7. The Consequences to the Banks of theCollapse of Money Values (Aug. 1931)

A year ago it was the failure of agriculture,mining, manufactures, and transport to makenormal profits, and the unemployment andwaste of productive resources ensuing on this,which was the leading feature of the economicsituation. To-day, in many parts of the world,it is the serious embarrassment of the bankswhich is the cause of our gravest concern. Theshattering German crisis of July 1931, whichtook the world more by surprise than it should,was in its essence a banking crisis, though pre-cipitated, no doubt, by political events andpolitical fears. That the top-heavy position,which ultimately crumbled to the ground, shouldhave been built up at all, was, in my judgement,a sin against the principles of sound banking.One watched its erection with amazement andterror. But the fact which was primarily re-sponsible for bringing it down was a factor forwhich the individual bankers were not re-sponsible and which very few people foresaw■—namely, the enormous change in the value ofgold money and consequently in the burdenof indebtedness which debtors, in all countries

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