Economic Depression 1930s Revision

Economic Depression 1930s Revision - Economic Depression...

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Economic Depression 1930s How would you account for the economic depression in Europe in the 1930s? Why did the US stock market crash trigger an economic depression in Europe in the 1930s? - The depression was a crisis of the economic system. - Crisis of investment confidence - Led to a downturn in world trade, therefore a decrease in production and demand. - Caused bankruptcy, loss of savings, unemployment. - The effects differed with national circumstances. Pre WWI: America and Europe - By mid 1930s some countries recovering from the war - France- prolonged depression. - There had been a delayed response to dislocation after WWI - Before 1914; o Stable currency relations o Very little difference in exchange rate o London- gold standard o Price rises not dramatic o Small increase in tariffs- modest level before 1914 o Increase in prices etc not enough to stop world trade. o Before 1914 relatively open world economy. Post WWI: America and Europe - Great increase in prices 1914 onwards, intense inflation. - Governments borrowed large amounts of money for the war effort. - Printed paper money should have had a tax increase. - All led to inflation. - Currencies dropped in comparison to the dollar. - Competition: cheaper products on the market o Added to by the breakdown of the gold standard o British believed in gold standard with disasterous results- it overpriced exports. o UK economy in serious trouble. Monetary Instability - Capital: how much money available and how used? - Domestic capital decreased in WWI - Domestic credit not there as in pre-WWI - Pressure intensified with reparations. - Allied forces went to the international market for loans (US financial markets)
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- Germany borrowed 132,000 million gold marks. - Britain lent to France and Italy more than they borrowed from the US. - French needed reparations payments to pay back war loans to UK and US - Circular flow of US money early 1920s eg Dawes plan and Young plan - Germany able to pay reparations therefore France and Britain could repay war loans. -
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Economic Depression 1930s Revision - Economic Depression...

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