MORE INFLATION

Evening Post, Volume CXXVII, Issue 91, 19 April 1939, Page 11

MORE INFLATION

ACTION IN GERMANY

MEETING GOVERNMENT BILLS

A new financial programme of a strange inflationary character was announced by _ the German Government on March 24, reports a Berlin message to the "Manchester Guardian." Henceforward until further notice the State will meet its obligations to industry for the vast present expenditure on armaments and public works to the extent of 60 per cent, only in cash and 40 per cent, in bills. All State dues exceeding 500 marks in amount will be niet in this way.

A new bill is to be created for the purpose to be called the tax certificate. The. Ministry of Finance will provide the Government Departments with tax certificates to meet the 40 per cent, proportion oi expenditure.

The tax certificate will be in two categories. Tax certificate one will be issued presumably in large denominations and will not be discountable and is intended to" circulate in industry only. Tax certificate two will be issued in small denominations and can be discounted. Half of the part of the State's dues shall •be paid-in tax certificates—^namely, 40 per cent, will be in a discountable issue and the other in non-discountable issues. In addition, a supplementary income tax is to be levied. It will consist of an additional 30 per cent, impost on increases in income- in the present year over the income of last year. CURRENCY INFLATION. It will apply to all. Germans whose increased income does not exceed 3000 marks per year. The issue of tax certificates'is equivalent to increasing the volume of currency. The nondiscountable tax certificates directly increase the volume of means of payment for goods. The discountable tax certificates constitute a form of forced loan. The inflation effected by the new financial plan will, it seems, be of a substantial amount. Last year the total volume of German industrial production amounted to about 70,000,000,000 marks (£3,500,000,000 at par, or neatly £6,000,000,000 at official rates). It has been estimated that I about half of the orders given to German industry come -directly or indirectly from the State. In that case the amount of tax certificates to be issued to meet their cost may amount to as much as 14,000,000,000 marks (£700,000,000 at' par).

The Government's new plan constitutes a l'eversal of the- financial policy, announced by Dr. Schacht, the former president. of the Reichbank, exactly a year ago. On Marcla 11 of last year Dr. Schacht proposed a return to normal financing in Germany, and said that it would be achieved henceforward. No more special bills would be issued, he said. Expenditure was then being met out of income. In the future, therefore, State expenditure would come from revenue plus long-term loans, as in other countries with ordinary financial methods.

. This statement was made just before the Anschluss with Austria. The cost of the military measures involved and of tbe subsequent mobilisations, or partial mobilisations, for the acquisition of the Sudeten area and of the later developments leading to the annexation of the country, and also the cost of building the Western fortifications, have been the apparent cause of the. reversal of the Schacht programme. REVENUE INADEQUATE. It is reported here tonight that Dr. Schacht,. who is on a world tour, has been summoned back to Germany. It is declared that the present revenue of the State is inadequate. Revenue amounts to about 8,000,000,000 marks , (£900,000,000 sterling at' par, or £1,500,000, sterling at official rates), which is three times as high as. in 1933 when the Nazis first earned to power. If the figure of 14,000,000,000 marks only represents the expenditure of the State- which can be met from revenue (though it is possible that this figure is on the liberal side), the total annual expenditure of the Reich at the present time would amount to 32,000,000,000 marks. If the cost of Germany's civil administration, including pensions and debt charges, remains at 8,000,000,000 marks, as it was in 1935, this would mean that Germany is spending (on armaments and public I works) some 24,000,000,000 marks! (£1,200,000,000 at par or £2,000,000,000 at the present rate of exchange) ; But present expenditure admitted is at an exceptionally high rate owing |to the building of the Western fortii fications ■ and the mobilisation measures of last year and this spring. Moreover, civil administration cost has increased since the union with Austria and the incorporation of the Sudetenland..