The Vampire Economy

Chapter X

BANKERS AS STATE OFFICIALS

“The totalitarian State will not have an empty treasury
so long as private companies or individuals still have
ample cash or liquid assets.”

THE manager of a big German bank sometimes goes abroad to visit foreign bankers, but bankers in Amsterdam or Zurich have ceased to wonder why their German business friends no longer dare to visit them alone. The German banker is often accompanied by somebody else—a Party man—who has to see that no private business is arranged without the knowledge of the Party. The Dutch or Swiss banker will be reluctant to invite his German friend for a social evening because the German banker would be afraid to come without the Party man. Otherwise Party authorities might be suspicious and troublesome after his return to Germany. He has to give a detailed report to the Government authorities about everything he discussed or heard. He would not be trusted if he declared that he talked with his foreign banking friends only about the weather or his own health.

Within Germany itself, the banker’s activities are likewise circumscribed. He plays a dual role, a fact which creates many unpleasant and even risky situations for him. He is the head of a “private enterprise,” yet he must always act like a representative of the State. A private investor would be naive if he continued to rely on the advice of “his banker” whom he has known for many years and who formerly advised him how to invest his money. The advice he would get now would consist only of the instructions the banker gets from the Government. The banker must urge his customer to buy State bonds or bonds of Four-Year Plan enterprises, and he must always pretend to hold the most optimistic views about the financial situation of the State, contrary to his real opinions. If a private investor dares disregard the advice and pressure exerted to force him to invest his funds in State bonds, the bank manager might tell him that he had better leave his money on deposit and not invest it at all. It is not illegal to refuse, but inadvisable. If he withdraws large funds for private investments or otherwise remains stubborn, the banker will have to send a report to Government authorities informing them about the case. They will then check on how the money is used. The local Party leader will keep in touch with the bank manager, too, and learn of withdrawals or of the existence of liquid assets and make use of this knowledge when there is a new Party drive for funds.

Under fascism, big bankers, formerly independent—except, of course, “non-Aryans”—have become State officials in everything but name. They are often in high and influential positions, but they are all members of the compact, centralized State machine. Their independence, their individual initiative, their free competitive position, all the principles for which they once fought fervently, are gone. They no longer lead in society. They used to be the most influential and independent capitalists, more powerful even than the bankers in England or in the United States. For in Germany big banks were not mere deposit banks like the “big five” in England which are not allowed to grant long-term credits or to participate in issues of stocks and bonds. A few big banks in pre-Nazi Germany were in much more complete control of the capital market and had eliminated banking competition to a greater extent than the big banks in the United States or in Great Britain. There were no antitrust laws in Germany which prohibited the rise of huge nation-wide banking trusts. They could, and did, grant long-term credits and participate in issues of stocks and bonds. The executives of the big banks were the financial advisers of the industrial trusts, which were largely financed by the banks. The steel trust controlled by Fritz Thyssen, who helped Hitler come to power, arose from the financial debacle during the stabilization crisis of 1924-25 as a result of the financial skill and support of the Jewish banker Jakob Goldschmidt, then managing director of the Darmstaedter-und Nationalbank. The big banks distributed the major part of the foreign capital which went to Germany during the prosperity era of 1927-29. This was a contributing factor in making their position untenable during the banking crisis in 1931. They had to apply for State assistance. When the Nazis came to power, the State owned or controlled most of the share-capital of the large banks, with the exception of the Deutsche Bank & Disconto-Gesellschaft.

These big banks are today again under private ownership. This fact easily misleads the foreign observer. For under fascism “private banks” are as much under State control and are as co-ordinated as ordinary State banks.

The transformation of the big banks from protectors and pillars of private enterprise to the whip of the authoritarian State to be used in controlling private enterprise gives a certain degree of opportunity to small private bankers. They may be financially weak, but they have one asset which the larger banks do not possess: they are not directly Government controlled.

The private capitalist who visits such an independent banker can, however, never be sure whether he can trust him. Ths banker may be a personal friend, but he would not be allowed to exist as a banker unless he were trusted by the Party leaders, too. He must prove his “reliability” by disclosing trade secrets. He would be suspect if he did not do so.

Such a banker is really in an embarrassing position. He should be on good terms with the Party authorities. and yet he must be trusted by the private investor, a combination which obviously is difficult.

Such a privileged position seems to be that of Dr. Christian Fischer, who decided to establish himself as, a private banker in the spring of 1939. He resigned from the executive management of the Reichs-Kredit-Gesellschaft, a very influential State bank which controls the financial affairs of most State enterprises. Dr. Fischer is an “old-line conservative” rather than a Party man. He has a chance to succeed in his new career, for he has good connections with the State bureaucracy, plus the reliability of an “old conservative.” On the other hand, the Government would not have allowed Dr. Fischer to act as private banker unless it had made sure that he would act in full accordance with the policies of the State.

The fusion between the State and the banks has developed as a result of forces which were miscalculated by all former leaders of the banks as well as of the Nazi. party. During the first period of totalitarian rule, Dr. Hjalmar Schacht was given a chance to reconstruct the old banking system. Many bankers who had to rely on State support before the Nazis came to power had hoped that fascism would mean a return to the old prosperity, with private banks taking advantage of new possibilities for private investment and of the increase in savings capital. The Nazi Government did not seriously attempt to abolish private banking as demanded in the Nazi program and did not try to create one large banking trust owned and administered by the State. The German bankers cannot complain that they were “betrayed” by Hitler. A chance was given them when Schacht became president of the Reichsbank in 1933. Private investments were encouraged by the State. Taxes which seemed to be an obstacle to prosperity were reduced. Profits which were reinvested became tax exempt. State credits and subsidies were granted for repairs of houses. But real prosperity failed to emerge from these measures.

In the meantime, Dr. Schacht tried to reconstruct a private banking system. At the end of 1933, an inquiry on banking was staged. Its results could have been foreseen. The Commission of Inquiry was against any kind of socialization of banking advocated by Nazi radicals. It only recommended measures for the supervision of private banks. And as a result of the inquiry, the Government decided upon a vague “control of all credit institutions.” New credit institutions would no longer be allowed unless they obtained special State permits. Other measures were quite in accordance with banking laws in democratic countries.

Many ruined Nazi manufacturers who had taken seriously the Party program against “interest slavery” and “unproductive banking capital” went to “Jewish bankers” requesting credits for themselves without offering guarantees and refusing disclosure of their financial status. Against these ultra-Nazis was decreed the Reich Law on Credits of December 5, 1934. This made it compulsory for all private bankers to grant non-secured credits of over 5,000 marks (about $1,200) to individuals or firms “only after obtaining full information on the financial affairs of the debtor.” Another decree, of December 13, 1935, provided that credits of over one million marks must be reported bi-monthly to a Reich commissar. This measure was to establish a better control of the credit policy of the banks as well as a control of the indebtedness of industrial concerns.

On the whole, these measures provided for a recovery of the private economy under the leadership of the banks. But the armament policy and the huge spending program of the State subjected the machine built up by the private banks to the demands of the State.

When this new policy began, Dr. Schacht still was president of the Reichsbank and subsequently was even made Minister of Economics. He must have foreseen that the huge financial deficit of the State could not continue forever. But Dr. Schacht did not expect that a financial crisis would endanger his position as economic dictator. On the contrary, he no doubt felt that in line with his previous experience, financial difficulties of the State would strengthen the position of the Reichsbank and would make the Government dependent on the wishes of those who controlled the capital market. This had been his experience under the Weimar Republic. But now the financial difficulties compelled Schacht to create a bureaucratic machine which enabled the Government to replace him at a moment’s notice by somebody more docile than he was.

Dr. Schacht tried to restrict State expenses, to keep at a minimum the regimentation of economic life under the Party bureaucracy, to encourage the revival of private initiative and competition, to end credit inflation and the growth of taxes. With Schacht were allied high Army officers who shared his point of view, who opposed the control of the armed forces by the Party bureaucrats and the Gestapo. But the Party would not tolerate restriction of its spending and curtailment of its authority by “outsiders.”

Dr. Schacht and the “conservative” leaders of the large corporations thought in the old terms of a “strong state” which would insure the smooth operation of an economic system under which they would remain in control of the capital market. They had witnessed many governments they did not like. Their influence had never failed them, for the State needed credits to meet its financial demands, especially during periods of depression when capital remained idle and the State had to spend more in order to temper the effects of the depression. In such a situation the Government had to appeal to the capital market.

Under the Nazis, Schacht could no longer apply the old methods of compelling the Government to fulfill the wishes of private corporations. The Reichsbank was no longer a central bank defending the interests of the private banks or of the “capital market” against the demands of the State. On the contrary, it had to function as an arm of the Government, issuing instructions to the “private” banks and to the corporations, directing them how to invest their funds. Dr. Schacht, who had attacked parliamentary government for its increased expenditures and its deficits during the depression, had to help the Nazi Government increase its expenditures and its deficits to such an extent as to necessitate the closing of the capital market to any but the demands of the Government.

“The Government decided to fleece the short-term money market on a gigantic scale. German capitalists, like those abroad, showed little confidence in the development of German economy, and they were in consequence loath to invest money on long terms. They were, on the other hand, eager to employ their capital somehow, and the Government exploited this situation by issuing so-called work creation bills, with which a large percentage of its expenditure was met. The industrialist, or whoever received these bills in part payment, kept them as a short-term investment. A relatively small percentage he sent to his bank, which in its turn kept them as a short-term investment.” 1

When Dr. Schacht realized that he was no longer the president of an autonomous institution, he openly attacked Party leaders as “frivolous dilettantes” in a speech at Koenigsberg on August 16, 1935. The publication of this speech in the press was prohibited by Goebbels, the Minister for Propaganda, so that Schacht decided to have it printed and distributed by the Reichsbank. The speech was rather the statement of a resigned old man than of somebody who expected to succeed in the internal struggle.

“These frivolous dilettantes have not the slightest notion of the immense efforts required in guiding financial and economic policy for the fulfillment of our task. Is there any person whose heart would not be warmed by such phrases as ‘The flag is more than a bank account,’ ‘The nation comes first, not its trade’? Such phrases are disarmingly true, but what practical use can a sensible man make of them? Recently I pointed out in a public statement that German trade must be kept free from disturbing influences; immediately thereafter I read that any argument over whether a measure disturbs trade or not was a Jewish and liberalistic one. I pointed out that our national rearmament demands the concentration of all economic and financial reserves; and when I said all, I meant all. The reply I received was that only old wives would throw up their hands and ask, ‘Who is going to pay for the whole thing?’ At the risk of being set down as an old woman, I want to say quite plainly that the question of the practical execution of the task set us is one over which I have racked my brains day and night. My comrades and fellow-Germans, to dismiss the gravity of the situation and our task as Germans with cheap phrase-mongering is not only silly but damned dangerous.”

Dr. Schacht retired from the Reichsbank when he had already lost any real influence on Germany’s financial affairs. The complete loss of the independence of the Reichsbank, which had become a mere tool of the Government, was not yet quite clear to the first successor of Dr. Schacht. As vice-president of the Reichsbank, Dr. Rudolf Brinkmann became the real head of this central banking institution, taking over the duties previously performed by Dr. Schacht. Soon after his appointment, however, he retired, according to the official Nazi version, as a result of a “nervous breakdown with loss of memory.”

Commenting on Dr. Brinkmann’s mysterious “nervous breakdown with loss of memory,” the French periodical, Agence Economique et Financière, published a report of a meeting in Berlin of civil service officials and Nazi leaders at which Dr. Brinkmann, then still State Secretary and Vice-President of the Reichsbank, said: “We have been paying in Germany for one gun the normal price of ten, and that gun is of inferior quality. Our currency is exhausted, and we know that no more money can be raised by taxation.” Three days after this speech Nazi papers reported Dr. Brinkmann’s retirement.

The totalitarian State reverses the former relationship between the State and the banks. Previously, their political influence increased when the State needed financial help. Now the opposite holds true. The more urgent the financial demands of the State become, the stricter measures are taken by the State in order to compel these institutions to invest their funds as the State may wish.

It happened in the spring of 1938 that the Reichsbank refused to rediscount any further issues of State bills. As a result, the banks stopped buying these bills from the industrialists. This almost created a panic, leading to sales of securities and a consequent fall of prices on the Stock Exchange. The banks were then ordered to intervene. Thus the Nazi State hinders the operation of the “economic laws,” which can make themselves felt in democratic countries.

Dr. Schacht stressed the fact that there was no longer any idle industrial capital. Further extension of production must therefore be financed from an increase in national income. In other words, private industrialists would be unable to replace their depreciated equipment and to make new industrial investments if the State continued to monopolize the capital market and to absorb all liquid funds.

The totalitarian State will not have an empty treasury so long as private companies or individuals still have ample cash or liquid assets. For the State has the power to solve its financial difficulties at their expense. The private banks themselves, the financial institutions which previously dictated the terms on which they were willing to lend money, have built up the system of siphoning off liquid funds. This financial system is now utilized by the totalitarian State for its own purposes.

The State has the supreme claim on anything private citizens or private firms own. These would have to go bankrupt first, before the State goes bankrupt. This, however, is not possible either. For the State can always free itself from financial commitments by a simple decree. It may refuse payment and make levies on individuals or whole groups of citizens in order to raise money, ordering them to turn over a part of their fortunes to the State without compensation. Or it may suspend payments of private debts in order to enable the State to raise fresh credits. This may be achieved by cancelling debts or by reducing the interest rates for loans. Early in 1935, for instance, a general reduction in the coupon rate of all bonds, with the exception of industrial debentures, from 6 per cent or whatever higher rate they carried, down to 41½ per cent was decreed, effecting a total indebtedness of about 10 billion marks. This was not a conversion as the term is understood in democratic countries, that is, a reduction of interest rate by voluntary agreement between debtors and creditors. The State compelled the creditors to renounce one-fourth and more of their interest claims on a total debt of over 10 billion marks. Private owners of mortgages and of industrial bonds were “advised” to follow the example; they had to reduce interest rates to 5 per cent or less.

Liquid funds which were freed by the cancellation or reduction of financial obligations were taken by the State. In practice, all institutions which usually have large funds for investment and for granting credits at their disposal had to buy State bonds. The suppression of private issues strengthened the position of the State on the capital market. In addition, insurance companies, savings banks, and municipalities possessing liquid funds were compelled by special decrees to buy State bonds or Treasury bills.

NEW ISSUES OF SECURITIES IN GERMANY
(In million marks)
(Compiled from reports of the German Institute for Business Research)

A decree of the Reich Minister of Finance, issued on October 29, 1938, compels all municipalities to invest at least 75 per cent of their liquid funds or reserves in State bonds or Treasury bills. Before this decree, the municipalities were able to use such funds for special local purposes.

Insurance companies must ask the Reich Minister of Economics for a permit before they may grant a loan to a private company even though this loan be secured by a first mortgage. When the decree making this procedure obligatory was issued, it was intended merely for the supervision of the insurance companies. Because of the compelling need to direct the flow of capital of these institutions as well, the Reich Ministry of Economics came to use its supervisory power as a brake on such credits.

“These measures were sufficient, until the middle of 1938, for a satisfactory supervision of the capital market. … In June and July, 1938, however, a special situation arose as a result of political events…. The Western fortifications created great financial demands. Therefore, every cent of the capital market had to be at the disposal of the Reich. As a result, on August 12, 1938, savings banks, State and private insurance companies were prohibited from granting new mortgage loans … except for the construction of army buildings and houses necessitated by the Four-Year Plan, apartment houses for workers, and replacements of tenement houses in Berlin, Hamburg and Munich.” 2

The resources of the German capital market, formation of new long-term capital, are estimated at 2 to 2½ billion marks yearly. Dr. Karl Schwarzkopf, managing director of the Landeskreditbank Kassel and former State Secretary, estimated that “the capacity for the formation of new capital … is less than one-third of the pre-War level. … At present one might estimate the new formation of long-term capital at 2 to 2½ billion marks.” 3 The estimates of new capital amount to 350 million pounds, or 7 billion marks, in England (1935), and 30 billion francs, or five billion marks, in France (1935).

The German Government expects to be able to issue at least 2 billions in new State loans annually for a number of years; that is, 80 to 90 per cent of the available new capital will be required by the State.4 The rest will not, however, be “free.” It will have to be used in those projects considered essential by Goering’s Ministry, to make Germany “self-sufficient.” Other issues of shares or debentures will not be permitted; they would be in competition with the State.

Many businessmen who previously left their money on deposit with the big banks turned to savings banks and insurance companies after the experience of the banking crisis and out of general anxiety to avoid any investment risk. It is tragic and grotesque that these funds which have been accumulated as a result of the desire of investors to avoid any risk are almost completely seized by the State and spent for armaments. Insurance companies and savings banks as well as commercial banks have to accumulate State bonds and Treasury bills. State debts increasingly become their assets, the “earning power” of the State—taxation of the nation—their chief source of income.

“The State could take the decisive role in the formation of capital…. This explains the fact that the heading ‘securities,’ in the balance sheets of insurance companies has changed … and has become the most important form of investment for new funds of the insurance companies…. Among ‘securities,’ of course, State loans and Treasury Bonds are of prime importance. … In addition, there are the bonds of State corporations for special purposes.” 5

The insurance companies fear that the investment of all their funds in State paper is very dangerous for them. They are in the position of a businessman who foresees that the debtor will be unable to fulfill his financial obligations and who, worse yet, knows that the creditor will be powerless in respect to the debtor whenever there should be any disagreement.

The leader of the Reich Group of Insurance Agents and Representatives stated the position at their Congress in Hamburg in October, 1938, in cautious and occasionally obscure words, the meaning of which is clear only to those with inside knowledge of the Nazi regime:

“The attempt to change the structure of the insurance business would be an extremely dangerous experiment. … It would be an irresponsible step to replace one economic form by another. It is true that the form is not the decisive thing, but rather the underlying philosophy. This is undoubtedly partially true, but not entirely. … A warning against total centralization…. Instead of working with knowledge based on practical experience, one works with general slogans which do not become significant by frequent repetition…. Competition must be orderly, but it should not be wiped out or replaced by compulsory cartels. The rules of competition should not be so severe that they protect lazy, inefficient enterprises which are inimical to progress and therefore a liability….” 6

A comparison of the trends on the American and German capital markets will startle the observer who pays more attention to statistics than to social facts. In the United States, private issues have shrunk and public issues have overshadowed them since the depression. American capitalists who held liquid capital funds did not find opportunities for private investment which adequately satisfied their demand for security and profit. Therefore, American investors (especially banks and insurance companies) preferred the purchase of Government bonds, thus rendering possible without difficulty the financing of the huge State deficits. The reader might conclude that in Germany the private capitalist looking for reinvestment of his capital would have encountered greater difficulties in finding satisfactory private investment possibilities and would therefore have bought State bonds anyhow, with or without coercion. Such a conclusion, however, would be contradicted by the fact that private banks and insurance companies made strenuous efforts to free themselves from the strict State control and to escape measures for compulsory investment of their funds in State bonds. This drive for private investment possibilities was not a result of new prosperity or of an at least partial recovery of private economy. Rather were these attempts to avoid the purchase of State bonds due to fear that it was too risky an investment, and that the State might devalue the currency. Therefore the obligations of the State were and are unpopular investments, although there is no alternative in the field of private investment. The main concern of private investors in Germany has been the safety of new investments rather than their profit possibilities.

In former times this problem could be solved easily. Under the old system of private banking, any enterprise could raise capital by selling shares or debentures, provided buyers could be found for the newly issued securities. If this was not possible, a banker might advance cash in the expectancy of a later issue of securities which would serve to repay the banking credit. This is “sound” finance as long as interest or dividends can be paid and as long as a capital market exists which will absorb new issues of securities.

The Nazi State was unable to find enough capitalists willing to buy State debentures. Yet it raised huge short-term credits and even loans by compelling capitalists and financial institutions, unwilling and unable to risk their money in new investments, to invest their capital in the riskiest form of large-scale, short-term financing of State “investments.”

This explains the impressive ability of the Nazi State to spend and spend extravagantly, to finance huge deficits without an immediate breakdown of the economic system.

The Nazi State takes advantage of the fact that Germany is a highly industrialized country where the savings of several generations have accumulated in the form of gigantic investments and in an industrial machine bigger than that of France or even England. In comparison with Germany, Italy is a poor country; its technical equipment and industrial capital is merely a fraction of such investments in Germany. Mussolini, therefore, finds it much more difficult to finance excessive State deficits than does Hitler, and Mussolini’s deficits have a greater and more immediate effect upon private economy than Hitler’s. Yet the final consequences of living at the expense of the savings of the past are more fatal for a system which can feed its population only by means of a highly industrialized economy and not entirely or mainly by means of agricultural labor.

This living on the capital of the nation finds expression in the growing indebtedness of the State to private economy. It has been authoritatively estimated 7 that in Germany today direct and indirect State indebtedness in all forms—bonds, other securities, bank credits and so on—amounts to over 55 per cent of the total indebtedness, with private debts accounting for the remaining 45 per cent. Excluding mortgage debts, the indebtedness of the State amounts to something like 75 per cent of the total.

If traditional relations between creditor and debtor prevailed, the debtor should be under the control of the creditor—in receivership—if there were any difficulties in paying interest and amortization charges. Figures and words have changed their meaning. Many private enterprises have managed to pay off debts under the Nazi regime. The fight against “interest slavery”—a propaganda slogan of the Nazis before they came to power—has in part been successful insofar as private debts are concerned, and interest payments have shrunk. But this shrinkage of debt and interest payments has been more than offset by the growth of debt and interest obligations of the State, and also by a tremendous growth of taxation. Yet this does not mean that the State as a debtor is “enslaved” to its creditors—the bondholders. For the State has the power, at any time it pleases, to refuse fulfillment of its obligations as a debtor.

“National Socialism does not allow either the level of interest rates or the distribution of new money capital to be determined by the free play of demand, supply and quotations. The present interest rate is the result of a number of planned and carefully adjusted economic measures which are not based on the impracticable idea of giving interest laws the character of police orders but which are based on the desire to control all factors which influence the rate of interest.” 8

There are, however, obvious limits to the State’s power to draw on private funds and the State budget must be limited accordingly. But these limits are very elastic, since they are not set by the net income of private economy. The State can spend much more by levying tribute on all private property and by eating up part of the capital which several generations have accumulated.

Unfortunately, the State deficit has grown so tremendously that it even surpasses the total liquid funds at the disposal of the capital market. The new State loans were used to pay for current State expenses—new deficits—not for transforming the short-term into long-term debts. A large proportion of the short-term State bills had been turned over to the Reichsbank or to other State banks, so that the State had to finance a large part of its own deficit.9 This would have led to inflation on a much greater scale than really occurred had not the totalitarian State reserved to itself the power to tighten control of all financial developments in an emergency. In 1939, the Government was no longer able to pay off the armament bills and compelled the industrialists to accept partial payment in the form of special bills which can later be utilized for payment of taxes. In order to overcome the difficulties of the moment, the tax revenues of the future are mortgaged.

The tremendous rise of the short-term indebtedness of the National-Socialist State has been often regarded as an indication that the regime would be defeated by a financial debacle. Those who stress this point underestimate the ability of the fascist State to exercise stringent control over private economy.

Only a fraction of the State deficit has been financed by inflation. The fact that an inflationary process has started is not so remarkable as the fact that it has not gone much farther. Despite a yearly State deficit of about five billion marks from 1934 until 1938, the financial means derived from inflationary expansion of money in circulation cannot exceed 2 to 4 billion marks, that is, they constitute only a small fraction of the total deficit. In February, 1939, the volume of “money in circulation” 10 was 68.6 per cent greater than in 1929, industrial production (including armament production) had increased about 30.1 per cent, production of consumption goods only 17.0 per cent. But money circulates more quickly, so that the inflationary process has probably gone further than the above figures reveal.

Such figures are not symptoms of an early breakdown of the system, but foreshadow more coercive acts by the State and indicate the impossibility of a return to the old kind of private economy.

“The present financial position is unsound, but it is not dangerous in the sense that Germany—as so many people believe—is headed for a financial collapse. It is true that under normal conditions the existence of a floating debt—that is, inclusive of creation of work bills—of as much as 16,000,000,000 marks would constitute a most dangerous potential inflation. At the first sign of financial or political disquiet the bills held by private capitalists and the banks would be rediscounted with the Reichsbank, and the note issue would be doubled or trebled at a moment’s notice. In Germany this danger can be ruled out. The means of control of the totalitarian State are so complete and powerful that it is well within the power of the government to nip such a danger in the bud. The government could, in fact, quite easily refuse to grant rediscounting facilities and thus transform the bills into a kind of perpetual loan.” 11

The most serious financial problem for the Nazi State is not the danger of a breakdown of the currency and banking system, but the growing illiquidity of banks, insurance companies, savings institutions, etc. The bulk of the funds entrusted to these institutions by depositors and holders of insurance policies is now invested in State bonds or bills which cannot be turned into cash. Germany’s financial organizations are again in a situation where their assets which should be kept liquid have become “frozen.” From the purely financial point of view, the situation is more serious than in 1931, the year of the banking crisis. But the totalitarian State can tighten its control over the whole financial system and appropriate for itself all private funds which are essential for the further existence of a private economy. Yet the institutions which still exist as private enterprises are not allowed to go bankrupt. For an artificial belief in credits and financial obligations has to be maintained in open conflict with realities.