'Creditanstalt' Titanic Prize for Incorrigible Piloting of Unsinkable Ships

The 'Creditanstalt' Proudly Announces the Creation of the Titanic Memorial Prize for Incorrigible Piloting of Unsinkable Ships in Treacherous Waters

RMS Titanic living up to her unsinkable reputation in 1912.

Capt. Edward Smith, imperturbable commander of the Titanic  and exemplary role model for current European leaders

Inspired by the op-ed in today's New York Times Europe Is Responding, co-authored by JEROEN DIJSSELBLOEM, OLLI REHN, JÖRG ASMUSSEN, KLAUS REGLING and WERNER HOYER, the 'Creditanstalt' has decided to create a third Memorial Prize named after that incomparable paragon of  European engineering, the RMS Titanic. The recipient of the Titanic Prize will be awarded One Million 'Euros' in European Investment Bank grants.

The five authors of this convincing piece have been jointing and individually nominated for the prize by the Awards Committee. (Dijsselbloem and Rehn have already been nominated for the Brüning and Mellon Memorial Prizes, where they are in serious contention, as readers can see from the ongoing poll results on the sidebar.) Additional nominations will be accepted by the Committee until April 30 by submitting comments to this post.

Some inspiring excerpts from their rousing clarion call:

"But in the eye of the storm, we strengthened the foundations of our currency and improved the sustainability of our economies." 

"This response to the crisis has delivered results. Countries under assistance are improving their fiscal situation and regaining competitiveness."

"Europe has responded to adversity by moving closer together and deepening integration. As a result of our determination and our common strategy, a difficult but necessary adjustment is taking place, from which a stronger euro zone is set to emerge."

Thus fiscal icebergs have been skirted and watertight contagion compartments are battened down. What do a little icy unemployment and recession choppiness matter to the Eurocrats and bankers in first class? The lookout is agreeably delusional in his crow's nest. The captain has gone to bed early after penning an op-ed for the New York Times and issuing the order of the day:

Full Speed Ahead! 

Be Sure to Press the "Vote" Buttons after Selecting Your Candidates!

After selecting your candidates for the Brüning and Mellon Memorial Prizes (see boxes on the right sidebar), be absolutely sure to press the Vote buttons on the bottom of the polls. Otherwise your vote will not be tallied.

If you think you might have forgotten to press the Vote buttons after voting, just go back and vote again. The software will prevent your votes from being tallied twice.

We don't want any more elections falsified by "hanging chads"!

Jan Brueghel the Younger's take on the bitcoin mania

Monkeys in contemporary 17th century Dutch dress are shown dealing in tulips. A satirical commentary on speculators during the time of "Tulip Mania", an economic bubble that centered around rare tulip bulbs. At left, one monkey points to flowering tulips while another holds up a tulip and a moneybag. Bulbs are weighed, money is counted, a lavish business dinner is enjoyed. The monkey at left has a list of rare tulips, his sword denotes upper class status. Farther back, a monkey sits like a nobleman astride a horse. One in mid-foreground draws up a bill of sale; the owl on his shoulder symbolizes foolishness and ignobility. Brueghel is not only ridiculing tulip speculators as brainless monkeys, the work is an object lesson for the folly of speculating to such an extent in such a transient thing as a mere bloom. In the denouement at right, a monkey urinates on the now worthless tulips; fellow speculators in debt are brought before the magistrate or weep in the dock. A frustrated buyer brandishes his fists, while at the back right a speculator is carried to his grave. [Source: Wikipedia article "Tulip Mania"]

Latest update from CNN: Bitcoin bubble may have burst

Polls Reopened and Extended Until May 5!

Due to the inadequacy of the Blogger/Google Poll gadget the 'Creditanstalt' Brüning and Mellon Memorial Awards Committee has decided to reopen the polls and extend the deadline until May 5, 12:00 (UTC+1, Vienna time).

If you voted before April 9, 16:15, please recast your vote using the new Polldaddy.com polling gadgets on the right-hand sidebar!

The order of the candidates is randomized at each webpage viewing to ensure fairness. There is now also a provision for write-in candidates.

The Prize Announcement can be found at this post.

The Blogger/Google Poll gadgets were not correctly recording the votes and even dropping votes that had already been registered. This is apparently a problem that has been brought to Blogger/Google's attention months ago but which they still have not fixed (sounds like the Cyprus banking crisis). 

I thank Blogger blogger DarkUFO for bringing the PollDaddy.com alternative to my attention (see his webpage on inserting PollDaddy code into Blogger.com blogs).

Happy voting and let the best policymaker win!

Margaret Who Died? Recalling Annette Funicello

Annette Funicello died yesterday, a sad day indeed for us remaining survivors of the baby boom. With tears in our eyes we recall those far-away halcyon days of innocence when real wages rose in lock-step with productivity, top marginal tax rates were over 70%, unions effectively protected workers rights, income inequality was at an all-time low, the boring banks were less than 4% of GDP, and the superpowers were free to test multi-megaton H-bombs in the atmosphere (even Charles Murray chokes up here).

And then along came Margaret Who (and somebody named Ronald R., can anyone remember?). After something called the Vietnam War, modest current account deficits and the breakup of Bretton Woods, inflation and the oil crises...

Those were the days. By the way, does anybody want to buy a Davy Crockett coon-skin cap?

Cast Your Votes!

The Polls Have Been Opened for

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

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

You can cast your votes using the gadgets on the right-hand frame of this blog.

The polls close on May 1, 2013 at 9:01 UTC+1! [Now extended until May 5 12:00 UTC+1!]

See previous post for more information on these prizes.

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)

and

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).

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.]

Background

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.

References:

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.]