The 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 quite urgent form of realization reflected the whole serious 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 reservoirs of collection in recent years have absorbed the stock material of the inflation period, which has repeatedly increased by billions, through which – often without the necessary condensation of the claims by way of premium utilization – the working capital cover, the adjustment to the devaluation of money took place. On the one hand, the shares, supported by the propaganda of the financial circles interested in the tempting emission profits, flowed into the hands of stock market speculation, which was spread inappropriately under the necessity of the time, on the other hand, the share as a real or supposed tangible asset became a means of maintaining substance for economic operation in trade, commerce and industry. With the foreign currency – and especially since the last foreign exchange ordinance had restricted the circle of foreign currency purchasers – it became the most important representative of the operating and asset reserve with the goods themselves.

Disruption of the money and credit market

This special type of placement of large parts of the German equity material, which differs significantly from the conditions in the pre-war period and which is mitigated only to a relatively inconsiderable extent by the transfer of German shares into foreign hands, has shown, as has already been emphatically pointed out at this point, that the consolidation of the share placement and thus the overall condition of the securities market is now much more important. It has become more dependent than before on the fluctuations of the currency and business cycle, the economic situation as a whole.

It is obvious that every serious disturbance of the money and credit market, every interruption of the regular turnover in business life with the continuation of ordinary operating costs and, in particular, any upheaval of the currency market with its inevitable consequences had to influence the stock market intensively. We have already seen major liquidation processes taking place in the face of milder economic fluctuations in the recent past. They were usually smaller than the current severe slump in prices.

Frenzied brand rating

The stock market economy had taken a tremendous upswing in January 1923 with the rapid brand devaluation. Speculation, especially outside the stock market, had turned to securities games with a highly increased greed under the compulsion to counter excessive inflation through speculative profits, the premium flourished as never before. Panic-like pre-provision in business life and a then still too far-reaching willingness of the financial world to lend, which, however, believed to be to promote its own interests by enabling mass missions, had led to a fictitious liquidity in business life, which had the consequence that on the one hand there were huge bills of exchange and bank obligations of the companies, but on the other hand these same companies and their owners large interested parties of the stock market. In the hope of finding compensation for any risk of devaluation of money, for the high bank charges, in the development of securities prices, and at the same time to secure the possibility of being able to meet the assumed business obligations from the expected added value of the shares.