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Wednesday, March 27, 2013

Announcing the 'Creditanstalt' Heinrich Brüning and Andrew Mellon Memorial Prizes

The 'Creditanstalt', Vienna, Proudly Announces the Creation of 

The Heinrich Brüning Memorial Prize for Self-Defeating Macroeconomic Stabilization Policy (aka Austerity)


The Andrew Mellon “Liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate” Prize for the Expeditious Resolution of Banks (aka Bank Runs)

Candidates for either or both of the prizes currently are
  1. Wolfgang Schäuble, German Finance Minister
  2. Jeroen Dijsselbloem, Dutch Finance Minister and Euro Group President
  3. Angela Merkel, German Chancellor
  4. Jens Weidmann, Bundesbank President
  5. Helmut Kohl, former German Chancellor, and with Francois Mitterand (deceased), founding father of the Maastricht Treaty
  6. Nicolas Sarkozy, former French President and co-initiator with Angela Merkel of the 'Deauville Agreement' for Private Sector Involvement in a Greek debt 'restructuring' (aka default)
  7. Olli Rehn, Vice-President of the European Commission, for blaming the Keynesian messenger (see letter and Financial Times piece)
The award committee of the 'Creditanstalt' is happy to entertain additional nominations by April 1. Readers of this blog are encouraged to submit their votes by May 1 [extended to May 5!].

The recipient of the Brüning Memorial prize will be awarded the sum of One Million 'Euros' in Bundesbank TARGET2 Claims on the European Central Bank, while the recipient of the Mellon Prize will receive One Million 'Cypriot Euros' (subject to currency controls and 'bail-ins' of the ECB and Central Bank of Cyprus).

The prizes will be awarded in a gala ceremony in the prestigious offices of the 'Creditanstalt', Vienna, on May 11, a historically commemorative date for the bank (on May 11, 1931, the 'Creditanstalt', the then largest Austrian bank, filed for bankruptcy, initiating a worldwide cascade of bank failures).
By Werckmeister (Own work) [CC-BY-SA-2.5 (], via Wikimedia Commons
Main Office of the former Creditanstalt, Vienna, ground zero of the 1931 worldwide bank run
[Disclaimer: Any identification with living persons or institutions of the same or similar names is hereby denied.]


The leading prize in economic science ('The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel') has become discredited by being repeatedly awarded to out-and-out 'Keynesian' charlatans such as Hicks, Stiglitz, Meade, and Krugman (the grand-master Keynes fortunately died well before he could be so honored). The 'Creditansalt' has realized the need to restore economic policy in these troubled times to a sound foundation. This is the motivation for establishing these substantial prizes. With state budgets coming under increasing pressure and the financial system still teetering, it has become imperative to formulate economic policies that have the biggest 'bang' for their Euro. For this reason, the prizes are named for distinguished economic policymakers of the past who proved that judicious and well-reasoned decisions could have world-historical implications beyond their wildest dreams. They serve has an inspiration for the current generation of policy makers, who, after the lapse of so many years and the decline in the teaching of economic history, may have lost sight of their shining examples.

German Chancellor Heinrich Brüning

Heinrich Brüning was the last democratically elected Chancellor of the ill-fated German Weimar Republic and served at the height of the Great Depression 1930-1932. After losing a parliamentary majority he began to rule by emergency decree, thus serving as an inspiration for the recent caretaker governments of Greece and Italy. His restrictions on credit, cuts in government spending and reductions in wages led to mass unemployment and the growth of support for radical parties on the right and left. Political intrigues of reactionary cliques led to the fall of his government in 1932, "one hundred meters before the finish line", i.e., before reparations payments were suspended in the Hoover Moratorium and austerity measures could bear fruit (although in fairness to Brüning some historians argue that he was about to switch to an expansionary policy just before his cabinet collapsed). He also pushed for a customs union with Austria, which played a crucial role in the demise of the 'Creditanstalt' and the subsequent worldwide bank run.

U.S. Treasury Secretary Andrew Mellon

Andrew Mellon was a wealthy banker and industrialist who served as U.S. Secretary of the Treasury from 1921 until 1932. He is especially remembered for his courageous stance during the Great Depression against fiscal stimulus, monetary expansion and injecting liquidity into failing banks. According to President Herbert Hoover in his 1952 memoirs, "Mellon had only one formula: 'Liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate'" (H. Hoover 1952, Memoirs: The great depression, 1929-1941, p. 30). [In fairness to Mellon, Hoover is the only source for this quote, and it may have been self-serving on Hoover's part to pass the buck to Mellon, who was by then long dead.]

The Creditanstalt

The Austrian Bank Creditanstalt was founded in 1855 with significant participation of the Rothschild family and imperial patronage. It became the largest Austrian bank but was induced by the Austrian National Bank to acquire the failing Bodenkreditanstalt in 1929. In some respects this parallels the acquisition of Bear Stearns by JP Morgan Chase under Federal Reserve auspices in March 2008, although the 2008 bank crisis was subsequently triggered by the failure of Lehman Brothers, not JP Morgan Chase. Creditanstalt's solvency became increasingly undermined, although this was disguised by accounting tricks and secret and probably illegal support via foreign accounts of the National Bank that weakened the latter's official gold and foreign currency reserve position. Bankruptcy was declared on May 11, 1931, which led to a run on the Austrian Schilling. While a bridge loan for 150 million Schilling was quickly forthcoming from the Bank of England to the Austrian National Bank, the Bank of France, the second largest holder of gold reserves in the world next to the USA at the time, prevaricated and even secretly encouraged withdrawal of Schilling accounts to put the Austrian government under pressure to renounce plans for a customs union with Germany (see Brüning section above). Does the willingness of the Eurozone to allow the Cypriot Banking Model to catastrophically fail reflect a similar political decision to thwart that country's controversial closeness to Russian business interests? While French and Bank for International Settlements loans were eventually provided, it was too late to prevent a collapse of the Austrian financial system, so that capital controls had to be imposed. The bank run then went internationally viral, spreading to Hungary, Germany, Britain (which managed to avoid bank failures by going off the gold standard in 1931), and the US (where 40% of banks failed before the US devalued and effectively left the gold standard while introducing deposit insurance under Roosevelt in  1933).

The 1931 Creditanstalt banking crisis stands as an incomparable monument to European monetary cooperation, and the troika (European Commission, European Central Bank and the International Monetary Fund) may have to redouble their efforts to live up to this historical precedent.


Iago Gil Aguado, 2001, "The Creditanstalt Crisis of 1931 and the Failure of the Austro-German Customs Union", The Historical Journal, Vol. 44, No. 1, pp. 199-221. [According to Aguado, the archives of the Creditanstalt have still not been opened to historical research]

Barry Eichengreen, 1995, Golden Fetters. The Gold Standard and the Great Depression 1919-1939 (New York and Oxford: Oxford University Press) pp. 264-286.

Richhild Moessner and William A Allen, 2010, "Banking crises and the international monetary system in the Great Depression and now", BIS Working Papers No 333

[For report on May 11, 2013 awards ceremony, jump to this post. For breakdown of poll results, go here.]


  1. One person should be replaced on the voting list and one person should be added.
    Jan Kees de Jager is a more appropriate choice as opposed to the recently appointed Jeroen Dijsselbloem given how he was in power in the beginning of austerity.
    If we are going to look at the head honcho of fiscal policy in Europe than Jean-Claude Trichet should be there who was the head of the ECB at the beginning of austerity and opposed expanding access to money and credit.

    1. Unfortunately, nominations closed on April 1, so I cannot enter de Jager (who I didn't even know to be a prominent player in the Euro crisis). Trichet is a rather ambivalent figure, Draghi even more so, which is why the committee did not nominate them. However, if there is a real upsurge of support for a proposed candidate, we might consider accepting a late draft.

      As to Dijsselbloem, Melvyn Krauss has a good take-down of him, "The Euro Can’t Afford Dijsselbloem’s Rookie Mistakes", at

  2. Anonymous7/4/13 18:22


    This prize needs to be awarded if only for educational purposes.

    -jonny bakho

  3. Anonymous7/4/13 19:14


  4. Anonymous8/4/13 04:05

    This is such a capital idea I would happily fund the award party. Unfortunately this fine line-up of candidates have mysteriously left me somewhat short on those funds.

  5. Anonymous9/4/13 09:55

    Axel Weber should have been on the list...

    1. You can now vote for write-in candidates on the new poll gadgets on the sidebar (please vote again if you have not already done so).

  6. I'm not sure wether Kohl and Mitterand deserve the award. Altough the ideia had liabilities, I doubt that if they were the present leaders they would allow this farse to continue. I would nominate, had I seen this before, Mr Barroso, for the absolute void that his European Commission Presidency is.

    1. You can now vote for Barroso or any other write-in candidate using the new poll gadgets in the sidebar.

  7. You have a point. Barroso would have been a perfect void on the ballot. But nominations closed on April 1, what can you do?

    1. Anonymous9/4/13 14:55

      You could turn it into an annual prize so we get to nominate and vote again? It's not like there's any sign of a change in policy. I would also have preferred fewer Germans on the ballot. The vote gets split.