The Consul General at Berlin (Messersmith) to the Secretary of State
[Received September 18.]
Sir: I have the honor to transmit herewith a translation of a résumé87 of the interview which Dr. Schacht, the President of the Reichsbank, recently gave to the Berlin correspondent of the Algemeen Handelsblad of Amsterdam.
The most significant part of the interview is the reply which Dr. Schacht gave to the correspondent’s question as to whether the anti-Semitic attitude of the present Government would not create very severe difficulties for German foreign policy as well as for her financial policy. Dr. Schacht is quoted as having said:
“International arrangements will not be sought by us for the present. In previous years we undertook too much in this field. Germany does not reckon in any way further upon international financial assistance of the kind she received before.”
He emphasized in the interview that the previous practice through which Germany was given loans at the enormous interest rate of 8% while in other countries a rate of 4% was current, showed that this international help was not on a sound basis.
“We do not even think of carrying on any longer such methods to which, as is well known, I was always opposed. Capital is hoarded labor. We have in Germany an enormous amount of labor. We need only to hoard it, and if it is said that the new Germany is poor in capital we can answer that she does not lack labor. Capital must be saved and earned [Page 449] through labor, but must not be borrowed. Loaned capital can only be used in small quantities.”
With respect to the currency, Dr. Schacht is quoted as saying:
“It is generally known that I am an adherent of the gold standard. It is not necessary for Germany to give up the gold standard, and furthermore such a measure would for inner-political reasons not be desirable. The exchange dumping policy of the English and the Americans, into which the Scandinavians and the Japanese have also been drawn, has brought about a momentary increase in exports, but it cannot in the long run hinder the relation between wages and prices. The mistake that Germany made in the years 1924 to 1930 in taking on surplus capital will certainly not be repeated.”
The Department may find the appended translation of a résumé of Dr. Schacht’s interview of interest.
The interview as a whole seems to be in the general style which Dr. Schacht is known to possess. It is direct and blunt, critical of others and somewhat provocative. While he is sincere when he says that it would not be desirable for inner-political reasons to give up the gold standard, it is questionable as to whether he is as sincere in the first part of his statement that it will not be necessary for Germany to leave the present gold parity.
His statement also that Germany is not seeking for the present international connections and that she does not desire further foreign capital, is not quite in accord with information which has reached me that not long ago foreign capital was sought by the K.d.W. (Kaufhaus des Westens), one of the important department stores in Berlin which is owned by the Tietz family. This department store, which has been one of the most successful of the larger Berlin establishments of this kind, has recently suffered severely as a result of the anti-Semitic movement. It was necessary to secure new capital in order to keep the store going. The Department is aware that under the new policy of the Government the department stores are to be allowed to continue to exist as it has been learned that their disappearance, which was originally planned, would do great injury to a considerable number of industries. The Chase National Bank was approached for a loan of 14,500,000 marks, which was refused. I am informed that efforts were then made in several other directions to secure the money from foreign banks. All of the efforts met with a full refusal that the proposition could not even be considered. The Berlin banking firms which are already deeply involved in the department stores and which feel that a good part of their loans is already lost, were then called upon to make up this amount. The Tietz firm was reorganized and I am informed that Hardy & Co., Mendelssohn and the Dresdner Bank advanced the fourteen and a half million marks, but with the guarantee of the Reichsbank. In what form this Reichsbank guarantee [Page 450] was given I have not been able to determine. It is quite clear, however, from the information which I have that the foreign capital sought to refinance the K.d.W. establishment was sought with the full knowledge and approval of the Reichsbank and of Dr. Schacht. It was one of the definite recent experiences which showed that the foreign banks irrespective of nationality are for the present avoiding to increase in any way their commitments in Germany. That this loan should have been sought on the outside for a department store under existing circumstances, is rather difficult to fathom, as recently in the Free State of Hamburg the Senate has increased the taxes on department stores having a turnover of over 400,000 marks a year, by 20%. Similar increases in taxation on department stores have been decreed in other parts of Germany. This increased taxation combined with the restrictions placed upon the activities of the department stores, together with the anti-Semitic attitude, have already so seriously prejudiced the position of these establishments that it is not believed that foreign capital can in any way be interested towards further loans or advances, even on the plea that it may be necessary to save capital already invested.
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