Abstract: Sensemaking and Financial Crises: Central Banks and the Austrian Crisis of 1931

Per H. Hansen


In this paper, I analyze how central bankers struggled to make sense of and construct a narrative of
the Austrian crisis that could guide the decisions to be made in order to stop the crisis from spreading.
My point of departure is that the misfit between the central bankers’ operating model and what they
found in Vienna in May must have been noticeable. As Clarke noted, “as no comparable international
financial difficulties had occurred before, the authorities had no previous experience by which to guide
themselves. They were still only partly aware, moreover, of the magnitude of the potential trouble.”23
To understand the different assessments of central bank and BIS performance in the European crisis
of 1931 requires that we leave the helicopter together with hindsight and instead try to envision the
messy, confusing and conflict filled world of a central banker in the days between May 11 when the
Credit Anstalt crisis was made public and May 29 when the BIS organized credit to the Austrian
National Bank was announced. In contrast to the FOMC of the Federal Reserve Board decisionmakers
examined by Abolafia and Fligstein et al. central bankers were not assembled in one room in
the summer of 1931.