Dhe year 1922 meant a period of quite unusually great strain for the German Reichsbank, the like of which had not even remotely been recorded before. The continuation of the fulfillment policy of the German government, the rising price movements in the most diverse areas, ever closer to world market prices, which caused the considerable increase in living conditions and the continuation of the rapid increase in wages and salaries in conjunction with a powerful expansion and enlargement policy Our industry and its investments caused a huge strain on the German money market to an extent that was becoming increasingly difficult to satisfy and in the course of the year grew into a widespread shortage of money and credit.
At the last meeting of the Central Committee, the President of the Reichsbank spoke out about this huge amount of credit claims, especially from private parties, pointed out the dangerous nature of this movement, since today almost every bill discount, even the healthiest one, means an increase in inflation, and has taken defensive measures against any overuse is announced because only the absolutely necessary and appropriate credits can be granted in these times. The design of the Central Bank’s identity cards in the last quarter of 1922 gave full justification for this urgent admonition; after all, they had brought increases in the main posts of sometimes almost gigantic heights in uninterrupted succession; which for a long time no longer showed a picture of a healthy development, but rather a reflection of the pathological state of our economic life.
The institute had tried to counteract the enormous strains that had come upon the Reichsbank by tightening the discount screw. For almost the entire World War, from December 23, 1914, to July 28, 1922, the Reichsbank remained at a discount rate of 5 percent; it then proceeded cautiously at first with an increase of one percentage point. This measure proved to be inadequate; a month later, on August 28th, a claim of the same amount followed, without, however, allowing the claims to be scaled back. The same cannot be achieved with the further increase in the discount rate, which also came into effect on September 21, by one percentage point to 8 percent thereafter. On the contrary, from this time on, as a result of the new, downright catastrophic brand devaluation, more and more extensive claims rushed towards the institute like an avalanche.
This meant that on November 13, the Reichsbank management had to increase the discount rate by two percentage points to 10 percent and the Lombard rate to 11 percent – a discount rate that only the Bank of England has recently agreed to at the beginning of the World War I had to understand for a very short time. The Reichsbank is still sticking to this rate, despite the constant outflow of billions of bills of notes into circulation.
In the month of December alone, 526 billion new paper notes were absorbed by circulation and the banknotes in circulation at the Reichsbank swelled to well over a trillion, i.e. over 1,000 billion marks – a sum that seemed downright grotesque if you compared the approximately two and a half billion notes in circulation faced before the world war.
