Towards Nationalism

Abstract

From May 1930 onwards deposits at German banks shrank, mostly because of the withdrawal of foreign capital. Capital outflows accelerated after the Reichstag elections in September, which substantially increased the Nazi party’s representation. The Reichsbank’s gold reserve also shrank as a result: by the end of 1931 it had fallen below RM1bn, and one year later it was only RM0.8bn.¹ Already in mid-1931, the event finally occurred that Schacht had feared the most: the reserve fell below the statutory threshold of 40 per cent of the amount of money in circulation. In this condition, the Reichsbank’s balance sheet could not expand, and banks were not legally permitted to rely on central bank support. British historian John Wheeler-Bennett relates his meeting in June 1931 with Schacht’s successor at the Reichsbank, Hans Luther: ‘[T]his is a historic day in German banking,’ [Luther] said quietly. ‘For the first time in our history² we have not enough gold to cover our paper.’³