Made in Germany : the German currency crisis of July 1931

international tragedy. It is the purpose of this essay to provide such an account.
Economic Conditions In Early 1931
The banking crisis of June and July 1931 heralded a disastrous new phase of the
world depression. But it was also integral to another, even greater, catastrophe - the
collapse of the Weimar Republic and the Nazi seizure of power. The aura of impending
doom that clings to all accounts of the period makes it difficult to assess how bad the
situation in early 1931 was, since the final result almost beggars description. But a unified
story about the banking crisis depends crucially on such comparisons.
At the beginning of 1931 the German economy was clearly in desperate shape.
The Depression had begun in Germany in 1927 or 1928, before the collapse in the United
States. 12 By the middle of 1931, production and employment had been declining for more
than three years. The level of human misery had reached colossal proportions.
Some relevant data are presented in Table 1 . Industrial production had fallen to
three quarters of its 1928 level. Unemployment had risen to over 30 percent of the labor
force by the end of 1930, and the prevalence of part-time work had risen from its
"normal" level of under ten percent to about 20 percent. 13
In many industrial towns
essentially everyone was unemployed. The special fund that financed the Weimar
regime's proudest achievement - the 1927 law establishing a system of unemployment
compensation - teetered on the edge of bankruptcy, as payouts ran far head of taxes paid
into it. As the central government reacted by tightening eligibility and reducing payments,
the armies of the unemployed — including many war veterans but also young people and
women — grew increasingly desperate. Many were recruited into the swelling ranks of
paramilitary groups run by parties and groups on the right; others joined groups run by