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With the present Report a period of four years closes. If we compare the present position with that of four years ago, we note a very great advance alike in regard to the economic development of the country as a whole and in regard to the position of the Reichsbank in particular.
There has been a far-reaching reorganisation and rationalisation of the industrial system of Germany; the standard of living of the masses of the people has appreciably risen, and in the case of a great part of the working-class has again reached or surpassed the pre-war level. The marked fluctuations of the first few years have made way for a more steady line of development, and an increasing power of resistance is clearly revealed. Those who foretold that the symptoms of decline from the highly favourable conditions of a year ago were about to take on the form of a rapid and serious depression, under-estimated the country’s economic power of resistance.
At the same time there are still considerable branches of the national economy which have had an inadequate share in the general recovery. If the general position were to change fundamentally for the worse—there are at the present no signs of such a change—this would presumably be more apparent.
The position of agriculture, though here and there improvement is apparent, remains on the whole less favourable than that of the rest of the national economy. The possibilities in this case of compensating out of the business the high rate of interest which has to be paid, or alternatively of passing it on to the consumer, are considerably less than they are in other economic branches.
The high rate of interest and the disproportion which it reflects between the supply and demand of capital constitute the main difficulty confronting the German economy at this time.
It was to be foreseen that after the war and the inflation which, followed the war a marked demand for new capital would make itself apparent for the purpose of improving the machinery of production as well as for public purposes. Much has been done during the years in question. The largely modernised machinery of production at the present time provides work for four million more workers than it did before the war within the same territorial limits, and a great number of public requirements which for a long time had remained unsatisfied have since been able to be met. The price, however, which has been paid for these results is a new annual burden of interest in relation to foreign countries, which at present is undoubtedly well over half a milliard reichsmarks. In so far as the calculations on which the borrowers have based their decision to take up these loans are found in the long run to have been correct, this new charge will represent no increased burden. But there can be no doubt that a section of the loans is not productive in this sense.
In view of the great importance which the situation in regard to capital in Germany will have for her future economic development, it is desirable to consider the problem somewhat more closely. No unqualified answer can be given; but it is possible to indicate certain factors of the position.