HY116_MT Week 5_Content - HY116 International History since...

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HY116: International History since 1890 MT Week 5 Isolationism, Disarmament, Depression, War, 1929-33 Lecture Introduction: the Great Depression in international history Insights from the 2008 financial crisis Globalisation increased the risk of contagion. Wealth and inequality, especially in Anglo-Saxon countries, had increased exponentially. People with low incomes borrowed huge loans and could potentially default on them. BOP between certain countries became very large (China, Germany). To enable the deficit countries to continue to buy their goods, the surplus countries recycled in the form of loans. International payment system was becoming unbalanced and fragile. Inadequate regulation of national and international financial systems. No market can function for long without a framework of agreed rules and institutions to sanction rule-breakers and intervening in the event of market failure. Such a framework is also essential in global markets. Since WWII, institutions such as WTO, World Bank, IMF have been created. However, these frameworks have since become inadequate. Trigger: Belated realisation that mortgages were taken up on such a large scale by people who were unable to afford them. It was impossible to value them. Arguably, US and Britain were chiefly responsible for the financial crisis in 2008. From the 1929 crisis to the Great Depression WWI left central Europe in a state of revolutionary chaos. Britain, France and US (victory powers) all subscribed to liberal economic principles and cooperated in applying them. o British and American bankers assisted other countries to restore their currency to the gold standard. Trade was expanded – a return to globalisation By Sept 1929, international trade and capital exports far exceeded levels in 1914. Oct 1929 crisis o Globalisation had integrated the capitals of the world and increased the risk of contagion. The gold standard had locked the major countries together and removed the ability to absorb external shocks by allowing their currency to fluctuate. o Aggravated the BOP from the Great War. The 1920s were favourable for the US: commodity prices declined but American manufacturers dominated the production of newest and fastest- growing products during that period, e.g. electronics, chemicals, refined oil products. This added to American trade surplus though Wall Street recycled the dollars in assisting other countries in the form of loans, making the financial system vulnerable.
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HY116: International History since 1890 Britain failed to enact regulations and institutions to intervene in market failure. There was a lack of agreement in how to operate the gold standard. President Hoover of US American historians claim that US was not really isolationist in nature because Wall Street banks provided informal assistance – but Washington took no responsibility for the bankers.
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