from the actual. These difficulties are appearing: (a) disappearance of lower-  
price grades; (b) lowering quality without lowering prices; (c) the appearance  
of unncessary middle men claiming margins; (d) direct buying to avoid retail   
profits; (e) growth of second-hand markets. Some price rises are being permitted,   
but prices of services are also being fixed. In November came a reversal with  
a forced lowering of prices. The tendency is to make sales prices the cost   
           prices of average not marginal firms.            
 
                                                            
 
 
5. Grain harvest 2% below average but 3 1/2 million tons gathered from   
Danube regions. Bread grain reserve August, 1940 exceeds beginning of war.   
Potatoes ample. Fruits low. Sales at retail in marks in period compared with   
pre-war: Total + 5.4%. Specific: tobacco + 42% (quantity + 25%); candy + 25%; tex-  
tiles + 46%. "Christmas buying in 1940, in the absence of the goods usually   
sold for presents, consisted largely of 'hitherto almost unknown luxury goods  
such as electrical shavers, automatic record-tuning gramophones and similar   
expensive gadgets, also artistic objects and out of the way models,' no   
'practical gifts' being obtainable." Food consumption dropped: meat - 11%; fats  
- 15%; bread - 8%; sugar - 7.5%. These are apparently quantities. Complaint in  
general that the rationing system is becoming too complex. The "point" system has abuses and points become more important than price. Trading in points is now prdhibited. "The point system is described as of a 'special degree of perfection and intellectual penetration.' It has   
'completely transformed the condition of the textile markets' by restoring  
free competition among dealers and producers. The resulting ,downward pressure  
on prices and the useful reactions on the zeal of the producer' came as a great  
surprise."  
                                                            
 
"Finally, the emergency of synthetic and substitute foods is noteworthy:  
egg substitutes both for the yoke and the white are now produced in a number   
of factories all over the country.' The slogan advertised is ,fresh eggs on   
the table, substitutes in the kitchen.' There is milk powder, 'casein', 'German   
rice' (80% flour from potatoes, wheat, rye or oats and 20% milk). This was at  
first used for pastries, etc., but since October it is issued to housewives,   
at the same time as 'butter lard,' a form in which butter can be stored 'at   
least a year.' 80 grams of butter lard is equal to lO0 grams of butter in the  
 fat ration. Margarine has been vitaminized since January." 
 
                                                            
 
 
6. For the calendar year 1940, expenditures were financed 42% by taxation.   
The boom on the Stock Exchange continues. "The yield of shares in December,   
1940 was 3.8%, which compares with 5.3% in June, 1939 and 4.9% in December,   
1939. The Volkswirt index for shares rose by 38% during 1940. The boom was   
further stimulated by measures taken during the summer recession: the abolution  
   of the excess profits tax, and the discontinuation of    
 
                                                            
 
 
                            -6-