My First Seventy-Six Years: Autobiography

By Hjalmar Horace Greeley Schacht | Go to book overview

CHAPTER TWENTY-SEVEN
A Painful Recovery

IT was unfortunate that my business with the Dawes Committee lasted so long. The Rentenmark could now be reckoned as legal tender, thanks to the willingness of the Reichsbank occasionally to accept the same at gold mark rates. Consequently, certain circles began to resume their practice of selling Rentenmarks abroad against foreign bills, not however, with the intention of using such bills to pay for imports but in order to replenish their hoards of stable securities. As early as 1924 the Rentenmark was quoted below par, and was therefore at a discount which soon reached some fifteen per cent.

When I was once more able to take up my duties at the Reichsbank and realized that the mark was again having to stand up to speculation my colleagues and I took counsel together and decided on a drastic step. Fine speeches about maintaining the stability of the mark were completely useless. It was necessary to show the speculators that the Reichsbank did not stop at mere words, but meant business.

Once the public loses confidence in a currency, not even the highest rate of discount will scare off speculators. It does not matter if he has to pay ten, twenty or thirty per cent. per annum if the value of the currency drops five, ten or fifteen per cent. from one month to the next. It was no good therefore attacking foreign exchange speculators with higher interest rates: we should have to launch an attack on the supply of funds. We decided on a complete stoppage of credit to the business community on the part of the Reichsbank. We realized that such a stoppage would not only be most awkward, to say the least, but that it contained a certain amount of injustice in that it would hit the innocent as well as the guilty. We comforted ourselves with the thought that the stoppage would not last long but that the exchange situation would return to normal in the shortest possible time.

In order to set the necessary machinery in motion we resorted to a method which has subsequently often been copied in the political world. On Saturday, 5th April 1924, after the Stock Exchange had closed, we announced that as from Monday, 7th April, the Reichsbank would not increase its total holding in

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