Chapter 393: Embers of the Old Dynasty and Hard Currency of the New

Chapter 393 -38: Embers of the Old Dynasty and Hard Currency of the New

Mid-June. Werner’s office.

“Boss, the list is ready.” Keller set down a thick file.

Werner opened the file. It was densely packed with names, addresses, and bank account information.

“How many people in total?” Werner asked.

“872,” Keller said. “They’re all people we’ve previously screened. Workers, farmers, retirees, and some students.”

“What’s their situation?”

“Most of them are very poor,” Keller said. “They have the exchange allowance but no money. For example, the policy gives each person a 4,000 Mark one-to-one exchange allowance, but many of them have less than 1,000 Marks in savings.”

Werner nodded. ‘These are exactly the people I’m looking for.’

The policy was as follows: every East German citizen had a 4,000 Mark allowance for a one-to-one exchange, with any amount beyond that exchanged at a two-to-one rate. The problem was, many of the poor didn’t have 4,000 Marks to begin with.

They had the allowance, but not the money.

And Werner had the money, but not the allowance.

This was the opportunity.

“Are all the agreements signed?” Werner asked.

“Signed,” Keller said. “We’re giving each person 300 West German Marks as a ‘service fee.’ They’ve agreed to let us deposit money into their accounts, and then transfer it out after the exchange on July 1st.”

“What’s the pretext?”

“A temporary loan,” Keller said. “The agreement states it clearly: we lend them East German Marks, they deposit them in the bank, and after converting them to West German Marks on July 1st, they return the money to us.”

Werner examined the agreement carefully.

It was cleverly written. On the surface, it was a loan agreement. Werner was lending these people East German Marks, which they would use to exchange for West German Marks and then repay the principal.

But in reality, Werner was using their allowances to launder his own dirty money.

“Is there any risk?” Werner asked.

“Some, but not much,” Keller said. “The biggest risk is the bank investigating the source of the funds. But we’ve taken precautions: the amount for each person doesn’t exceed 4,000 Marks, which is right within the one-to-one allowance. Plus, we’ve spread the deposits across different banks in multiple cities like East Berlin, Dresden, and Leipzig.”

Werner asked again, “With these 872 people, how much money can we launder?”

Keller did the math. “An average of 3,700 Marks per person, for a total of about 3 million East German Marks. After July 1st, that can be exchanged for 3 million West German Marks.”

“Not enough,” Werner said. “I need 30 million.”

Keller was stunned. “Boss, 30 million? That would require nearly ten thousand people… It’d be too conspicuous.”

“We won’t need ten thousand,” Werner said. “We have other methods.”

************

「Late June, Dresden.」

Werner sat in the office of a chemical plant director.

The director’s name was Schmidt. He was in his fifties, with graying hair and bloodshot eyes. His desk was piled high with documents, alongside a few empty liquor bottles. Outside the window stood the towering factory buildings, but the smokestacks were idle. The plant had clearly ceased production.

“Director Schmidt,” Werner said, handing him a document, “this is a loan agreement.”

Schmidt took the document and began to read, his brow furrowed.

“I’ll lend your factory 5 million East German Marks,” Werner said. “The money can be in your account today. You can use it immediately to pay wages, buy raw materials, and keep operations running.”

Schmidt looked up. “And the conditions? I’ve never seen a good thing in my life that didn’t come with conditions.”

“The condition is simple,” Werner said. “This debt must be officially entered into your factory’s books today, June 29th. And it must be registered with the bank tomorrow, June 30th.”

Schmidt hesitated. “Why the rush?”

“Because on July 1st, the monetary union takes effect,” Werner said. “At that point, all debts will be converted to West German Marks at a two-to-one rate.”

Schmidt’s eyes widened.

He understood.

If the factory owed Werner 5 million East German Marks on June 30th, then after July 1st, according to policy, that debt would automatically become 2.5 million West German Marks.

The factory’s debt would shrink from 5 million to 2.5 million. The pressure of repayment would be cut in half.

It seemed like an incredible stroke of luck.

But Schmidt wasn’t stupid. He stared at Werner. “Why would you do this? You lend us 5 million East German Marks, and after July, you only get back 2.5 million West German Marks. Aren’t you taking a loss?”

Werner smiled.

He took a cigarette from his pocket, lit it slowly, and took a drag. Then he said, “Director Schmidt, what do you think the exchange rate for the East German Mark is on the Black Market right now?”

Schmidt thought for a moment. “Around… ten to one?”

“Correct,” Werner said. “Ten East German Marks to get one West German Mark. So, tell me, if I were to exchange these 5 million East German Marks on the Black Market right now, how many West German Marks would I get?”

Schmidt calculated. “Five hundred thousand.”

“Exactly,” Werner said, flicking the ash from his cigarette. “But if I lend this 5 million to you, after July 1st, I’ll get back 2.5 million West German Marks. Now, do you think I’m losing money, or making it?”

Schmidt was speechless.

‘So that’s how it is.’

Werner’s 5 million East German Marks were only worth 500,000 West German Marks on the Black Market. But through this loan agreement, by exploiting the state’s two-to-one conversion policy, that 5 million could be “locked in” as a claim to 2.5 million West German Marks in debt.

Werner would make a fivefold profit.

“But,” Schmidt still didn’t understand, “can’t you just exchange your East German Marks at the bank directly? If you have the 4,000 Mark allowance, you can exchange it one-to-one.”

Werner looked at him with a knowing smile.

“Director Schmidt,” Werner said, “if I walked into a bank with 5 million in cash, what do you think they would ask?”

Schmidt froze.

“They’d ask, ‘Where did you get this money?'” Werner continued. “How does a single individual come by so much cash? Is it from the Black Market? Embezzlement from Koko? Proceeds from smuggling?”

Schmidt understood.

The source of Werner’s money was questionable.

If he tried to exchange it directly at the bank, it would immediately trigger an investigation. At that point, he wouldn’t just fail to get the money exchanged; he’d likely be arrested.

“So,” Werner said, “I’m lending this money to you. Book it on June 30th, convert it on July 1st. From then on, the source of these funds won’t be ‘Betelich’s cash,’ but rather ‘a legal debt repayment from a certain chemical plant.'”

He paused. “Two and a half million West German Marks, transferred legally from your factory’s account to mine, all through the banking system. No one will ask where the money came from, because the books will be crystal clear—it’s a debt repayment from the factory.”

Schmidt finally understood completely.

Werner was laundering money.

He was trading a 50% loss on paper for the absolute legitimization of the other half of the funds.

For Werner, the deal was a steal. He was exchanging the soon-to-be-obsolete currency of the old regime for the hard currency of the new one—and it would be clean, able to withstand any scrutiny.

“Then… what about our factory?” Schmidt asked. “After July 1st, we’ll owe you 2.5 million West German Marks. Where are we going to get that kind of money?”

Werner slowly exhaled a puff of smoke, gazing out the window at the factory buildings.

“Director Schmidt,” Werner said, “your factory’s problem right now isn’t whether you can repay the debt. It’s whether you can survive.”

He turned to look at Schmidt. “If I don’t lend you this 5 million, can your factory even make it through the month?”

Schmidt fell silent.

‘We can’t.’

Wages hadn’t been paid in three months; the workers were about to walk out. Raw material suppliers refused to extend credit, and the equipment was about to be sold off.

“So,” Werner said, “what you need right now is this 5 million. As for the 2.5 million debt after July…”

He smiled. “We’ll cross that bridge when we come to it. Maybe your factory will survive privatization, and you can pay it back slowly. Or maybe you won’t be able to pay, in which case we can discuss other arrangements.”

Schmidt heard the unspoken implication.

‘What “other arrangements”?’

‘A debt-for-equity swap.’

If the factory truly couldn’t repay the 2.5 million in the future, Werner could demand the debt be settled with the factory’s equity, land, and equipment.

Then, Werner could use this “half-price” debt claim to swallow the entire factory.

‘This was Werner’s true goal.’

Schmidt looked at the document, his fingers trembling.

He knew it was a trap.

But he also knew he had no choice.

If he didn’t sign the agreement, the factory would go bankrupt next month. If he signed, it would survive for at least a few more months. Maybe, just maybe, it could hold on long enough for a turnaround.

“I’ll sign.” Schmidt picked up the pen, his voice hoarse.

Werner nodded. “Director Schmidt, remember our conversation today. When privatization comes, you’re going to need a partner who understands your factory.”

Schmidt gave a bitter smile. “I’ll remember.”