German newspaper Die Welt compares Eurozone crisis with 1930s slump that ushered in Hitler
Portrait of a monster: Adolf Hitler exploited the economic slump of the 1930s to rise to power
A German newspaper has broken a major taboo by comparing the crisis engulfing the eurozone with the 1930s slump which ushered in Hitler, the Nazis and WW2.
The ghosts of those times still haunt the modern generation and is illustrated by a strong aversion to debt, to stock market investing and - increasingly - a distrust in the euro.
Recently, house prices in Switzerland have begun soaring as wealthy Germans pour their money into what they hope is a safe haven. Now the country's conservative daily Die Welt has drawn the parallels between the crisis and the dark days over 80 years ago.
'The spectre of the 1930s financial crisis that culminated in the rise of Adolf Hitler’s Nazi party and the Second World War is stalking Europe,' it said, quoting a Bloomberg News story.
In May 1931, Creditanstalt, founded in Vienna by the Rothschild banking dynasty and the biggest lender in what remained of the Habsburg Empire, suffered a run. Its collapse after a merger with an insolvent rival sparked a crisis that left Germany and central Europe strewn with failed banks, caused defaults in Europe and Latin America, knocked the pound off the gold standard, and forced the New York Federal Reserve by October to raise its discount rate by two percentage points.
Ewald Nowotny, governor of the Austrian central bank, said at a conference this week in Vienna: 'I truly can say that when we had the big crisis of 2007 and 2008, it was in the back of the mind of everybody, all of us, every central banker, that we must avoid the mistakes of the 1930s.'
Some investors have said the German government must do more to try and save the euro
The article went on: 'What Harold James, professor of history and international affairs at Princeton University, calls the 'vicious cycle' of contagion between banks and sovereigns is spinning today, just as it was 80 years ago.
'Under Germany’s austerity policies in the 1930s, taxes rose, benefits and wages were reduced and unemployment soared, stoking the popular ire that Hitler harnessed. Extremists are gaining ground now as unemployment in Greece passes the 20 percent mark after five years of recession. The far-right Golden Dawn won 6.9 percent of the vote and 18 seats in the country’s most recent elections. France’s anti-immigrant, anti-euro National Front won two seats in parliamentary elections June 17.'
Dark days: A German newspaper has sparked controversy by comparing today's recession with that of the 1930's, which ushered in the Nazis
A housewife uses millions of Deutschmarks to light a stove during a period of hyperinflation in Germany in the 1920s
It was the run on the Creditanstalt Bank in Germany in 1931 which - like Spain's Bankia now - was created by 'mergers with lenders weakened by toxic loans and capital shortfalls.' Its demise was the beginning of the end of democratic Germany.
'The critical thing now and in the
1930s is that you can’t distinguish between bank and sovereign debt,'
said Brian Reading, an economist at Lombard Street Research in London.
'As long as banking systems remain national, it doesn’t much matter how international the bank is, local taxpayers are on the hook for it if it collapses.'
'In June 1931, as the German financial system teetered on the brink, the Reichsbank received a $100 million loan --equivalent to more than $5 billion today -- from the central banks of France, the U.K. and U.S.
'The sum turned out to be insufficient to meet soaring German demand for foreign exchange.
The conservative daily paper Die Welt has broken a long-held taboo by drawing the comparison
George Soros warned Germany would become a 'hated imperial power' unless it did more to save the euro
'A bigger loan was blocked by France, which was concerned about plans for a customs union between Germany and Austria. Germany’s Danatbank collapsed after one of its biggest borrowers failed. That sent capital fleeing abroad, depleting reserves, according to a 2009 paper by Martin Pontzen of the Bundesbank. By September, German banks, including Commerzbank AG (CBK)and Deutsche Bank AG (DBK), were under state control.'
Larry McDonald, a former trader at New York-based Lehman Brothers Holdings Inc. and one of the authors of 'A Colossal Failure of Common Sense' about the securities firm’s collapse said: 'It all comes down to systemic risk- The deadly nature of a banking collapse is that it can cause everything to unwind. Banks are interconnected globally.
'Everything is interconnected.'
George Soros, the global investor who nearly broke the Bank of England with his foreign exchange dealings two decades ago, warned a day ago that Germany was on course to become the new 'hated imperial power' of the continent unless it did more to save the euro.