by Somary
[Title Page and Publication Information]: Title page and publication details for Felix Somary's 'Krisenwende?', published by S. Fischer Verlag in Berlin, 1932. [Introduction: The Origins of the Economic Forecast]: Somary discusses a prophetic economic forecast published in the Berliner Tageblatt regarding the 1931 financial collapse. He confirms he was the source of the prediction, which correctly sequenced the reconstruction of Italian banking, the German bank failures, the suspension of the British gold standard, and the fall of the Kreuger concern. [Analysis of the European Banking Collapse]: The author analyzes why the Central European banking system failed, citing the dangerous reliance on short-term foreign credits for long-term industrial financing. He explains the systemic link between the Austrian Credit-Anstalt, German banks, the Bank of England's departure from gold, and the eventual collapse of the Kreuger concern. [The Current State of the Global Crisis]: Somary surveys the global economic wreckage, including drossled international payments, the precarious state of the US budget and the Dollar, and the rise of extreme protectionism. He argues that the current crisis is unique due to the collapse of post-war currency stabilization and the transition from free trade to high tariffs. [The Situation in Debtor Nations]: The author examines the fiscal desperation of debtor countries where the public sector has exhausted itself supporting private industry. He argues that inflation is not a solution and that budget recovery must come through cutting subsidies for housing, agriculture, and unemployment benefits, regardless of the political regime. [The International Credit Situation and American Banking]: Somary critiques the American banking system, specifically the failure of thousands of small provincial banks due to a lack of professional 'art' in banking and poor liquidity management. He advocates for a massive reduction in the number of US banks and criticizes the dangerous entanglement of commercial banks with real estate and mortgage markets. [The Failure of Moratoria and Standstill Agreements]: The author argues that debt moratoria and 'Standstill Agreements' (Stillhalteabkommen) have prolonged the crisis by avoiding necessary liquidations. He specifically critiques the German situation, noting that trying to pay everyone in full while facing foreign trade barriers is impossible and leads to a cycle of destructive emergency decrees and bank balance sheet fictions. [Disruption of Global Trade and Fiscal Crises]: Somary describes the destruction of post-war currency stability and the return to mercantilist autarky and nationalism. He questions whether the US Dollar can maintain the gold standard and warns that the massive debt burden on both public and private sectors historically leads to either inflation or social revolution. [Optimism and the Historical Perspective of Crises]: Despite the grim outlook, Somary argues that the intensity of the crisis proves the vitality of capitalism rather than its end. He places the current situation in a historical context, comparing it to the John Law crisis and the 1873 crash, suggesting that while crises sow the seeds of social change, they also eventually reach a turning point. [Obstacles to Recovery: Trust and Capital Disparity]: Somary identifies the primary obstacle to recovery as a profound lack of trust and a massive disparity in gold reserves between nations. He provides a statistical comparison of gold coverage in Germany, Austria, Switzerland, and France, noting that recovery is impossible without the restoration of property security in debtor nations. [Structural Mismatches and Institutional Failure]: The author critiques the mismatch between the massive capital needs of modern industrial giants/states and the shrunken capacity of banks. He also highlights the failure of international organizations like the Bank for International Settlements (BIS) and the League of Nations to provide effective leadership or financial stabilization during the crisis. [Foundations for a Turning Point]: Somary identifies signs of a turning point: raw material prices hitting a floor, the immense latent purchasing power of French gold reserves, and the market technicality where stock yields significantly exceed interest rates. He argues that the worst economic shocks are already priced into the market, citing the extremely low prices of European state bonds. [Crisis Abatement: Ineffective vs. Concrete Measures]: The author warns against premature state intervention and 'credit creation' for insolvent entities. He transitions to concrete proposals, focusing on the unresolved issue of international political debt (reparations and war debts) and the necessity of American cooperation, which has been hindered by political prestige and domestic resistance. [A Proposal for Debt Settlement and Trade]: Somary proposes a unique solution to the debt crisis: European debtor nations should commit to purchasing fixed quantities of American raw materials (grain, cotton, oil) at current prices in exchange for debt cancellation. This would create a price floor for US producers, providing a political incentive for Washington to forgive debts and stimulating global trade. [Fiscal Discipline and Currency Stabilization]: The author advocates for rigorous fiscal discipline, including the reduction of public spending, wages, and prices to align with economic reality. He defends the gold standard against the 'Knapp school' and the gold-exchange standard, arguing that a physical gold reserve is essential for settling international balances in times of crisis. [The Path to Debt Consolidation]: Somary calls for an end to the 'fictions' of bank balance sheets and the 'Standstill' agreements. He proposes a radical consolidation where debts are written down to realistic levels (e.g., 50% for Germany) and converted into long-term bonds, distinguishing between companies made insolvent by currency controls and those fundamentally bankrupt. [Implementation and Conclusion]: The final section addresses how creditor nations should manage the losses from debt consolidation without ruining state finances. Somary emphasizes that while the path to equilibrium is difficult, the capital for reconstruction exists; what is missing is the leadership and courage to face economic truths and stop delaying necessary liquidations.
Title page and publication details for Felix Somary's 'Krisenwende?', published by S. Fischer Verlag in Berlin, 1932.
Read full textSomary discusses a prophetic economic forecast published in the Berliner Tageblatt regarding the 1931 financial collapse. He confirms he was the source of the prediction, which correctly sequenced the reconstruction of Italian banking, the German bank failures, the suspension of the British gold standard, and the fall of the Kreuger concern.
Read full textThe author analyzes why the Central European banking system failed, citing the dangerous reliance on short-term foreign credits for long-term industrial financing. He explains the systemic link between the Austrian Credit-Anstalt, German banks, the Bank of England's departure from gold, and the eventual collapse of the Kreuger concern.
Read full textSomary surveys the global economic wreckage, including drossled international payments, the precarious state of the US budget and the Dollar, and the rise of extreme protectionism. He argues that the current crisis is unique due to the collapse of post-war currency stabilization and the transition from free trade to high tariffs.
Read full textThe author examines the fiscal desperation of debtor countries where the public sector has exhausted itself supporting private industry. He argues that inflation is not a solution and that budget recovery must come through cutting subsidies for housing, agriculture, and unemployment benefits, regardless of the political regime.
Read full textSomary critiques the American banking system, specifically the failure of thousands of small provincial banks due to a lack of professional 'art' in banking and poor liquidity management. He advocates for a massive reduction in the number of US banks and criticizes the dangerous entanglement of commercial banks with real estate and mortgage markets.
Read full textThe author argues that debt moratoria and 'Standstill Agreements' (Stillhalteabkommen) have prolonged the crisis by avoiding necessary liquidations. He specifically critiques the German situation, noting that trying to pay everyone in full while facing foreign trade barriers is impossible and leads to a cycle of destructive emergency decrees and bank balance sheet fictions.
Read full textSomary describes the destruction of post-war currency stability and the return to mercantilist autarky and nationalism. He questions whether the US Dollar can maintain the gold standard and warns that the massive debt burden on both public and private sectors historically leads to either inflation or social revolution.
Read full textDespite the grim outlook, Somary argues that the intensity of the crisis proves the vitality of capitalism rather than its end. He places the current situation in a historical context, comparing it to the John Law crisis and the 1873 crash, suggesting that while crises sow the seeds of social change, they also eventually reach a turning point.
Read full textSomary identifies the primary obstacle to recovery as a profound lack of trust and a massive disparity in gold reserves between nations. He provides a statistical comparison of gold coverage in Germany, Austria, Switzerland, and France, noting that recovery is impossible without the restoration of property security in debtor nations.
Read full textThe author critiques the mismatch between the massive capital needs of modern industrial giants/states and the shrunken capacity of banks. He also highlights the failure of international organizations like the Bank for International Settlements (BIS) and the League of Nations to provide effective leadership or financial stabilization during the crisis.
Read full textSomary identifies signs of a turning point: raw material prices hitting a floor, the immense latent purchasing power of French gold reserves, and the market technicality where stock yields significantly exceed interest rates. He argues that the worst economic shocks are already priced into the market, citing the extremely low prices of European state bonds.
Read full textThe author warns against premature state intervention and 'credit creation' for insolvent entities. He transitions to concrete proposals, focusing on the unresolved issue of international political debt (reparations and war debts) and the necessity of American cooperation, which has been hindered by political prestige and domestic resistance.
Read full textSomary proposes a unique solution to the debt crisis: European debtor nations should commit to purchasing fixed quantities of American raw materials (grain, cotton, oil) at current prices in exchange for debt cancellation. This would create a price floor for US producers, providing a political incentive for Washington to forgive debts and stimulating global trade.
Read full textThe author advocates for rigorous fiscal discipline, including the reduction of public spending, wages, and prices to align with economic reality. He defends the gold standard against the 'Knapp school' and the gold-exchange standard, arguing that a physical gold reserve is essential for settling international balances in times of crisis.
Read full textSomary calls for an end to the 'fictions' of bank balance sheets and the 'Standstill' agreements. He proposes a radical consolidation where debts are written down to realistic levels (e.g., 50% for Germany) and converted into long-term bonds, distinguishing between companies made insolvent by currency controls and those fundamentally bankrupt.
Read full textThe final section addresses how creditor nations should manage the losses from debt consolidation without ruining state finances. Somary emphasizes that while the path to equilibrium is difficult, the capital for reconstruction exists; what is missing is the leadership and courage to face economic truths and stop delaying necessary liquidations.
Read full text