The National Recovery of Germany: Part 1
Tirpitz became the chancellor of Germany in the year 1928. He had many reforms and ideas to get Germany out of the “Economic Calamity” period (sometimes also known as the “World Depression”, among other names. In Germany, as in many other countries, panic in the stock market happened, and the panic selling caused people to attempt to dump stocks before the stocks lost all their value. causing consumer spending and investment to decline. This also led to the crash in production and employment. German banks were in a state of financial ruin during the “Economic Calamity”, as the German populace lost confidence in banks and other financial institutions.
The Run on the Munich Banks occurred on December 2, 1927, and kicked off several other incidents in Germany. A bank run occurs when a large number of people who deposit funds into a bank withdrew all their funds at once due to losing confidence in the security of that bank. In a bank run, a bank needs to sell its assets and quickly liquidate its loans to grant the necessary cash (since a Bank usually holds only a fraction of its deposits in cash at one time). The losses a bank suffers this way can make a bank insolvent; in some cases, bank runs started to cause the banks to collapse, further crashing the economy.
Banks were closed temporarily almost immediately until the German government inspectors determined that the banks were solvent. In addition, Many Germans were suspicious of this measure, so Tirpitz decided to give speeches to address the German people directly. This program was called “The Kanzler (German for chancellor) and the Radio”; in his first speech, Chancellor Tirpitz explained why he and the German federal legislature, the Bundestag, did the actions they did. Tirpitz reassured Germans that the bank failures of the previous year would not happen again, and the banks would be secure upon reopening. In addition, the Bundestag started to pass laws regulating finances in Germany. Another important part of the Tirpitz recovery included the liquidation of certain unprofitable companies in Germany. The dissolution of these companies and the streamlining of their assets helped the German economy recover, as did a revitalization of the research sector.
Germany had some holdings in Africa. These were exploited for their resources so that Germany could provide for itself during the “Economic Calamity”. However, abuses of the Africans were extremely common during this period. In one of the blunders of American human rights policy, not much awareness happened here. Admittedly, everyone was struggling past the economic collapses, but this was heinous. Much of the population of German holdings in Africa (especially Kamerun) were quite literally worked to death. (This only ended after the economy of Germany had largely recovered). Needless to say, this did not reflect well on German colonial administrators.
Tirpitz’ recovery in terms of bank fixing inspired many other countries to perform similar measures with their banks. In fact, the US bank recovery was heavily based off the Tirpitz bank program in Germany.