The big crisis

(Published in GralsWelt 19/2001) 

In memories of the time after the First World War, people speak of the “golden twenties”, the “golden twenties”. During that decade, between 1920 and 1930, Europe slowly recovered from the wounds of war, and art and culture flourished. Many developments, the effects of which can still be felt today, such as the rise of the film industry, began back then. The German Reich, which was heavily burdened by the consequences of the war and reparations, also experienced a brief (sham) bloom.

This happy time, at least for the upper class and the intellectuals, came to an abrupt end with the stock market crash of 1929, which ushered in the most drastic global economic crisis to date.

“It is fair to say that the Great Depression because of their effects on human behavior that up was now the most important event of the century - at least for the Americans. "                                John Kenneth Galbraith.

This was preceded by a stock boom that encouraged many speculators to speculate in credit-financed stocks. Banks readily gave loans that appeared to be backed by stocks. As long as stock prices rose faster than lending rates piling up, it was good business. But no boom lasts forever; if the prices rose excessively, a “correction” followed every time.

In the United States, the price slide began on October 24, 1929 (a “black” Thursday), which expanded into a terrifying price drop on “black Tuesday” October 29.
The shares deposited as security no longer covered the loans after the share price fell; the banks asked for their money back. Shares were sold in a panic. The courses fell and fell; frivolous speculators were bankrupt.

And this is what the facts looked like:
The New York Times stock index rose from 134 to 449 in late 1924 through the summer of 1929; more than three times as much in less than 5 years. In July 1932 this index stood at 58, a little more than an eighth of the high! Real estate fared no differently; temporarily they fell to a tenth of the 1929 value.
For fear of bank failures, many investors withdrew their cash deposits; half of American banks went bankrupt and the money entrusted to them by their customers was lost.

This crash was not limited to the United States. Due to the monetary entanglements (the European, especially the German, economy was largely supported by loans from the USA), the European and thus the world economy plunged into a deep crisis. Bankruptcies, layoffs, liquidations, production restrictions, falling prices and wage cuts dominated events around the globe, and the masses of unemployed people rose explosively.
In 1932 there was civil war in China, war in South America, oil war in Asia Minor. Industrial production and producer prices had fallen drastically and there were unemployed people everywhere (almost 7 million in Germany, 13 million in the USA).

A way out of this world depression had to be found!
Today we are of the opinion that this stock market crisis, as it usually occurs after overheating, should not have led to an economic crisis. The responsible heads of government thought too restrictively and did not act in a coordinated manner.

To the German Chancellor Heinrich Brüning (1885-1970) must be credited with the fact that he wanted to prove to the world how unattainable the reparations demands of the Versailles Treaty were. But also Herbert Hoover (1874-1964), the 31st President of the USA, knew no remedy for the Depression for his rich country. Both - Hoover and Brüning - had to vacate their posts.

In the US it was launched in January 1933 Franklin D. Roosevelt (1882-1945) President. Under the heading “New Deal”, he made state funds available and launched a variety of measures to stimulate the flagging economy. *)
In Germany, the crisis on January 30, 1933 helped Adolf Hitler (1889-1945) to the office of Reich Chancellor. Experts advised Hitler to adopt a program similar to that dared by Roosevelt. However, with the difference that the “Third Reich” invested primarily in armaments, while civil investments were planned in the USA.

Worldwide, the “free market economy” fell into disrepute, which supposedly oscillates between boom and crash. A time followed when exchange controls, high tariffs and quotas hampered world trade. To this end, the focus was on bilateral cooperation. Totalitarian economic methods, as in the USSR or in National Socialist Germany, could feel confirmed by the crisis caused by the free economy, and the politics of the "Berlin-Rome axis" was also in line with the trend of the time.

Final grade:
*) In 1936 John Maynard Keynes (1883-1946) provided the missing economic theory of “deficit spending”.
(1) Ambrosius, Gerold “Social and Economic History of Europe in the 20th Century”, CH Beck, Munich 1986.
(2) Fernau, Joachim "Germany, Germany above everything ...", Gerhard Stalling, Oldenburg 1952.
(3) Galbraith, John K. “Geld”, Droemer-Knaur, Munich 1976.
(4) Senf, Bernd “The fog about money”, Gauke, Lütjenburg 1987.
(5) Zierer, Otto “New World History” Vol. III, Fackel, Stuttgart oJ