Made in Germany : the German currency crisis of July 1931

Why, therefore, were depositors so worried in the late Spring of 1931, if they were
not anxious about the soundness of German banks? Our answer is straightforward: They
were alarmed by the latest manifestation of the Weimar Republic's long running fiscal
crisis. This now threatened to go completely out of control and lead - for reasons of
domestic politics - to a moratorium or repudiation of Germany's foreign currency debts
and to default or postponement of payments even on domestic debt.
The first step down the fatal path came with the decision of Hindenberg and his
advisers to have Briining pursue a more aggressive and nationalistic foreign policy. Soon
after taking the reins, the Chancellor ostentatiously snubbed a proposal advanced by
French Foreign Minister Briand to broaden the "Locarno System" of European security
arrangements that had helped to pave the way for Germany's return to 'normalcy' within
the European order. The frosty response automatically carried the implication that
German government would continue to seek border adjustments in the East, with all that
potentially implied for the peace of Europe. 37 Even more ominously, Briining, prodded by
Hindenberg and the vast "National Bloc" of industrialists, Junkers, and right wing parties
that helped power this whole "right turn," insisted on pushing ahead with the building of
the notorious "Panzerkreuzer B," the second in a series of warships that were designed to
evade the naval limitations of the Versailles Treaty. This step made no sense in terms of
either the existing military balance or the Reich's budget situation. It also made it very
difficult for even sympathetic SPD leaders to assist the Chancellor, tacitly or otherwise. 58
This more assertive foreign policy destroyed the basis for cooperative
internationalist strategies over time. Because the point can easily be misunderstood, it is
worth observing that Briining and his cabinet were not exponents of autarchy, though
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