GERMANY: Market Crash

A high "V"-split collar like that of Charles Gates Dawes. A Theodore Roosevelt pince-nez. Such are the two foibles of dress affected by President Dr. Hjalmar Schacht of the German Reichsbank. There was a dash of Roosevelt and more than a tang of Dawes in certain words spoken by Dr. Schacht, last week, which caused prices on the Berlin Bourse to break and go crashing down harder and lower than at any time since 1914.

The market has been ripe to break for months, of course, but none the less Dr. Schacht brought about the crash, He called the leading German banking representatives into his office and informed them quietly that they had lent too much money to speculative market operators. This condition could not be remedied, as would ordinarily be the case, by raising the Reichsbank rate, because Dr. Schacht put the rate down from 6% to 5% last January, and considers that level necessitously expedient for reasons affecting his defense of the gold mark.* As a result there remained not sufficient sums at the disposal of individuals desiring to borrow for productive enterprise. Therefore, Dr. Schacht informed the German bankers, they must undertake to reduce their loans to market speculators, not by raising their rate of interest, but simply by refusing to lend to other than productive businessmen. If they would not cooperate. . . . But Dr. Schacht knew that they would. . . . His power as President of the Reichsbank, backed by the possibility of Government-sponsored legislation, was not to be thwarted. Soon the banks announced "voluntarily" an arbitrary reduction of all loans to market operators of 25%, with further progressive reductions to follow. Like a pricked bubble, the market burst. The average decline of all stocks was 45 points. Glazed textiles, quoted on the former bull market at seven times their par, tobogganed almost instantly 150 points. On the other great German stock exchanges in Frankfort, Hamburg, Cologne, etc., the collapse was, of course, equally terrific.