NEWS OF THE WEEK
DR. SCHACHT'S removal from Presidency of the Reichsbank has produced a rich crop of rumours within and without Germany; the real question it raises is whether Germany can continue to rearm at the present rate without a nancial collapse. Dr. Schacht's thesis is that, since produc- tion has reached full capacity, any further creation of credit means inflation. But credit is necessary if Germany's dimin- ishing export trade is to be maintained at a level sufficient to pay for the raw materials industry requires. Dr. Schacht's remedy was to introduce economies by reducing expendi- ture on arms, and dismissing party officials and to increase taxation. It is not surprising that Herr Hitler should reject such proposals and allow Dr. Schacht at length to resign. His successor, Herr Funk, will continue to use Dr. Schacht's methods when their creator believes their usefulness has been exhausted. Thus a large credit fund will be placed at the disposal of German industry, presumably to subsidise exports ; and rearmament will continue at its present or an even higher level. In Germany pessimistic conclusions are drawn from Dr. Schacht's resignation ; they remember that he overcame the post-War inflation and that the last time he resigned from the Reichsbank it foretold the end of the ruling regime. Outside Germany, the impression is that the Nazi State is organising itself, whatever the risk, for a final effort to achieve its extravagant aims, and that with social and economic disintegration beginning to be manifest it cannot afford to wait long.
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