The Transfer Agreement by Edwin Black

Author:Edwin Black
Language: eng
Format: epub
ISBN: 978-0-9141-5313-9
Publisher: Dialog Press

19. Germany Will Crack This Winter

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TIME was what the Reich needed. When the Reich could no longer pay its obligations, Germany would be bankrupt. That moment had been technically postponed for years by rationing foreign exchange to only the most important transactions. But with Reichsbank reserves hit so hard by both the boycott and the Depression, there would soon be nothing left to ration.

In fact, in early June 1933, the German government was forced to permit the American Jewish Congress and other groups to send a multimillion-dollar Jewish relief fund to Berlin. The decision was of such importance that final approval could be granted only by Hitler himself. It was a difficult approval, because accepting relief funds was an admission that German Jews were being economically destroyed—something the Reich continued to deny. But the dollars were too badly needed to prop up the foreign-exchange scarcity. Moreover, when recalcitrant NSDAP activists tried to seize the funds from Berlin banks, claiming that the Congress money belonged to a hostile organization, the government quickly intervened and cash distribution to Jews resumed. The threat that future relief dollars would not be sent to Germany was too perilous a possibility to allow any interference.1

But relief funds were mere drops of water to the cash-thirsty Reich. In plain English, they were already broke. Only Schacht's clever acts of desperation were postponing a mass shutdown of German industry.

For example, shortly after Sam Cohen's deal was concluded, the Reich Economics Ministry realized the potential of using blocked marks and merchandise to pay desperate creditors. A similar arrangement was set up with a new American syndicate managed by the Harriman Company Harriman would purchase German merchandise for about 150 American individuals and companies owning blocked accounts in Germany. It worked this way: American importers would pay only 75 percent of their merchandise invoices in actual U.S. currency. But these dollars would never reach the German manufacturer; they would go into the Reichsbank reserve. The Reichsbank would then pay the German exporter in blocked marks. The remaining 25 percent of the invoices would be paid to a U.S. escrow account in dollars. To consummate the transaction, the U.S. creditor would take over the dollar escrow account in America and the German manufacturer would take over the creditor's blocked account in Germany. The Economics Ministry expected to promote about RM 25 million in exports by this technique.2 The U.S. creditors were so desperate they were willing to traffic in German exports to slowly regain part of their assets frozen in Germany. In the process, Germany earned foreign currency and kept industry working a little longer.

Another trick for time was the proliferation of bilateral bartering. With little or no cash to pay for raw materials and semifinished goods needed for industry, Germany could resort to the barter system, a straight exchange of goods or commodities. For instance, Germany could swap its coal for another country's cotton, or German pharmaceuticals for another country's metal ore. In this way, a bankrupt Germany

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