Gold Over Europe

1930

May 9: The Young Plan adopted, puts Reparations & War Debts on a "business basis" -- fiscal skies serene.

1931

May 14: First thunderclap of the present crisis: collapse in Vienna of Kreditanstalt, colossal Rothschild bank, which is taken over by the Austrian Government, shaking confidence in related German banks.

June-July: A rush to withdraw credits from Germany becomes frantic as France blocks the Hoover One-Year-Moratorium-to-save-Germany for 15 days (June 21 to July 6), but signs Moratorium Accord July 6.

July-Aug.: Germany "saved" by agreement of her creditors (under U. S. impetus) to leave their short term credits "frozen" in the Reich.

Sept. 21 : $650,000,000 credits extended to the Bank of England by U. S. & French banks nearly exhausted, and the pound Sterling ($4.8665) goes off the Gold Standard, declines to $3.45, recovers to $3.92 (in October).

Sept.-Oct. : Attacks on the U. S. dollar and gold hoarding in Central Europe.

In Vienna last week Chancellor Karl Buresch of Austria grimly fired from their jobs 25 of the 28 directors of Kreditanstalt. Cried Dr. Buresch:

"These men -- these directors -- dealt Austria a greater blow than they can ever answer for! For months the condition of their bank has influenced every decision of the Government, by reason of the necessity of advancing and guaranteeing huge sums to save the Kreditanstalt from bankruptcy.

"My Government's investigations of these men will be continued, and those found responsible will be brought before a judge and forced to pay compensation! My Government's action in dismissing 25 of the 28 directors was made necessary by their continued refusal, even up to now, to accept cuts in their directorial salaries."

Reported the Vienna paper Stunde "on high authority": Chancellor Buresch expects to force President Louis Rothschild of Kreditanstalt* to make "enormous personal restitution."

But, however that may be, when the Baron tendered his resignation as president, it was refused. Of the three Kreditanstalt directors still holding their jobs two are recent Government appointees and only one is precrash, honest Dr. Alexander Spitzmueller-Harmersbach.

Bankers Warm. The Bank of France last week tried a threat on Wall Street. So, at least, some U. S. bankers thought. Their patriotism, kept sternly in check on ordinary occasions, was abruptly aroused. What was called the "French threat" was this : the Bank of France told Wall Street banks with which it had short term balances of some $600,000,000 that their rate of interest (1 1/2%) was "unsatisfactory."

That was all. But when any depositor says such a thing to his banker, he means that he is thinking of taking his money somewhere else. Could Wall Street stand, last week, to lose $600,000,000? In Europe, especially in Berlin, editors took the line that "Wall Street must yield to the Bank of France" (i. e. must persuade the French to leave their deposits in Manhattan by offering higher interest).

Their danders up, some of Manhattan's biggest bankers let newshawks know that Depositor France could withdraw her gold and welcome (i. e. and be damned). Straightway two things significantly did not happen : the Bank of France and other European interests with large balances in Wall Street not only made no large withdrawals but drew less U. S. gold by earmark and shipment last week than for any similar period during the month ; secondly, Manhattan banks did not up their interest rate but continued to pay only 1 1/2% to the Bank of France which continued to take it.

Gold Hoarders. Nervous Poles, who have hoarded U. S. banknotes, recently exchanged them by the million in unreasoning panic for Polish banknotes. Not exactly pleased with themselves, the Poles next took a tip from Frenchmen, began buying U. S. gold pieces. Last week this trend made Polish bankers simply wild.

They had been eager, fortnight ago, to give Polish zlotys in exchange for dollar bills. But they winced last week at supplying dollar gold pieces in exchange for paper zloty. All this gold, declared the Bankers' Association of Poland in a manifesto to the public, was becoming "sterilized" in Polish pockets, socks and safety deposit boxes--a dreadful thing to have happen. When Poles continued doggedly to buy and hoard gold, the Bankers' Association warned Finance Minister Jan Pilsudski (brother of Dictator Josef) that there was but one thing to do: the State must ban gold imports into Poland by any individual or bank except the Bank of Poland.

Roman Jubilee. Eighty fat barrels full of U. S. gold ($22,000,000) made Romans jubilate last week. Where they came from interested Wall Street. No gold shipment of such size has cleared from the U. S. for Italy this year. Smug, the Bank of Italy (having probably obtained its U. S. gold via France) would admit only that Italy had got it, would use the precious stuff to keep her lira on the Gold Standard.

Europeans know this: many nations remain on the Gold Standard but only the U. S. will promptly give in exchange for its paper money gold coins. France mints no new gold; Great Britain minted none after the War (even while her pound was on the Gold Standard); Germany mints no gold marks. In France the state bank is obliged by law to give gold in exchange for paper only in the awkward form of gold bars weighing 25 Ib. each, costing $8,700. Private European banks traffic in gold coins at a premium as in Poland.

Canadian Silver Racket. Canada's paper dollars sagged to 86-c- each after the fall of the pound sterling, but Canadian silver dollars have continued exchangeable at face value for U. S. silver dollars in U. S. towns along the Canadian border.

Suddenly last week many a U. S. border storekeeper noticed that his till had become overloaded with Canadian silver, cursed his own stupidity. Shrewd border farmers, it appeared, have been working an ingenious rural silver racket thus:

Go to a U. S. bank and get a Canadian paper dollar for 86-c-.

Cross into Canada with this paper, exchange it for a Canadian silver dollar, come home.

Buy a U. S. dollar's worth of goods at the corner store, paying for it with your Canadian silver dollar.

Net profit on each dollar wangled in this way: 14-c-.

McGarrah, In Manhattan, newshawks sought news of the dollar-slandering campaign from big, broad Gates W. McGarrah, president of the Bank for International Settlements at Basle.

"Yes, I've heard all that," rumbled barrel-chested Gates McGarrah, "and I know that in most European countries they are hoarding gold. . . . But the American dollar is very highly spoken of in Europe, gentlemen, very highly spoken of indeed."

*Head of Viennese branch of the great family, direct descendant of Solomon Rothschild, world's first promoter of railroads and crony of Prince Metternich. Two years ago he was called "savior" of financial Austria, for causing his Kreditanstalt to absorb the overexpanded Bodenkreditanstalt. But the details of that transaction were never made public, are now a subject of Governmental investigation. A story goes that last summer Baron Rothschild tried again to be a savior when he saw the Kreditanstalt beginning to totter. He secretly took plane to France to enlist the aid of the Paris Rothschild cousins. But his plane was forced down near Metz, a fortress area, where officials took his documents for examination. Before Baron Rothschild could complete his mission the secret was out.

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