Harry E. Barnes, Genesis of the World War (New York: Knopf, 1926), pp. 241-247:
. . .
This luxuriant and voluptuous legend was not only the chief point in the Allied propaganda against Germany after the publication of Mr. Morgenthau’s book, but it has also been tacitly accepted by Mr. Asquith in his apology, and solemnly repeated by Bourgeois and Pages in the standard conventional French work, both published since the facts have been available which demonstrate that the above tale is a complete fabrication. The myth has been subjected to withering criticism by Professor Sidney B. Fay in the Kriegschuldfrage for May, 1925:
The contemporary documents now available prove conclusively that there is hardly a word of truth in Mr. Morgenthau’s assertions, either as to (a) the persons present, (b) the Kaiser’s attitude toward delay, (c) the real reasons for delay, or (d) the alleged selling of securities in anticipation of war. In fact his assertions are rather the direct opposite of the truth.
a) As to the persons present, it is certainly not true that “Nearly all the important ambassadors attended.” They were all at their posts with the exception of Wangenheim, himself, and it is not certain that he even saw the Kaiser. Moltke was away taking a cure at Karlsbad, and Tirpitz was on a vacation in Switzerland. Jagow was also in Switzerland on a honey-moon and did not return until July 6. Ballin, the head of the Hamburg-American Line, who was absent from Berlin in the early part of July at a health resort, does not appear to have had any information until July 20, that there was a possible danger of warlike complications. Krupp v. Bohlen-Halbach, the head of the great munition works, was not at Potsdam on July 5, but saw the Emperor William next day at Kiel as the Emperor was departing for his Northern cruise. Nor is there any evidence that they were gathered at Potsdam on July 5 any of the others who were “necessary to German war preparations.” The only persons with whom the Kaiser conferred on July 5, at Potsdam after his lunch with the Austrian Ambassador, were Bethmann-Hollweg, the Chancellor, Falkenhayn, the Prussian Minister of War, and certain routine subordinate officials.
b) It is certainly not true that the Kaiser wished Austria to delay for two weeks whatever action she thought she must take against Serbia in order to give the German Bankers time to sell their foreign securities. There is abundant proof to indicate that Emperor William wished Austria to act quickly while the sentiment of Europe, shocked by the horrible crime at Sarajevo, was still in sympathy with the Habsburgs and indignant at regicide Serbs. As he wrote in a marginal note, “Matters must be cleared up with the Serbs, and that soon.”
c) The real reasons for the delay of two weeks between July 5 and 23, was not to give the German bankers two weeks to sell their foreign securities. The real reasons for delay were wholly due to Austria, and not to Germany. They were mainly two, and are repeatedly referred to in the German and Austrian documents which were published in 1919. The first was that Berchtold, the Austro-Hungarian Minister of Foreign Affairs, could not act against Serbia until he had secured the consent of Tisza, the Premier of Hungary. It took two weeks to win Tisza over from his original attitude of opposition to violent action against Serbia. The second, and by far the most important reason for the final delay, was the fact that Berchtold did not want to present the ultimatum to Serbia until it was certain that Poincaré and Viviani had left Petrograd and were inaccessible upon the high seas returning to France. For otherwise Russia, under the influence of the “champagne mood” of the Franco-Russian toasts and the chauvinism of Poincaré, Iswolski, and the Grand Duke Nicholas gathered at Petrograd, would be much more likely to intervene to support Serbia with military force, and so Austria’s action against Serbia would less easily be “localized.”
d) In regard to Germany’s alleged selling of securities in anticipation of war, if one follows Mr. Morgenthau’s suggestion and examines the quotations on the New York Stock Exchange during these weeks, and reads the accompanying articles in the New York Times, one does not find a shred of evidence, either in the price of stocks or the volume of sales, that large blocks of German holdings were being secretly unloaded and depressing the New York market during these two weeks. The stocks that he mentioned declined only slightly or not at all; moreover, such declines as did take place were only such as were to be naturally expected from the general trend downward which had been taking place since January, or are quite satisfactorily explained by local American conditions, such as the publication of an adverse report of the Interstate Commerce Commission. Here are the facts. The amazing slump in Union Pacific from 155 ½ to 127 ½ reported by Mr. Morgenthau represented in fact an actual rise of a couple of points in the value of this stock. Union Pacific sold “ex-dividend” and “ex-rights” on July 20; the dividend and accompanying rights were worth 30 5/8, which meant that shares ought to have sold on July 22nd at 125 ¾. In reality they sold at 127 ½; that is, at the end of the two weeks” period which it is asserted that there was “inside selling” from Berlin, Union Pacific, instead of being depressed, was actually selling two points higher.
Baltimore and Ohio, Canadian Pacific, and Northern Pacific did in fact slump on July 14, and there was evidence of selling orders from Europe. But this is to be explained, partly by the fact that Baltimore and Ohio had been already falling steadily since January, and partly to the very depressing influence exercised on all railroad shares by the sharply adverse report on the New York, New Haven and Hartford Railroad, which was published by the Interstate Commerce Commission. The comment of the New York Times of July 15, is significant: “Stocks which have lately displayed a stable character in the face of great weakness of particular issues could not stand up under such selling as occurred in New Haven and some others today. There were times when it looked as though the entire market was in a fair way to slump heavily, and only brisk short covering toward the close prevented many sharp net declines. For its own account, or on orders from this side, Europe was an unusually large seller of stocks in this market. The cable told that a very unfavorable impression had been created by the Commerce Commission’s New Haven report. The European attitude toward American securities is naturally affected by such official denunciations of the way in which an important railway property has been handled.”
Most extraordinary is Mr. Morgenthau’s assertion about United States Steel Common. He says that between July 5th and 22nd it fell from 61 to 51 ½. The real fact, as any one may verify from the Stock Market reports for himself, is that Steel during these two weeks never fell below 59 5/8, and on July 22nd was almost exactly the same as two weeks earlier.
When the facts are examined, therefore, it does not appear that the New York Stock Market can afford much confirmation to Mr. Morgenthau’s myth of German bankers demanding a two weeks respite in which to turn American securities into gold in preparation for a world war which they had already plotted to bring about.
As Mr. Morgenthau has persistently refused to offer any explanation or justification of his “story” or to answer written inquiries as to his grounds for believing it authentic, we are left to pure conjecture in the circumstances. It appears highly doubtful to the present writer that Mr. Morgenthau ever heard of the Potsdam legend while resident in Turkey. It would seem inconceivable that he could have withheld such important information for nearly four years. The present writer has been directly informed by the Kaiser that Wangenheim did not see him in July, 1914. We know that Mr. Morgenthau’s book was not written by himself, but by Mr. Burton J. Hendrick, who later distinguished himself as the editor of the Page letters. We shall await with interest Mr. Hendrick’s explanation of the genesis of the Potsdam fiction as it was composed for Ambassador Morgenthau’s Story.