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The First Great Depression: Blow By Blow, From The Bis, And How It Mirrors Our Ongoing Second Great Depression

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After surviving the start of the Second Great Depression, and living in its first great bear market bounce/short squeeze, where now all the attention is focused on a collapsing Europe, many could be wondering how, if at all, it would have been different to have lived through the first Great Depression. Luckily, courtesy of the recent release of the BIS's full annual reports, history buffs can now replay, year by year, the events in world capital markets from 1931 onward. We have put particular emphasis on the dark days of the 1930s. Below we present the first several such years as seen from the perspective of the BIS. Note the endless similarities - in fact one could say the only difference between then and now is the lack of "liquidity providing" algos (soon, there will be an iPad app for that) to front run slow and stupid retail/pension/mutual fund money. Pay particular attention to the role of gold in the crisis period, the amusing reference to FDR's confiscation of gold in 1933, and how the mood of insecured optimism shifts to one of endless gloom, and ends, as everyone knows, with World War 2.


The year under review has been one of dramatic occurrences in the whole field of international finance, credit, monetary stability and capital movements, both public and private. The record of this year of unparalleled world-wide disturbance reflects itself in the progress, resources and activities of the Bank, which have been intimately affected by each succeeding episode, in all of which the Bank was promptly called upon to play a rôle, as was but natural for an international institution the statutory object of which is "to promote the cooperation of central banks and to provide additional facilities for international financial operations, and to act as trustee or agent in regard to international financial settlements", whose "operations for its own account shall only be carried out in currencies which satisfy the practical requirements of the gold or gold exchange standard".

In the second month of the fiscal year, the collapse of the Oesterreichische Credit-Anstalt, with its ramifications throughout Central Europe, called for immediate aid to the National Bank of Austria. In the third month of the fiscal year, there was announced the so-called "Hoover moratorium", which materially changed the scope of the operationsof the Bank and the magnitude of the funds at its disposal in its capacity as Trustee for international financial settlements between Governments. In the same month the banking difficulties in Germany, precipitated by wholesale withdrawals of short-term credit, and the pressure upon the Hungarian exchange, necessitated the organization of central bank aid to the Reichsbank and to the National Bank of Hungary.

In the fourth month of the fiscal year, the London International Conference declared that "excessive withdrawals of capital from Germany" had "created an acute financial crisis", and invited the Bank for International Settlements to set up a Committee to inquire into the credit needs of Germany. In the fifth month, this Committee urged "most earnestly upon all Governments concerned that they lose no time in taking the necessary measures for bringing about such conditions as will allow financial operations to bring to Germany — and thereby to the world — sorely-needed assistance".

In the sixth month of the fiscal year, the world was shocked by the sudden fall of sterling, which was almost immediately followed by the suspension of the gold or gold exchange standard by six other nations. These occurrences still further shattered what was left of confidence and forthwith caused a strain on the reserves of nearly all central banks of the world, including the Federal Reserve System. The necessity for the employment by central banks of their reserves in turn placed a strain upon the Bank for International Settlements, in its capacity as the depositary for a substantial portion of the reserves of many European banks of issue, but the large withdrawals in September were met without decreasing its high degree of liquidity.

Much more at the link.

Luckily history never repeats....

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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