The British Ambassador (Lindsay) to the Secretary of State

My Dear Mr. Secretary: Since I saw you this morning I have received from Mr. Arthur Henderson the text of a telegram concerning [Page 22] the German situation, which he sent yesterday to the British Ambassador in Paris. Having been authorized to communicate a copy of this telegram to you, I enclose one herewith.

Believe me [etc.]

R. C. Lindsay


There is no doubt that the situation in Germany is exceedingly critical. It is in fact more critical than at any time during the last six years. During the past few days and in part at least for psychological reasons the situation has rapidly deteriorated and has now become gravely alarming. The Reichsbank has lost over £30,000,000 during the past ten days mainly due to withdrawals of foreign money. If the movement extends to German capital it may involve collapse of the mark with disastrous consequences not only to Germany but to Austria and to Hungary. As you know the Reichsbank on Saturday raised its discount rate by 2 per cent and it is hoped that this may have a steadying effect. But as the movement is due to political rather than financial causes the increase of bank rate may be ineffective. Political difficulties of Bruening cabinet or any delay in settling bank trouble may in any case be sufficient to neutralize the effect of the increased bank rate. On the other hand, if as of course we hope, the Bruening Government can survive their present political difficulties, and the Austrian trouble is cleared up, an easing of the financial situation may be hoped for. We are aware that there has been improvement in the situation today, but financial circles here still feel the deepest apprehensions. The key to the situation seems to rest with the United States and France. We should of course be prepared to join in any action that might be deemed salutary but it would seem best for the first move for joint action to come from those chiefly interested, and it is no use disguising our fear that if confidence is not speedily restored we may be faced not merely with a complete cessation of reparation payments but with financial collapse in Germany and Austria involving serious risk of political and social trouble in those countries and consequent repercussions on the rest of Europe.

We hope the situation is fully realized by French Government.

  1. Filed separately under 462.00R296/4010½.