Alex -
My final post on these events, which take us up to 1932.
In the wake of the Credit-Anstalt crises, a committee of international bankers met at Basil and in mid August 1931 released the Layton-Wiggen report, which called for a 6 months extension of all foreign credits to Germany. These credits were expressed in terms of foreign currencies, so that they were "frozen." Germany never again until after the war became fully solvent in international transactions.
On September 21, the Bank of England was forced off the gold standard, in spite of credits of 25,000,000 pounds each from the Federal Reserve Bank of New York and the Bank of France, and the formation of a National Coalition ministry which was to balance the budget. This was followed by wild fluctuations in the sterling exchange rate, and in those currencies tied to sterling. The depreciation of these currencies in terms of those countries which remained on the gold standard and did not devalue amounted to an export subsidy which temporarily stimulated trade and eventually forced devaluation by almost all other countries. Ultimately, trade was greatly contracted by the absence of any fixed medium of exchange. Capital began to flee from one country to another and back again, in a vain attempt to escape the shrinkage of assets involved in devaluation.
This takes us up to the Lausanne conference in June of 1932, which Bill mentioned. Germany, France, Belgium, Italy, Great Britain, and Japan reached an agreement which set aside the German reparation debt and substituted instead 5% bonds for 3 billion reichsmarks, to be deposited with the BIS and issued when and if it became possible to market them at a price of 90% or better within the following 15 years. Ratification of the agreement was made contingent upon US willingness to cancel or reduce debts owed them by the allies. The US congress refused, and the failure of the Lausanne Agreement technically meant a return to the Young Plan. Actually, Germany made no payments, the debts being repudiated by the National Socialist government. |
