REICHSBANK GOLD

Evening Post, Volume CV, Issue 80, 4 April 1923, Page 16

REICHSBANK GOLD

LARGE SALES REPORTED A "BOMBSHELL" FOR BERLIN. A violent explosion—naturally of the figurative sort—on the Berlin Bourse recently seems to have been the signal for a great battle on the financial front of the present Franco-German war. The event must be spoken of conjecturally, for all but the initiated—and they ar« very few —are like watchers from afar who see an immense upheaval wreathed in dust and smoke rise in, the- centre of No Man's Land and immediately afterwards hear the roar of a mighty detonation. We can only guess who lighted Lhe fuse, writes the Berlin correspondent of the "Daily Telegraph," and whether it was the mine or the countermine that; went off first. However, we are quite justified in inferring strenuous subterranean activity on the part of one or both of the belligerents.

The chief manifestation ofi such activity in the present case was the throwing on the market by a leading firm of bankers—only one paper mentions the name of Mendelssohn —of a very large parcel of sterling which in the Press is variously estimated at from a quarter to half a million pounds, but much more frequently at the latter than at the former figure. From the normal relations and activities of the firm in question the conclusion was drawn generally that ifc was operating on behalf of the Reichsbank. It is noted in several papers that though the sum, even if the lowest estimate of it is taken, was an unusually large one to be dumped like this on to the Berlin exchange market, it was at once absorbed without, producing any appreciable effect on' rates. Apparently the coiip was carried out late in the afternoon, and after the mark had shown rather alarming symptoms of relapse.' Financial writers in the Press throw very little direct light on the precise meaning of these events, and are themselves evidently very imperfectly informed. We know that the Government, came to an understanding .with the leading banks to the effect that a fresh and disconcerting fall of the mark must ha prevented, even at heavy cost, so long as the fight for the Ruhr continued. And /it is also notorious that in certain business quarters such a collapse was anticipated. Indeed, until recently, I found the best-informed Entente financiers in Berlin still speaking of a decisive turn in the tide taking place. As has been seen, there were signs of such a turn,' but they melted away before the bombardment of sterling. What is more natural than to infer that the bears had been laying a mine under the mark, but that before they could fire it they were blown sky-high by the Reichsbank?

The best Entente financial opinion in Berlin holds that Germany cannot keep iip this form of warfare with success if she depends on bills alone for, the charging of her mines, but that her findiu-nnce in it will be practically without limit if she is prepared to load them with gold. At that time the experts referred to were entirely sceptical ac to the willingness of the president of the Reichsbank to sacrifice any of his dearlycheriahed reserve for this purpose, and, ■is far as my knowledge goes, the possibility of such a step had not up till then been mentioned in the Press. Now, however, there is no longer any doubt that the Government has overcome Dr. Havenstein's scruples, and that he has agreed to stake a portion of his hoard an "national struggle." Rumour has it that his superstitious devotion to his treasure was not overcome without a_ stiff fight, in which threats of resignation were used. Be that as it may, it is now generally, assumed by the Press that the Reich6bank reserve is to be employed for the purpose of buttressing up the mark so long as the gonflict over the Ruhr continues.

Before the decision, whatever it may be, was come to the Reichsbank had taken a step with the object of sparing its own treasures at the 'cost of hoards in private hands. This took the form of an. exhortation to other banks to refuse to grant mark credits on the security of holdings of foreign currency. At the same time, it was delicately/hinted that institutions which did not respond to this appeal might not meet with a benevolent reception for their own demands- for credit from the Reichsbank, and it is probable that in this way considerable quanities of "Devisen"' have been forced on to the market during the past week or so. However, the inadequacy of this, palliative seems to have been speedily _ recognised, for later on the economic and financial committees of the National Economic Council —a publio advisory body of high authority—published a number of farreaching recommendations with respect to the currency crisis. Two of these met with considerable opposition, and were adopted only against a, strong minority of votes. One urged "examination and energetic restriction of credits demanded from the Reichsbank by the business world, and, in particular, the exclusion of finance bills from discountins by the Reichsbank." The other proposed the "creation on the basis- of the Reichsbank sold of an adequate foreign currency fund for the satisfaction of the unavoidable important requirements of the business life of the country."

Those two points may perhaps be taken as repreeenting the financial policy now decided upon. There are, howaver, jjifferenccs of ppinon as to the ex-

act manned in which the Reichsbank gold is being, or is to be, employed. Some papers speak flatly of a sheer sacrifice of some of the treasure in the good cause, while others instist that hpothecation is the most that can be thought of, and that proprietary rights in not on ten-mark niece must be surrendered. The best-inforlmed financial Press prepares its readers to leiirn from the next returns of the Reichsbank that a further instalment of gold from the vaults of this institution has been transferred to the Bank of England—where fifty million ijold_ marks are already deposited—to provjde more elbow-room for any interventional activity that may be necessary. Like most features of this strange struggle, the financial manoeuvres of the German Government are not -without, sardonic humour. The gold reserve which Germany was ready to risk in order to avoid the Ruhr conflict is now to be used to fight it. Instead of being employed to satisfy France's demands it is to be exploited to defy them. It was to have been the instrument of a stabilisation the object of which was to render Germany solvent towards her war creditors, but it has become a means of diminishing, and, as many of her people confidently hope, in the end dodging altogether, her liability to pay reparations.