Zeit gerade manchen grossen Industrieunternehmen and - konzernen das Betriebskapital so knapp, dai3 sie sick gezwungen sehen, die in ihrem Besitz befindlichen Beteiligungen an andern (Internehmungen (Aktien pp.) 2Ugt Tell wieder abzusto2en. Ich vies bereits oben darauf hin, class die Steuer- kraft der Handels-und Industrieunternehnungen in Deutschland ausserordentlich stark ungespannt ist. Ich fUrchte, Bass die direkten Steuern bereits erheblich Uberspannt sind, du die deutsche 7irtschaft als Ganges fortgesetzt an der Substan2 ihres Produktionsoermdgens zehrt; die lediglich aus der Geldentwertung entspringenden Papiermarkgewinne sind leider geeignet, einer oberfldchlichen Betrachtung diese realen Verluste zu oerschleiern. Je ,I,ehr der Staat in Gefahr gerdt, der ihm aufgebUrdeten Vberlast zu erliegen, umsomehr wird rein Buick fur die nun einmal oorhandenen Grenzen der Leistungsfeihigkeit des deutschen Wirtschaftskdrpers getrilbt. Die Einziehung der ill?. Ausbau des deutschen Steuers,dstems durchgefiihrten schweren Steuern, sowie der beschlossenen Zwangsanleihe wird zu einem sear bald fUhlbaren Kapitalmangel fUhren, dem ein RUckgang der zurzeit oorhandenen geschdftlichen Lebhaftigkeit auf dem litthe folgen muss, falls nicht etwa ein weiterer Sturz der Mark mit seinen Scheingewinnen eine neue Konjunkturwelle ausldsen sollte. Ich mdchte mein Urteil dahin zusammenfassen,da2 die uneriassliche Voraussetzung :fir eine Konsolidierung der deutschen Wirtschaft ale Zurfickfhrung der auf dem Friedenscertrag beruhenden enormen wirtschaftlichen and finanziellen Belastung auf ein tragbares MaR bildet,d.h. du: ein PJa2, das con Deutschland ohne fortschreitende Zerstdrung Zerstdrung seiner wirtschaftlichen Leistungsfdhigkeit aufgebracht werden kann, (denn gegenodrtig besteht in- folge der Reparationsoerpflichtungen in lahrheit eine Zahlungsunfdhigkeit Deutschlands). .Wiese Voraussetzung allein ourde Deutschland die ajglichkeit erdffnen k5nnen, im Auslande ausreichende Kredite aufzunehmen zwecks BeschaffUng der Rohstoffe, deren die deutsche Industrie zur Erweiterung ihrer Produktion bedarf, die Passioitdt der deutschen Zahlungsbilanz durch oermehrte Produktion und erweiterten Export bet mdglichster Einschrdnkung des Imports auszugleichen sowie die Ausgaben des Reichs durch ordentliche Einnahmen zu balanzieren und damit etner Zunahme der schwebenden Schuld oorzubeugen, die durch ausreichende innere Anlethen mit Erfolg fundiert werden kdnnte. Die deutsche Valuta ourde stch alsdann 'don selbst auf ein Ntoeau einstellen, das deL gegenuber der Vorkriegszett geschodchten Stande der deutschen Volkswirtschaft entsprdche. 7dre ein solches gletchbleibendes Nioeau erreicht, so kdnnte es durch eine Devaloation legalisiert und die deutsche 7dhrung oon neuem auf eine metalltsche Grundlage, die nur das Gold sein kann, gestellt werden. Nach Lage der deutschen VerhLitnisse hat es das Reichsbank-Direktorium - 30 sehr es die Vermehrung der schwebenden Schuld des Reichs in ihrer Tirkung auf eine Steigerung des Banknotenumlauft hin oerurteilt - nicht oermocht, die Dtskontierung der room Reich angebotenen Schatzanweisungen abzulehnen. Es muss to so handeln in der Erkenntnis, daB dem Reich zur Decking der durch ordentliche Einnahmen nicht zu bgleichenden, gro2enteils .mit den Friedensbedingungen zusamaenhdngenden Ausgaben etn anderer reg als die Aufnahme schwebenden Schulden bisher nicht 28 - nicht offers stand. Eine Zdhlungseinstellung des Retchs wUrde die gesamte Reichsoerwaltung lahmlegen und anarchische Zustdnde herbetfuhren, die den Ruin der deutschen VOlksoirtschaft and die D5llige Entwertung der Mark mit ihren auch den internationalen Verkehr berfIhren- den Folgen nach sich ziehen mdsste. Tatsdchltch besteht, ote Sic es selbst aussprechen, in dem Falle, dal Deutschland nicht in die Lage Dersetzt wird, das Budget des Reichs zu Ausgleich 2U bringers, keine andere .'Tail als die zwischen der cue iteren Emission on Banknotenlder Ausgabe oon Staatsnapiergeld oder der Zdhlungseinstellung des Avichs. Ich hoffe, in den Dorstehenden Ausldhrungen die Don Ihnen berilhrten Fragen beantwortet and die beregten Problerne beleuchtet gu haben, lege Ihnen aber auch zur yeiteren Information ilber unsere Geld-und Tdhrungsver- hditnisse noch drei in der Reichsbank ausgearbeitete Denkschriften f_lber " Den Geldumlauf in Deutschland", Zentral - und Emtssionsbanken und "Valutafragen" bet. mit 6nglischem Text. Da ich nicht sicher bin, ob die hier angefertigte englische Obersetzung dieses Schrei- bens dberall genau den Sinn trifft, !lige ich auch die deutsche Fassung dieses Schreibens bet. Sehr erfieut ydre ich, wenn ich Ste au: der Konferenz der Zentralbanken in London dernndchst begrd2en kdnnte, um Ihnen in mUndlicher Ausspracile weitere Aufschlasse 2iZ geben. twit der Verstcherung meiner Dorztiglichen HOch- achtung bin ich Ihr sehr ,ebener FED RAJ.. RESE V. OF NEW YORK Ak E CORRESPONDENCE Governor Strong DATE SUBJECT: July 10, Havenst eint a_LLemo. )re Two things seem to me to stand out in this letter; The first is an old one, and that is the reiterated insietenc (1) upon Germany's incapacity to Day in cash any such sum as two or three milliards of gold marks, with the camouflaged implication that it could not pay this amount at all, whereas this sum would not exceed 5 or E per cent, of the total of Germany's pre-war national income, which was around 40 to 50 billion gold marks. But it does still remain a very wide open question as to whether Germany could pay this amount plus the taxes to meet her very heavy goyI do not know what is the taxable limit on a ernmantal expenditures. nation's product--Sir Josiah Stamp considers it in his recent book on the subject, and imagines that it may be much hi&,er than most students of the subject have believed. The second is the last part, and that is the curious evasion (2) of the fact that it is the increase in currency and not the increase in the floating debt that is responsible directly for the fall in the mark; and with Of course if they could this a justification of the Reichs'oank's course. only stop the fresh issues of currency, then and then alone would it be pos- Mt Bible to balance the budgets (and to float internal loans.) The people of t. Germany are not going to subscribe to a huge loan in a currency that is con-, tinually depreciating under their eyes. : A 4- "-a( ati October 2, 1922. PRIVATE Alit OONFIDENTIAL Dear Ur. Piaeident: '1)u must not believe from not having heard from me before this that a am at all lacking. in appreciation of your letter of 1:ay 31, and the most interesting and importaat information which you were good enough to send me More than once I have undertaken to start a reply, but conditions with it. abroad have been so kaleidoscopic, and the obange has been so rapid from time to time, thA I have not felt that it was'poeeible to, bend you any intelligent comment upoa what you have sent me, because it would be out of .date before it reached you. This has been especially true during the last sixty days. felt ratheringuilty in ma having made the suggestion translation your-letter. Yau were good of enough to adopt myI suggestion Fending ar English ,hen I becaae aware of the labor which it had imposed upon you, and as we now excellent facilities for making translations of that character, permit me to withdraw the revest and allow me to-relieve you hereafter of_this burden. It had been my hope and expectation to attend the meeting of central banks to be held in London sometime of meeting you there. this fall, and to have the pleasure Various developments, of which you are informed; have resulted in aostponing this meeting ao that there :.same to be no likelihood of my makings trip abroad until next year - possibly early in the year. This in part explains my delay in writing you, as I was in almost daily expectation of the receipt of advice that the meeting would be held, and of answering your kind letter in person. gill you be. good enou7 of your owm,:,ald of :early dJ.te:-L ccect this letter as an acknowledgment warm appreciation of it,iuld the ,Lseurance that at an, aoPing to write to you in solewhat similar faa'rlion. as to conL --dftions in this country, and something of our public opinion in regard to. ;natters whic:. are transpiring abroad. It will, I hope, take the place of .the conversson which we might otherwise have had in London, or if not there in Germany, W111 my personal good crispers, and assurance of my esteem Faithfully yours, Ben,-!.. Strong, Go verno r. Rudolph Havelstein, Esq., President, The Reichsbank, Berlia,Gemlny. believe '31,,1;11. .: t . . I -) 23252 31t :130voz: , t 1 7.11."3,11Q vot;tch,c0or Dear The good and confiL.:P.-Ltic/ rel iions existina betu;een. The FedPral cnAencorce u roerLtc that, an"' th couniate c t2ehbo, o you in connexicn I'ith the occupatian of the .:uhr District ,ti? 2.7r:Ot" Lri2iu,7:, recently happen,- b!r on 7; °Anion, daiso affe.ct, accoring to 1\can issuing p.lorth Ac eri .1.)a s, Hre&is of 211 Ce!ltrol :Vote L'ni 79-th o orer to W;UCi: WE, :,e3p2 !7ZFC.1S Of pay,zo:t, f places of oo4n or from certain ,?maces tr, Oj SCe, been sei;...-d Of OCCLZPC:tiOr.; The partly duin) the trans".;or-, thel!seloes. and stellen at 1.ach 1st :;ooer _-)r of . Feder2 71: 1 it r : . f ;1 3. - F0 7jJ - u021J0 U1D..U0O 'sfog uoNor ;su7otn 0009 su077-7-7 fi;a,)cjoad Jo au; '!op ;quao fulpurq fo 0 aagnialq Tiro aul; .1- r)r I. 34 (saa;soo Tuo v)o; woal C. E57.../Nuroo fo c;-crlufo!L, aow saEngis,a 3gz):2 fo au; TUO ul fiaacz LT 3u07TTP 7.0".10 fra3;7 st,!oTcrxa 11;71. E3-oaalia uawfu;aom d7.i2 u; IC 43r) (tiaaaA Cu7u1::, 2v.i..)1Jaa2;:a r;77 dr 'o; fig auru aa7rbaa U0 -0.22X9 Jo -07,4:31p ;0 u 51uogsli07dy u4o, pauado ul aapao of firddns firpp ,s;a7:L:a7ntaa /o Jz4 bUD sropiffo 1f02R lo ay; )rbuog, ap ',aouoaz ;0 Jo afo uo7ux po4 d4:2 v7ogo o :442 au; aouolslsso passasE'od 'SdCT937:IdTi2 fo uomi );:aL 74. as7adaris au; fiq Uw 200 Jo -01Q ;:gla sociro,o uouvaz dooa; aa.,,aorb ),_sod -nn1S UMO 3Z.%2 aoDrd to 9a fc 'Ii;12ccoac papoau7 :5227pa00oc 02 .1117 tu ,,LoTo 000'02, Tri"t uo J77 aof 17.4)-1:od r,.i7r7;,a aof ,-;714 ,noTo Jo dill. opaorr2w 'r!L fiaac; 1, .31aoz ofiodp -asodard ;I aoz ;rag° ol au2 -.);.)0 /0 au; /79U0LY fo ow, vogsu0;47' sou zoz1,7273 -sa.-)77a,Ja ;1 a fiT.-97.7aa;2 U0; 44, --(dGgg 10 aq; aroutn saL!,:, ;0 217 .4 eon perhaps iPipossibletopaL;thcor;i:: by necessity lead tc /1,) :-I-uraanceo and must largely io.trigues of the communi:fts. It faoor the plans an comuntsir is on11) too ObDiOUS and peri:aps cec in .7erma7 the vould s;-,o-7e it scread 11.1m14. r07.1.7d not ctop on }°rr.an borc?ers. !.:;hich note on.prioate capital central - an 1-s way th,c' i s, fo::nLied on17; icnrrL.11y cr,nclent from the f.lornr:!ent a hus been as !lei oiolntly aepri9ed of no less 127.186.750.000 mcrA- in total..It ic a matter of co re, ::iscir-nt supply the that in front-of ....uch with means of payment, inf.;:ipensably necessary in tte economical interest o: the 000 pied districts i.-. a77 their parts, will be rendered more difficult to the utmost..in order to carne -:..rough, for all that, as far as possible, this .:;upply, ?i: ere coripelled to determine 1'.;;.> on engaging in ire:).ter pri?lting of:q.ces !rii:2in the .r,1?C'SL.1.rE occupied districts, for the p.:rpose of the malt-ing of Reicsbank-note.s. rhus ;,:ulhein on Ruhr, b % - at - first. of al/ conication of the large 23erlin L':.:xenstein, lade an agreement with printing hour, - of the printing fira of E. 1.:cr;cs-, in fulfillment of which this printing house is bound to print forms, to be used as notes of ti:!.7 n c ` :OAF 0 objections ;:(22,' to and then to de.liber to zame. , rer a?-:J, unless ac;ittoeci, ucc,pt, tr-' (Ind this they put into :Jirculcii:on acouire the character of notes of the 2.eichsbank and simultaneously also tLo quality of a legal tender. Now, on April 6th, as points out the copy enclosed of an ur,c .')714 exhibit, directed by us to our Foreign Office, have enclos French r. 15/A ' ; I ;..t - . 04,-.0 i 040. v .44140k 010.104-404**V,. 2A 4 French troops of occupation inocded ti:p printing office arks. Dy seized: the printing plates, of Y. sheets, not yet co,:ipletell: printed, the th6- sherts, a17-eddy pr,inted ,;;,!.t not get oat into.forms as ';.,11 as the already finished bani: note forif:.s, pictos a?;d tCOr the;, away. g72,e printin: piece - the be(-n - "itiz exception of not fully printed -sheets, except 41 aolle sheets, given jull well as the thesf- 41 dou4;1e sheets f-IcTever, pr,Lted, but not finished for.s cut sheets, and the already not been returned. :he fully printed note sheets a th n all to a nominal not: fonzs a7.ount oalue of ltib* millions :7.ar:i% :^i7te receij E, giocn by the Frrh troops of occup..)-ion, a copy of Thich is enclosed enclOSure priori the inten- in this letter, shows evidently, that tion preoailed, to issut: those pieces ;:3 genuine ones. It can, of course, not be the question of genuine notes in this case. Or the contrary', the ilicJitimate cutting . into pieces of the fully printed sheet:: represents an 21zttir.2 into circuLltion of pieces, act of after o)tting found alreado (..1:.ttted to ?he 7;c11 as of those ferns which were az: in the printing 1-se, is tantamoun7 pieces do not.huve. the at the time, than a of For, these ssue of coLi,ner:'eft ,paper ualit of legal notes; they were tairen hold of, nothing more ti-Ley ,roduction of the printing housc, a mere property It seer,"Lec, incredibly to us that the .:,Irench Govern- m-nt really :p.ight att(:xpt to put into .:irculation this counterfeit paper ;,:on:7y. :foyoer, for .,reater security, th(- en t, i,as, at all nts, pubished the announce copied in our letter to vhr Foreiwl Office, warnini, the public to Lccept those ille)itiT.ate notes. I% 01 4,0 $ /h. .11 ; $ y 4 :70T, 010,-;r19, "-->nrrrd tn on_iu^ a - 7,47 to 100 to cr(:.-'it r,- coLel,t to th count ('Jiro -c:Onto). tranz3fc ac- i. accor:ling a, our intruction, has bPrn r, oered, have been canc('17.=d the pieces, de7i- Gni.' !,ay of perforation. ::Lttep s haor ;ihr..r9 too On J:;:ril the .,.:i0,:ber,..0-,,jol-Qte7le such illegiticte notes, amount; oupti7i7 7:Tr, nr f"nt - :att,=='^ far to Ocnk hous: in co7o,?ne and 77:t_1,appeared ofyicers in the T. 1?eichsbanA7,t:,11(.7 ut 1)uis;..urj. of those, T:?ntic)ned cno tendered note fom:s :rhose to 6 millions change into oalid notes. :.aping been r,,used this change, lently poif :hr of t :ey oio- fror: the cash c. and disappeared, leabing mho e note forms, :chose "change" they thus. - so TO - in L.,a, (.....-:,,,toirt a ,.. . s.. r .. ... v I. measure hod en or- .-.. .., ,..s: .., ced. se'L;ed and not returned, az;o")r ..7di.;e been used yor the not ful77./ Pr2:):7,'ff ourpose of :or-er: still note shertL y.LrC not nor narr.:;Frca, ncreasing :':easu-e. suaYied Tith si.:-lat,re types, iroes, Cu: 0.T of t::ez, haz.:E now, supplied toes and false numbers, ?Ath i7legiti77.ate signdtur come into circulation, how many, yet, there haoe co:77.e cossession, cz.zr iC oieces, 1 \O. ^ it cannot beAsstated. ?;;:.ich are no!,* a sop s!:off', and erbeg to Of enclose the :-)otojroz:ic ri...i.::rojuction of that piece. l''rom a coirison 7.:ith another enclosre Of a photo2rapic-reproduction, being a cov::ete7z; enclor's in our One those Pieces 7 has been tendered by ,'rench officrs it roneous77,. These orinted printed note Om. of the alJo!:)e m(.ntior./7d Tito eoidence that .'Slid, results types and number;, bein: applied by :;:edi=! of couh:'erfeit stamps. are 7e ii77.73e, as you will kindly see from tie photos, the counterfeit pieces ofter?ords had cancelled by riuintuple or sextuple perforation. It ::ill be euident - without any dc,:Ca't - what enormous danger may grow to the whole f;.-.) irculation from the abo!?e detailed proceeding of ne Le :EPlgian authorities by' real,counterfeitin of payment. Lalaat::dri;:ced cutting of completely printed sheets into pieces, from the completion of such pieces by printing rhem illegitimate signature types and false numberin2 and from giuing into circulation of the cut as well as of the already complete note forms to the own making of Berman paper money in prioate prin sing houses by aid of Ierman printing plates and, fUrther-t more, to the ma;-:ing of ?ernan paper money in 2Prench offices - is but a small step. The difference is merely if a ..1.1,opernment begins n paper money, such a ion and evoke retorsions er the monetary relations nd even r,:aife them im- ransactions of the :zbt. no more be maintained, 1, tier o ma.4:e in a striking d in large paper mills all ac an of technical n--00,;flizing . c. lPttE?' 2O d11 eo-t62 by 2S to ti!, liberty 0: b' t!:6 AdiL.2 :ete Lcra. O., t7 it to roLLL'd to fo!..r(7,2n1 it to t ,si ED 0 i r 2 ar. / 4. 1,, }0 Cs C1 n 7 , I t:.zXe 1(ttP:- ond obliged to cz:: bern ti? is rnor t:tc a . ant:, .violcnay of Ly the troops of occupat_ion =Place of th- zsizure 5 200 000 LYichnark at 12. (. 1GC 000 11 chen. ".;:s,nF,stey rav Hagan 1 L.:0 coo 000 ,..;0 000.000 _ost Railwa, Station near Rbchst :0 450 000 3. ,o OCJO (.,00 Go° Cfic. Duisurz, :thine 7,:cidp-s. 11:r to tra:-cfcrr1 nssn. ;J:cittarce,forwarded on a iiessian 1-overn- ment steaner by the of Reicr.:.sbankstelle .eizure to the at Mayence Date. 1923 17. 4. 1-.,,if_thsbaTkneben11.:: at ":orn.4;,seie^ loy hsr- 27 106 750 000 75 000 000 ffiils Speyer' l'our oentrollinp: ,ount,taken away by the French from tne safe of the heichsbankstelle Coblentz,after having brOken up the 1. 5 5 1Jz v;i14dow argof the safe. 000 000 - - away from Taken the safe of the Reichsbankstelle, having been kept violently open,by ?rench detectives and tr troops. t ., 12., 5. :2 000 000 000 5. 3 000 000 COO 1'7. 26. 5. :2 000 000 COO ;-.7ichsbank at Cob, cntz Reir.:hsban:c in Essen ; . total: = Ifrin.,"`.44 01% AV,/ V-1. 4.. - N ---i , . Enclosure ;`"10'" I.%) BerltnIthe 18 2 the 6 tit of Apri:, 1923. t.,7 ti-oors invaded the printinghouse of E.Harks in 111217).eiT. tRuhri ,en.t.r.u.,:ted by thc. Reichsbank, o f Tench 21r_. -i with tie i-rintirig of ti:)en-tythousand the liar;-..notes,and tool .away: printng plates, 2i a large nurber of partially printed not yet firLshed sheets, 600 sheets,finished and numbered though not get out into pieces,haring a value or 336 millions Har71, 1,1 a lot of Tiecs printed,having valu,3 1530 millions Eark. he printing-plates have been returned of thf tlinee,oxcept ohe :ost important of nem,a plate with texts. Y'he whereabouts or the same arc unknown. it has been impossible to obten any inforraion oheth,,r or not the plates have been in the reanuhtle, object of abuse, such as the Laking tae Out of the prints. seets,on 7ohic;h the print in had begur,41 double-Sheets 7iave not 'Leen returned. iioaling with the possi;)ility,that our notes tecoe io sub jec.- ill Twssession (I such partll, printed pieces which shcie the details or p.:occedings in pr,.nting notes,is obviously of greatest importance. seers diffielt o adr.Lt a suspfcion than, the French right intend tc proceed to 'L/legitt:::ate tritation of our notes r this reason we aslc 5ou. tc insist 7.L.,th the French C.i.overnar.ent 70 the Foref B 0 f ri cc i 1 n. fk ,A w rnn,dnt that :--2in'7ing plate tog6her with th:.- sheets_on which p:'intin rned to us,and has been begun,be ,'orthwith that the French Government gives to pl e*" "" -14 .!..,OUTO, lc 6 av:ril 1523 Armee Frangaise du Inin E.M 2eTe Bureau, 5.2. Service de Si;rete Secteur de Butsbourg No. 1122 Dq. - de la sorrv3 de un million huit cent sot.,;ante six ntiliona (1.866400.000) sataie ce jour 3 l'imvrtmerie... Mar7fs Ernest.aein, , ':pans le but de supplier ux requisitions auquelles le Couvernement allenand, contratrement a l'arrangenent rh4nan, se refuse d sattsfatre. Le Comnissatre Chef Da la Stirete 7rancatse: signatue: (stamp] Enclosure 3 4. -7 - ft /41A, kor4.041 Ralla Duisbourg, le 6 avril 1923 rmee Frangaise du Rhin '.11 2eme Bureau, 5.2. Service de Siirete Secteur de Dui sbourg No. 1122 Dg. Reciu de la somme de un million huit cent soixante six millions (1.866.000.000) saisie ce jour a l'imrrimerieL Marks Ernest,ri,X0heim, 'dans le but de suppler aux requisitions auquelles le aouvernement allemand, contratrement a l'arrangement rheiTan, se refuse a satisfaire. Le Commisstire sp4otal, Chef de la Sizrete: Francaise: signature: (stamp) 5RTOTT0FG:-. 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