Shouts by Schacht

With his back to the wall of Germany's new moratorium (TIME, June 18), Dr. Hjalmar Schacht, iron-willed President of the Reichsbank, bristled into action last week as a Briton no less stubborn took drastic steps in London to make Germany pay.

Chancellor of the Exchequer Neville Chamberlain, who has a gentlemanly aversion to naming names, asked the House of Commons to empower him to collect "certain debts" from "certain foreign countries" by the extraordinary step of seizing the proceeds of their exports to the United Kingdom, at the discretion of His Majesty's Government. The bill was clearly aimed at Germany and amid a chorus of "Hear! Hear!'' the House rushed it through first reading and sped it on toward second.

When news of this reached Berlin peppery Dr. Schacht, boiling with rage, rushed around to the afternoon teaparty for the foreign press and diplomats at the Ministry of Propaganda (see p. 16). "Nobody will expect Germany to accept such a clearance system!" he snapped at the assembled correspondents, reminding them that while Germany has a favorable trade balance with the United Kingdom she has an unfavorable balance with the British Empire as a whole. This fact gave Dr. Schacht a chance to threaten "complete rejection of all further intercourse" with the Empire, should the Kingdom crack down on Germany.

Any other country which tries to put screws on Germany, Dr. Schacht cried, faces the same threat. Denouncing as "immoral" the 7% rate of interest carried by the Dawes Loan which enabled Germany to end her fantastic post-war inflation, red-faced Dr. Schacht shouted: "There is no purpose in insulting the German Government or the German people! In that case the German people might lose interest in paying at all!" What the Great Powers really ought to do, declared Dr. Schacht as a parting shot, is to return Germany's colonies before asking the Fatherland to pay another pfennig.

Next day Dr. Schacht dramatized the Reichsbank's shortage of gold and foreign exchange by decreeing that on each day hereafter no more money will be permitted to leave Germany in payment for imports than is received on that day from abroad in payment for German exports. Simultaneously Germans were deprived of the right to send private money orders abroad. In Berlin representatives of leading U. S. firms who have been greatly hampered by former exchange restrictions called Dr. Schacht's new decrees the last straw and Remington Office Machinery Co. of Berlin closed up with a bang, discharging 300 German employes.

Suppressed in Germany but released throughout Britain was a sensationally tart note in which His Majesty's Government broached to the German Government flat charges that Dr. Schacht has so manipulated the Reichsbank's balances of foreign exchange as to have set up "a hidden reserve equal to many times the amount of interest on the Dawes and Young loans" lately repudiated by Dr. Schacht (TIME, June 25). The British note, probably the stiffest yet signed by Foreign Secretary Sir John Simon, accused the Reichsbank by inference of falsifying its statistics and branded Dr. Schacht as a willful saboteur of German credit. "The policy of Germany," Sir John charged, "is to claim that no foreign exchange resources are available to meet the service on her loans, and then to apply resources which should have been used in meeting that service to the repurchase of her loans at the low prices resulting from default."

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