Terrible price losses on the stock exchange – Frankfurter Zeitung from 1923

Dhe slump in the German stock market continued at an accelerated pace this week. An astonishing wealth of effects material came up for sale, and the at times very urgent form of realization reflected the whole severe crisis that our economic life has to endure in these weeks and months.

The situation is as follows: In addition to the regular capital investment, two large collective reservoirs have absorbed the stock material of the inflationary period, which has increased by billions again and again in recent years, through which – often without the necessary consolidation of the claims on the way of the premium utilization – the working capital coverage , the adjustment to currency devaluation took place. On the one hand, the shares, supported by the propaganda of the financial circles interested in the enticing profits from the issue, flowed into the hands of stock market speculation, which was unreasonably widespread due to the hardship of the time, on the other hand, the share, as a real or supposed material value, became a means of preserving the substance of economic operation in trade, commerce and industry. It became with the foreign currency – and especially since the last foreign exchange decree restricted the circle of those entitled to buy foreign currency – with the goods themselves the most important representative of the operating and asset reserve.

Disruption of the money and credit markets

From this special way of placing extensive parts of the German stock material, which differs significantly from the conditions in the pre-war period and which is only moderated to a relatively inconsiderable extent by the transfer of German shares to foreign hands, resulted what has already been expressly pointed out at this point is that the consolidation of the placement of shares, and with it the overall condition of the securities market, has now become much more dependent than before on fluctuations in the currency and business situation, and the economic situation as a whole.

It is evident that every serious disruption in the money and credit markets, every disruption in the regular flow of business, while ordinary operating costs persisted, and especially if these increased, every shock in the currency market, with its inevitable consequences, had to have an intense impact on the stock market. We have already seen major liquidation processes taking place in the more recent past when the economic fluctuations were milder. They were mostly smaller than the current severe slump in prices.

Raging brand depreciation

In January 1923, the stock market boomed with the rapid devaluation of the market. Speculation, especially outside of stock exchange, had turned to securities games with an extremely increased greed under the compulsion to counteract the excessive inflation through speculative profits, the agiotage flourished as never before. Panic-like pre-provisioning in business life and a willingness on the part of the financial world to lend that was still too far-reaching at the time, which, however, believed it should be promoting its own interests by enabling mass issuance, had led to a pseudo-liquidity in business life, which had the consequence on the one hand that huge bills and bank obligations of the companies existed, but on the other hand these companies and their owners were very interested in the stock market, in the hope of finding in the development of stock prices a compensation for every risk of currency devaluation, for the high bank charges and at the same time the possibility of being able to meet the assumed business obligations from the expected added value of the shares.