The Wages of Destruction: The Making and Breaking of the Nazi Economy

by Adam Tooze

What was ultimately decisive, however, was the effect of devaluation on the Reichsmark value of Germany’s foreign debt. The vast bulk of Germany’s foreign debt was denominated in foreign currency. The immediate effect of a reduction in the value of the Reichsmark would, therefore, have been to raise the burden in Reichsmark terms of Germany’s foreign obligations. Though the Bank of England would have welcomed a German devaluation, the United States made it clear that it wanted to see Germany servicing its long-term loans whilst protecting its balance of payments by means of exchange controls.76 With President Hoover finally intervening decisively in the reparations question and even hinting that he might support German claims against Poland, Berlin opted one more time for the Atlantic strategy. Chancellor Bruening’s government gambled that, sooner rather than later, American action on war debts would enable Britain and France to accept the end of reparations. This, Bruening confidently expected, would open the door to the normalization of both political and economic relations in Europe.77 In the event, however, it took twelve disastrous months until the deal was finally done in Lausanne. Meanwhile, the outlook for the German economy was dire.