Who will now stabilise the world economy?

februari 21, 2025

Kindleberger’s Spiral

Some experts are reaching for this apocalyptic chart of the over-tariffed world in the 1930s.

The tariffs didn’t cause the Great Depression — but the work of the economist behind the spiral still has a serious warning for today. It is all about America’s role in the world.

Charles Poor Kindleberger II drew the spiral for The World In Depression, first published in 1973, his monumental study of the 1930s

Kindleberger’s work showed that tariffs were only part of the story and not even the most important.

The bust in stock markets was transmitted to commodities and trade through a collapse in credit and waves of bank failures as people everywhere rushed to get hold of gold, dollars and British pounds, the reserve currency before the Great War.

What turned all this into a full-blown global depression was the collapse of a small bank in Vienna in 1931

and the failure of any central bank, or group of authorities, to prevent knock-on effects for lenders in Germany, London and ultimately the US, too.

Since the end of World War II, the US has taken the mantle of top dog in international money to varying degrees.

In the global financial crisis of 2008, it played the part par excellence with the Federal Reserve lending hundreds of billions of dollars to other major central banks around the world, to keep cash moving and avoid global depression.

It did so again in 2020, when Covid-19 shuttered economies globally.

Paul J. Davies Bloomberg 7 april 2025

https://www.bloomberg.com/opinion/articles/2025-04-07/kindleberger-s-spiral-is-less-about-economic-depressions-than-trade-wars

In 1931, Austria was attempting to deliver the kind of austerity now being witnessed in parts of southern Europe.

The crisis culminated in the failure of Creditanstalt, a major Viennese bank – the 1931 equivalent of Lehman Brothers.

A handful of years later, Hitler was welcomed by cheering crowds in Vienna.

Stephen King, HSBC Group’s chief economist, Financial Times, 9 May 2012

https://www.internetional.se/doom071126.htm#CreditAnstalt

What we’re reading: Charles P. Kindleberger’s “Manias, Panics and Crashes”

https://englundmacro.blogspot.com/2022/12/what-were-reading-charles-p.html

“The 1929 depression

https://www.internetional.se/shares.htm#bbc16

was so wide, so deep and so long because the international economic system was rendered unstable by British inability and United States unwillingness to assume responsibility for stabilising it.”

Kindleberger

https://englundmacro.blogspot.com/2022/12/what-were-reading-charles-p.html

published his book, The World in Depression, in 1973

https://www.amazon.com/World-Depression-1929-1939-Charles-Kindleberger/dp/0520025148

From the Latin American debt crises of the 1980s

https://englundmacro.blogspot.com/2021/06/remember-volcker-shock-triggered-latin.html

to the Asian financial crisis of 1997

https://www.internetional.se/asia978.htm

and the global financial crisis in 2008-09,

https://englundmacro.blogspot.com/2024/05/varfor-min-sida-om-finanskrisen-heter.html

Washington co-ordinated the response, and prospered by doing so.

Robin Harding Financial Times 19 February 19 2025