2023-06-23 17:29:09
The development of the foreign exchange market over the last week has once again demonstrated with extraordinary clarity the importance of the degree of panic, of the swing of the exchange rate pendulum, of the position of the key domestic factors. As long as the authorities called upon to take the lead in foreign exchange policy limited themselves to declaring that the situation was desperate in the face of the new market collapse and that they no longer had any power to regulate the exchange rate, as long as speculation felt safe on the basis of this declaration of impotence there are no limits to the rise of the dollar and other foreign currencies. When the highest rate for the dollar of 167,500 marks was reached and the political consequences of this rapid and unforeseeable collapse of the currency took on very threatening forms, fortunately government circles also saw that a fatalistic “We can no longer do anything” could mean the catastrophe in the accelerated in the worst way.
The tendency to despair is humanly understandable given the overall situation in Germany. But those who indulge in this inclination are not called to be leaders. Leadership can only ever be fruitful in the hands of men for whom every worsening of the situation is a spur to double exertion, and who do not know the concept of idle despair. This applies to monetary policy as well as to general politics. At the moment when, instead of the harmful “Nothing can happen”, one heard from Berlin with some energy an energetic “Something will happen”, the devaluation of the mark came to a standstill.
The dollar exchange rate fell below 120,000 marks and even if it picked up again then, at around 188,000 marks, it remained not insignificantly below the high it had previously reached. Up until yesterday, the new support campaign had essentially only been talked about. Now the new emergency decree against over-the-counter trading in foreign exchange has been issued and more severe effects are by no means out of the realm of possibility when the planned new support action begins to be implemented in other ways as well.
Adjustment of tax prepayments to currency depreciation
The decisive weight for the regulatory influence on exchange rates is on the real power of the central office to issue foreign exchange. What about these real reserves of power? First of all, it must be pointed out that the funds directly available to the Reichsbank are by no means exhausted. The Reichsbank statement of June 15 still shows an unencumbered foreign gold deposit of 180 million gold marks, which can also be increased under certain circumstances. In addition, however, a new regulatory fund must be created.
After all, the public learned with some astonishment, first from the negotiations in the investigative committee and then from the continuation of the discussions between the banks and the government, that a considerable part of the guarantee sum that the bank consortium had assumed when issuing the dollar treasury bills Banks has not been paid, but that it was deferred to the banks. The increase in sales of Treasury bills has meanwhile reduced the amount that the banks have to pay under their previous obligation, and the current lifting of the deferrals no longer hits them particularly hard.
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