My First Seventy-Six Years: Autobiography

By Hjalmar Horace Greeley Schacht | Go to book overview

CHAPTER THIRTY-SEVEN
The Bank Crisis

IN March 1931 an event occurred which I could only regard as a storm signal. The largest bank in Austria, the Austrian Kreditanstalt, was no longer in a position to meet its foreign liabilities. It ceased its payments abroad and came under the trusteeship of its foreign creditors. It was a decisive shock to the system of the granting of international credits, and it was clear that Germany could not fail to be affected by it. Foreign creditors began to call in the loans that had previously been made to Germany.

Matters now developed as I had always foreseen and foretold. Private firms could not furnish the necessary foreign currency from their own resources and were obliged to purchase from the Reichsbank. The Reichsbank's reserves of foreign exchange and gold melted away at a terrifying rate. Since the amount of reserves was invariably published by the Reichsbank in its weekly returns, every foreign creditor was able to follow the decline in gold and foreign exchange, which resulted in a steady increase in the calling-in of loans.

On the 3rd June 1931, in the middle of a very heated economic and political atmosphere, I had accepted an invitation to the White Hart near Dresden, which included all the so-called "German Associations" (clubs, societies, unions). It was, if I remember rightly, the last demonstration at which the representatives of laissez-faire monetary policy sought to defend their ideas, first and foremost among them being Professor Wilhelm Röpke, a relic of the plebeian type of Schultz-Delitz economic liberalism dating from the middle of the last century.

I took the opportunity to address the meeting and pointed out that the very essence of banking advances demanded particular consideration on the part of creditors when faced with difficult times. The creditor should not aggravate the debtor's condition by compulsory calling-in of loans, thereby actually creating an insolvency which would have been avoided by the exercise of a little patience.

I had hoped that the Reichsbank would have taken advantage of these expoundings to proclaim a moratorium and thus stem the unlimited withdrawal of foreign exchange reserves. Curiously

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