Further Contribution on the Old Prussian Financial Administration

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Cologne, February 21. We must supplement our article in No. 224 of the newspaper on von Bodelschwingh and Co. and the Prussian financial administration. At the end of that article we pointed out that the books of the treasury show 27,127 Reichstalers (17,127 is a misprint) less than were transferred to it according to the accounts of the exchequer. Since then we have found in the accounts published by the Government a note which solves the riddle as to the whereabouts of this money.

The fact is that the so-called savings on the cost of administration in 1844, amounting to 2,000,002 Reichstalers, were not paid in cash to the treasury but were used to buy Prussian state bonds to this amount. Because of the market rate at the time, a loss of 27,127 Reichstalers was incurred on their purchase. The Prussian Ministers are, or were, brilliant financiers! The present case makes this obvious again. So we no longer need to ask the Herren ex-Ministers what has become of these 27,127 Reichstalers, we can tell them that, owing to their cleverness in this one business deal, not merely 27,000 but more than 400,000 Reichstalers have been lost. This reproach is incurred in the first place by Herr Flottwell, for he was Finance Minister at the time. It may be that he is an honest man. But it makes no difference to the country whether its Ministers harm it owing to incapacity or to ill will. An investigation of this matter can be of interest at most to the Minister’s family.

In his memo on the treasury dated April 6, 1847, the then Finance Minister von Thile says quite frankly that in regard to the treasury the following two principles hold good:

1. that the balance in hand must always be in cash, in coin of the realm;

2. that no payments of any kind may be made from the treasury except for the purpose of armaments.

As far as tie first principle is concerned, it is correct that, if there is to be a treasury at all, it has a rational meaning only if it consists of cash or precious metal. A government which is unable to rely on the strength of the people may, of course, need a reserve for so-called difficult times. If its credit, too, is impaired on the Stock Exchange, it must have some means in reserve to help it escape from this embarrassment, but that can only be done by means of cash or precious metal. Gold and silver are at all times the means to open the hearts of the bourgeois. But depreciated paper of little worth is the most certain way to lose also the “respect” of the Stock Exchange. When the credit of the state has fallen so low that the aid of the treasury is essential, there is nothing more humiliating on the Stock Exchange than to have to offer state bonds for sale and look for buyers. Anyone who has ever observed the activity of one of the larger stock exchanges will know what contempt is to be seen in the features and gestures of the money speculators when at such times they are offered government securities. For the rest, the speculator may be a Commerce Counsellor and very “well-intentioned”.

The purchase of state bonds, therefore, was the most incompetent operation that the Prussian Government could undertake.

Herr von Thile states in the above-mentioned memo that he was compelled to accept state bonds to the value of 1,972,875 Reichstalers instead of 2,000,002 Reichstalers in cash. We do not attach any importance to this excuse of being “compelled”. But if the accounts are correct, the purchase of the government securities was carried out by the exchequer. Otherwise the whole amount would have had to be supplied to the state treasury in cash. Hence Herr Flottwell seems to have been closely connected with the successful financial operation.

How petty-bourgeois parsimony, which is eager to save a small sum in interest but is not capable of dealing with the greater financial enterprises of a state, ends most ignominiously by doubling the loss, is evident from the figures given below.

To the loss on purchase compared with the nominal value	27,127 Rt
must be added the far greater loss on sale. From March to the beginning of July 1848 the market rate of the state bonds fluctuated between 66% G. (April 4) and 83 1/2% Br. (March 21). Since the market rate falls at once when a large amount of scrip is put on sale, one must assume that the Government did not receive more than 70% in getting rid of its state bonds. The loss incurred on the sale, therefore, was probably not less than 30% of the nominal value of 1,972,875 Rt., i.e	591,840 Rt.
a total of	618,967 Rt.
From this loss must be subtracted the interest for 3 years at 69,048 Rt	207,144 Rt.
Hence the net loss probably amounts to	411,823 Rt.

Almost a quarter of the total amount has been lost and furthermore the state’s credit has become still weaker owing to the depreciated market rate of the state bonds.

We cite this small sample of the wisdom of Prussian Ministers of Finance and Exchequers a la Flottwell-Thile only because it forms a necessary supplement to our article mentioned above. Otherwise we would not concern ourselves with minor matters when great ones provide us with such rich material.