Further Contribution to Old Prussian Finance

*Cologne, February 21. No. 229, February 23, 1849.*  
*Neue Rheinische Zeitung.*

We must supplement our article in No. 224 of the *Zeitung* on von Bodelschwingh and his consorts and the Prussian financial administration. At the close of that article we pointed out that 27,127 _Reichsthaler_ (17,127 is a misprint) are entered in the state treasury accounts less than were paid over to it according to the accounts of the General State Pay Office. Subsequently we have found a note in the accounts laid before the government which solves the riddle of the whereabouts of this money. It appears, namely, that the so-called administrative savings of the year 1844, amounting to 2,000,002 _Reichsthaler_, were not paid in cash into the cashier’s office of the state treasury; instead, _Prussian_ government bonds were purchased for this sum. According to the then prevailing price, this is said to have resulted in a loss of 27,127 _Reichsthaler_ on the purchase. The Prussian ministers are, or were, brilliant financiers! This case once again makes that apparent. For we no longer need to ask the former ministers where the 27,127 _Reichsthaler_ have gone; we can tell them that through their cunning, not only 27,000, but more than 400,000 _Reichsthaler_ were lost on this single transaction. This reproach applies first of all to Herr Flottwell, for he was Finance Minister at that time. He may be an honest man. But it can be a matter of complete indifference to the country whether its ministers injure it through incompetence or through ill will. An investigation into this could at most be of interest to his family.

In his memorandum on the state treasury of April 6, 1847, the then Treasury Minister, von Thile, declares quite unreservedly that with respect to the state treasury the following two principles were firmly established:

1) that the fund must always be on hand in cash, in minted coin,
2) that no payments of any kind whatsoever may be made from the state treasury, except for the purpose of arming for war.

As regards the first principle, it is correct that if a state treasury is to exist at all, it only has reasonable meaning if it is laid down in hard cash or in precious metals. A government that cannot rely on the strength of the people may indeed need a reserve for so-called difficult times. If its credit also suffers on the Exchange, it must still have means in reserve to help itself out of this embarrassment, but this can only be done with hard cash or precious metals. Gold and silver open the hearts of the bourgeois at all times. But printed paper, wretched paper, is the surest way to forfeit even the “esteem” of the Exchange. When state credit has sunk so low that the aid of the state treasury becomes necessary, there is nothing more humiliating on the Exchange than having to offer government bonds for sale and having to seek a buyer. Anyone who has ever observed a larger Exchange will know what contempt shows itself in the looks and gestures of the money speculator as soon as government securities are offered to him at such times. For the rest, the speculator may be a Privy Commercial Councillor and very “well-disposed.”

The purchase of government bonds was therefore the clumsiest operation that the Prussian government could undertake.

Herr von Thile declares in the memorandum cited that he was obliged to accept the 1,972,875 _Reichsthaler_ in government bonds instead of the 2,000,002 _Reichsthaler_ in cash. We attach no value to this excuse of being “obliged.” But if the accounts are correct, the purchase of the government securities was already effected by the General State Pay Office. Otherwise the entire amount in cash would have had to be delivered to the state treasury. Herr Flottwell, therefore, appears to stand closest to this happy financial operation.

How petty-bourgeois parsimony, which would like to save a few per cent on the interest and was never equal to the larger financial undertakings of a state, ultimately ends in disgrace and ignominy with double the loss, will be shown by the figures below.

To the loss on the nominal value at the time of purchase of ................. 27,127 Rth.
is added the far larger loss at the time of sale.

From March to the beginning of July 1848 the prices of the government bonds fluctuated between 66% _bid_ (April 4) and 83 1/2% _asked_ (March 21). Now, since prices fall at once when a large sum of securities is thrown onto the market for sale, it is to be assumed that the government got rid of its government bonds at not over 70%. At the sale, therefore, against the nominal value, probably at least 30% of 1,972,875 Rth., that is ............... 591,840 Rth.
were lost, making a total of 618,967 Rth.;
from this, the interest gained for 3 years at 69,048 Rth., amounting to 207,144 Rth., is deducted,
so that 411,823 Rth. probably remain as the net loss. Almost a quarter of the whole sum is lost, and in return for this state credit has been still further weakened by the depressed price of the government bonds.

We adduce this little sample of the wisdom of Prussian finance and treasury ministers à la Flottwell-Thile only because it is necessary as a supplement to our above-mentioned article. Otherwise we should not occupy ourselves with the small, where the great offers us such rich material.