The Credit-Anstalt Crisis of 1931 (Studies in Macroeconomic by Aurel Schubert

By Aurel Schubert

Austria performed a renowned function within the all over the world occasions of 1931 because the greatest financial institution in critical and jap Europe, the Viennese Credit-Anstalt, collapsed and led Europe right into a monetary panic that unfold to different components of the area. The occasions in Austria have been pivotal to the industrial advancements of the Nineteen Thirties, but the literature approximately them is sparse. This booklet attempts to fill this hole. Aurel Schubert analyzes the problem utilizing the top theories of economic crises, identifies the factors of the difficulty, examines the market's potency in predicting occasions, analyzes how the drawback used to be transmitted to the true zone, and stories the habit of the Austrian in addition to foreign gurus as creditors of final hotel. His major end is that even sixty years after the trouble, lots of its classes are nonetheless legitimate. Managerial and regulatory deficiencies resulted in the cave in of the financial institution; the following foreign money problem was once now not an irrational and unexplainable panic by means of a burdened public, yet fairly a rational reaction to inconsistencies in coverage; and the reactions of the principally unprepared authorities--in Austria in addition to abroad--did no longer assist in resolving the quandary quick.

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The Credit-Anstalt Crisis of 1931 (Studies in Macroeconomic History)

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A widespread change in expectations associated with fear of a change in economic environment. 2. The fear of insolvency of somefinancialinstitution(s). 3. An attempt to convert real as well as illiquidfinancialassets into money. 4. Threats to the solvency of otherwise sound commercial banks and financial institutions. 5. Bank runs that could lead to a general bank panic and to 6. A reduction in the money supply. 7. And finally the whole process could be arrested at the outset by the timely intervention of some authority (the lender of last resort) that lends freely at a penalty rate or engages in open market operations.

For one, the losses of the bank will give us insight into the causes of the problems. A comparison to the developments at other, nonfailed, Viennese banking institutions allows us to isolate the CA specific causes. A look at other countries provides hints to specifically Austrian developments, and finally investigations and reports made in 1931 help us to reveal some of the internal problems of the company. , Federn (1932), Rutkowski (1934), Ausch (1968), Kernbauer (1981), Stiefel (1983a, 1983b, 1989).

The timing of the collapse of the second largest bank, the Boden-Credit-Anstalt, which occurred in the fall of 1929, seems to be more consistent with Minsky's hypothesis, and further investigation into that problem could bring valuable results. 26 The Credit-Anstalt crisis of 1931 But a question remains: Namely, why did the bank disclose its losses in 1931, when it was able to hide them for so many years, without any impact on its international financial standing? Federn (1932), an excellent and knowledgeable expert of the Austrian banking sector of the 1920s and 1930s, assigns credibility to rumors that a newly appointed bank director refused to sign the first draft of the balance sheet and by doing so forced the disclosure of (some of) the losses.

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