How the German crisis of 1931 swept across Europe: a comparative view from Stockholm

Straumann, Tobias and Kugler, Peter and Weber, Florian. (2017) How the German crisis of 1931 swept across Europe: a comparative view from Stockholm. Economic History Review, 70 (1). pp. 224-247.

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According to conventional wisdom, the fall of the Swedish currency in September 1931 was caused by the sterling crisis. This article shows that the road towards devaluation began earlier and that financial linkages with Germany proved to be more important than Sweden's economic and monetary relations with Great Britain. It all started in late 1929 when the Swedish financier Ivar Kreuger gave a loan to the German government in exchange for the match monopoly, thus tying his business ventures to Germany's solvency. In addition, a part of this loan was financed by large US dollar credits from the two largest Swedish banks that, in turn, accumulated a sizeable foreign short-term deficit. When in June 1931 the German fiscal crisis began to escalate, international investors ceased to consider Sweden a safe haven because they knew about the linkages between the German government, Kreuger, and the Swedish banking system. This downgrading, in combination with the foreign short-term deficit of the banking sector, proved lethal for the reserve position of the Swedish central bank, once the international liquidity crisis in mid-July 1931 erupted. The sterling crisis only put the final nail in the coffin.
Faculties and Departments:06 Faculty of Business and Economics
06 Faculty of Business and Economics > Departement Wirtschaftswissenschaften > Professuren Wirtschaftswissenschaften > Geld- und Währungsgeschichte (Kugler)
UniBasel Contributors:Kugler, Peter
Item Type:Article, refereed
Article Subtype:Research Article
Note:Publication type according to Uni Basel Research Database: Journal article
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Last Modified:14 Jun 2018 10:02
Deposited On:14 Jun 2018 10:02

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