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Report of the Commissioner of the Reichsbank (December 10, 1928)

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That the formation of capital inside Germany has increased in the years just passed may be confidently assumed. The psychological influence of the destruction of so many earlier savings by the inflation has gradually diminished, and new groups of savers, partly from other sections of the population, have come into being. The internal accumulation of capital which is taking place inside industrial undertakings will always be dependent in a high degree on the general situation. But the cumulative character of individual savings justifies the expectation of a further increase in the future. That on the other hand the State and social charges, which have so largely increased since the pre-war period, and the reparation charges tend to diminish new capital formation requires no further argument. But the effect is confined to that part of the purchasing power withdrawn from the population which would otherwise have gone into savings; and it must also be borne in mind that the State and social charges to a certain extent go back into capital formation.

As regards the demand for capital it may be assumed that the heavy accumulation of requirements which was at first apparent after the war and the inflation is gradually diminishing. Nevertheless there are numerous capital requirements which have been for the moment postponed, but would immediately come to the fore again in the event of a slight easing of the market.

One particular factor which will undoubtedly be felt in this connection is the falling off to be expected in the near future in the supply of new labour which has been the sequel to the decline in the number of births during the war years. The dimensions which this contraction of the labour supply is likely to assume over a period of years may perhaps best be seen from the fact that the number of children who became of school age during the years 1922 to 1925 inclusive remained on an average under 700,000, or only a little more than half the numbers of previous years when the figure of births was not subject to the influence of the war. The consequence is that within a short space of time there will probably be a decrease instead of an increase in the aggregate numbers of the working population. The housing market on which at present there is still a large deficit particularly in the big cities in spite of vigorous building activity, will also be influenced by this development at a later stage.

To what extent all this will find expression on the capital market and in the future movements of the interest level cannot yet be said. But it is certain that there will be something of a breathing space.

Whatever turn the future may take, it is certain that the present is still entirely under the influence of the serious temporary shortage of capital. The difficulties encountered in placing long-term loans have led to a growing proportion of the long-term capital requirements being met for the present by short-term borrowing only. The foreign indebtedness has also been incurred on a short term basis to a much greater extent than is desirable. The last few months, however, have happily shown that it is possible for important alterations to take place in the money market of one of the great lending countries, with concomitant changes in the circle and nationality of the foreign lenders, without the favourable international position of the German currency suffering even to a slight degree. A certain provisional stiffening of rates on the money market has been the only consequence. The large short-term debt of Germany remains a serious feature. But it is a satisfactory phenomenon that the position of the Reichsbank has continually strengthened and is to-day stronger (as has been shown above) than at any other period of the last four years.


Source: “Report of the Commissioner of the Reichsbank, December 10, 1928, Berlin,” in Allied Powers Reparations Commissioner Official Documents, XIXA. London: His Majesty's Stationary Office, 1929, pp. 52-54.

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