You Might Also Like: The Story of Money

**Liaquat Ahamed** (0:00)
This was the first time that we get this notion that Jewish people are operating some kind of secret financial cabal and using that to control the world.

**Robin Wigglesworth** (0:12)
Why do you think these journalists and these kind of yungas did this? I mean, was it just to sort of have a scapegoat?

**Liaquat Ahamed** (0:20)
They were trying to make a name for themselves.
That was certainly the case of Bill Elmar. He had tried all sorts of ways to make a reputation. This was just the last of his ventures. Oddly enough, he didn't actually believe what he was writing. He had been married four times. Three of his wives had been Jewish.

**Robin Wigglesworth** (0:49)
Today on The Story of Money, a financial crash that mutates into pure political poison. And sure, yes, every financial crash leaves people poorer.
But some leave something far more dangerous behind. And in this case, it ultimately arguably paved the way to genocide. So Gillian is away this week. But to tell today's story, I'm joined by Liaquat Ahamed. He's the author of Laws of Finance, one of my favourite books on financial history. And now 1873, which covers the numerous financial crises that happened around the world in that fateful year. Liaquat, thanks so much for being here. This is a real pleasure.

**Liaquat Ahamed** (1:29)
Thanks for having me, Robert.

**Robin Wigglesworth** (1:31)
So Liaquat, in today's show, we're going to be talking about how a spectacular stock market crash led to the birth of a new virulent modern brand of anti-Semitism. In fact, it was in the wake of this crash that the term anti-Semitism was coined, right?

**Liaquat Ahamed** (1:48)
Yes, it was actually coined in 1879 by a rabble-rousing journalist who was trying to use the opportunity to make a name for himself.

**Robin Wigglesworth** (2:00)
Well, that sounds sadly very familiar. Well, we're going to be meeting a lot of people on the way. The banker who became the main scapegoat, naturally, he was Jewish. The government leaders who failed to quash this pernicious phenomenon when it arose, and ultimately how Adolf Hitler would exploit these same ideas decades later with terrible, terrible consequences.
Welcome to The Story of Money from The Financial Times. I'm Robin Wigglesworth.
So, we're going to get to all those events I mentioned, but let's start at the beginning. Let's go back to 1871 in Germany, in Austria, and there's this huge, insane, never seen before boom happening on the stock markets in both countries at the same time. Liaquat, can you tell me, help me paint a picture of what it was like at the time?

**Liaquat Ahamed** (3:04)
Well, until then, both the German and the Austrian stock markets were pretty sleepy places.

**Robin Wigglesworth** (3:12)
This wasn't London or even Paris at the time. They were small stock markets.

**Liaquat Ahamed** (3:16)
Exactly. And from 1871, though, a giant boom develops. Over the next two years, 900 new companies are formed on the Berlin Stock Exchange and 600 on the Viennese Stock Exchange. So the number of companies quoted expand enormously.
Stock prices start going up. The new companies go up even more. The total value of the German and Viennese stock markets rise fourfold in a period of two years. There was a real estate boom, so there were lots of real estate companies being formed. Credit was expanding, so there were a whole lot of new banks being formed.
But a good portion of these small companies were purely paper companies, established by promoters, in order to get money from shareholders.

**Robin Wigglesworth** (4:20)
And quite often they would give journalists shares in return for positive press, right?

**Liaquat Ahamed** (4:27)
Right. Not only journalists, but they also induce minor aristocrats to join their boards, to lend their names. The governance of these companies was not of the highest standards.

**Robin Wigglesworth** (4:41)
No, no, this does not sound entirely above board.
And obviously, minor aristocrats and journalists are unfortunately going to be a bit of an underlying villain of our story today. But there was one, of course, from your book I was delighted to read. There was a Viennese journalist who made fun of all this stuff. He could clearly see where things were going. And there's this great quote where he said that, companies were founded to transport the Aurora Borealis in pipelines to St. Stephen's Square and to win mass sales for our boot polish among the natives of the South Sea Islands. He was clearly mocking this giant boom that started in 1871 and continued until 1873 It became known as the Grundesheit, or in English, the Founders Error, the boom of the founders. It's kind of a hot tech bubble. What caused it?