In September, 1938, British Prime Minister Neville Chamberlain struck a deal with Adolph Hitler. Britain (and France) would allow Germany to seize the parts of Czechoslovakia that were inhabited by ethnic Germans (the Sudetenland), in exchange for a promise not to make any further advances on the country. Upon returning home, he declared that he had insured “peace for our time.” A few months later, Hitler grabbed all of Czechoslovakia.
In my book entitled The Midas Paradox, I cited a NYT report on the market reaction to the Munich Agreement:
“From a strictly market viewpoint the news of the decision of the Czech Government to capitulate to the demands that it cede the Sudeten area to Germany was favorable. Prices, quite naturally, improved as the threat of war seemed to recede. But this was ‘good news’ with a difference; hardly the sort of good news to capture the imagination of individual traders and evoke a spirit of bullishness. Even in Wall Street, where the mental processes are supposed to be exceedingly realistic, there was a sufficiently powerful sense of the tragedy involved in Czechoslovakia’s surrender and the unhappy role that Britain and France played in bringing it about to dampen the normal speculative impulses.” (NYT, 9/22/38, p. 33)
This happened a long time ago, and I suspect that today very few Americans understand the consequences of appeasing a tyrant who promises that he just wants a portion of a neighboring country.
I was reminded of this market reaction when I read the following tweet:
