Schacht Back!

Only one German felt strong enough to drive a bargain last week with Chancellor Hitler (see above). The bargain: Monkish little Dr. Hans Luther (twice Chancellor, 1925, 1926) agreed to resign as President of the Reichsbank if Chancellor Hitler would appoint him on the spot Ambassador to Washington. Both men scrupulously kept their word.*

Intuitive Herr Hitler appointed as the new President of the Reichsbank perhaps the greatest prophet of modern times. Dr. Hjalmar Horace Greeley Schacht, "that tough Schleswiger from the Town of Tinglev" (in Denmark) whose parents resided in Brooklyn until shortly before his birth, when they removed to Germany.

Unlike common soothsayers, Prophet Schacht has prophesied publicly and in explicit terms.

Upon reading the Allies' demands on Germany for Reparations, he said: "If they are to collect that much from us, the world will have to absorb our exports in quantities which will ruin their trade-- something the Allies cannot permit. Therefore they cannot collect the Reparations they propose."

In 1927 Dr. Schacht, then President of the Reichsbank and famed for his success in stabilizing the German mark in 1924 at its present gold value, predicted catastrophe if U. S. and other foreign loans continued to pour into Germany, did what he could (not much) to stem the flood.

Consistently, as often as Agent General of Reparations S. Parker Gilbert prophesied that Reparations could be paid, Dr. Schacht prophesied that they could not & would not be paid. (German Reparations were virtually canceled by the Allies themselves at the Lausanne Conference last year.)

When the best brains of the Governments' banking systems of the world met in 1930 to complete the Young Plan, prophesying that it would work in statements so unequivocal that $300,000,000 worth of Young Plan Bonds (German Government 5 1/2%) were eagerly bought by the world public, Prophet Schacht resigned as President of the Reichsbank to emphasize his prophecy that the Young Plan would not work.

So recently as last November, when President von Hindenburg refused to ask Adolf Hitler to form a Government, Prophet Schacht said, "There is only one man who can be Chancellor at this period and he is Adolf Hitler. If Hitler does not become Chancellor now, he will within four months" (TIME, Dec. 5). Herr Hitler became Chancellor and virtual dictator exactly 66 days later.

The residence of Prophet Schacht is now once again on the fourth floor of the red brick Reichsbank Building in Berlin's Jaeger-Strasse. Dr. Schacht walks up & down the four flights between home & office.

Once famed as Germany's "Iron Man" because of his Bismarckian manner at conferences, straight-necked Dr. Schacht is genial, kindly, twinkle-eyed among friends. Enemies (mostly people he has outguessed) call him a disgusting opportunist with the vanity of a Pompadour and the ambition of a Napoleon. It is better to call him Dr. Hjalmar Horace Greeley Schacht, his father having been a cover-to-cover reader of the works of Horace Greeley. Last week Dr. Schacht said:

"When I retired from the Reichsbank three years ago its reserves of gold and foreign currencies were 3,300,000,000 marks [$785,000,000]. Today they are about one-ninth of this total. In less than two years 10,000,000,000 marks have been paid off on short-term loans abroad. This constitutes such an inordinate drain that even a less vulnerable national economy than that of post-War Germany could hardly have survived."

This amounted to a very polite repetition of Dr. Schacht's original prophecy that Germany's creditors (irrespective of rights or wrongs, good faith or bad faith) cannot be repaid in full--unless they permit a stupendous expansion of German exports.

"As long as the outside world continues to refuse our commodities," purred Prophet Schacht last week, "we will be compelled to give increased attention to our home markets" (which obviously cannot increase Germany's capacity to pay abroad in gold or its equivalent, the only thing her creditors want). So far as acknowledging Germany's obligation and even desire to pay, Dr. Schacht was completely obliging last week and his words produced in the New York Times this headline: SCHACHT PROMISES TO PAY ALL DEBTS.

Dr. Schacht, though not directly quoted (even by the Times) as promising, did create an atmosphere of confidence last week. After all, he stabilized the mark and it held stable fortnight ago while the dollar momentarily and fractionally declined during the U. S. banking crisis. Neither knave nor fool, Dr. Schacht knows how to deal with both. That he should have picked Adolf Hitler as Germany's probable winner long ago and had the pluck to stick by the man he picked (even when Herr Hitler had been turned down by President von Hindenburg and the Nazi vote was falling off) is the ultimate proof of Dr. Schacht's iron nerve, bold acumen, acute intuition. A man of honor, Dr. Schacht grew livid with rage at the suggestion that he might have tipped off Owen D. Young to sell German securities short just before he (Dr. Schacht) amazed the world by resigning as Governor of the Reichsbank in 1930. "Aside from the damnable insinuation," he sternly replied, "that a man like Mr. Young might use information, if given, for purposes of speculation, the report is absolutely false" (TIME, March 17, 1930). To be comparatively without wealth is, under the circumstances, the most amazing thing about Prophet Schacht.

*Quaint, were it not so painful, would be the plight of Baron von Prittwitz und Gaffron, until last week German Ambassador in Washington. After the Empire was overthrown, the Baron was among the first German aristocrats to "desert to the Republic" (as other aristocrats sneeringly called it). For twelve republican years he rose like a skyrocket in the German diplomatic service, only to "explode" last week, his career ruined by the death of the German Republic (TIME, March 13). In Washington the Baron, who democratically eschews his title whenever possible, has been socially popular, distinctly persona grata to the State Department.

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