German Exchange Act of 1896

William Engdahl, A century of war: Anglo-American oil politics and the new world order, 1992, 2004 

pdf page: 25/314 (filename: Engdahl_Century_of_War_book.pdf) 

pp.14-15

p.14

In 1890, as a result of the near failure of the prestigious London merchant bank, Baring Brothers, arising from their huge losses in Argentine bond speculation and investment, and the ties of German banking to this Argentine speculation, a Berlin bank panic ensured, as the dominoes of an international financial pyramid began to topple. 

p.14

   Berlin, and German investors generally, had been caught up in international railroad speculation mania in the 1880s.  With the crash of the elite Baring Bros., with some $75,000,000 invested in various Argentine bonds, down came the illusions of many Germans about the marvels of financial speculation. 

pp.14-15

   In the wake of the financial collapse of Argentina, a large wheat exporter to Europe, Berlin grain traders Ritter & Blumenthal had foolishly attempted to ‘corner’ on the entire German wheat market, planning to capitalize on the consequences of the financial troubles in Argentina.  This only aggravated the financial panic in Germany as their scheme collapsed, bankrupting in its wake the esteemed private banking house of Hirschfeld & Wolf, and causing huge losses at the Rheinisch-Westphaelische Bank, further triggering a general run on German banks and a collapse of the Berlin stock market, lasting into the autumn of 1891. 

p.15

   Responding to the crisis, the Chancellor named a Commission of Inquiry of 28 eminent persons, under the chairmanship of Reichsbank President Dr. Richard Koch, to look into the causes and to propose legislative measures to prevent further such panics from occurring.  The Koch Commission was composed of a broad and representatives cross-section of German economic society, including representatives from industry, agriculture, universities, political parties, as well as banking and finance. 

p.15

   The result of the commission's work, most of it voted into law by the Reichstag in the Exchange Act in June 1896, and the Depotgesetz of that July, was the most severe legislation restricting financial speculation of any industrial country of the time.  Futures positions in grain were prohibited.  Stock market speculation possibilities were severely constrained, one result of which has been the relative absence of stock market speculation since then as a major factor affecting German economic life.

p.15

   The German Exchange Act of 1896 established definitively a different form of organization of finance and banking in Germany from that of Britain or America──Anglo-Saxon banking.  Not only this, but many London financial houses reduced their activity in the restrictive German financial market after the 1890s as a result of these restrictions, lessening the influence of City of London finance over German economic policy.  Significantly, to the present day, these fundamental differences between Anglo-Saxon banking and finance, and a ‘German model’ as largely practiced in Germany, Holland, Switzerland and Japan, are still somewhat visible.3 

3. Friedrich List. The National System of Political Economy (1885 edition. London: Longman, Green). Reprinted New York: Augustus M. Kelley, 1966.  

William Engdahl, A century of war: Anglo-American oil politics and the new world order, 1992, 2004 

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