IR 349 Final.docx - The International Economic Order 1929 1939 The Great Depression and its Aftermath How did the U.S stock market crash affect

IR 349 Final.docx - The International Economic Order 1929...

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The International Economic Order, 1929 - 1939: The Great Depression and its Aftermath How did the U.S. stock market crash affect international finances, lending, and repayment? US govt. Not involved but US businesses and banks were involved in the reparation loans Oct 1929: Germany says they can’t pay the reparations US can’t lend at the same rate, America no longer loaning money to Germany, thus Britain and France no longer receiving war reparations Abrupt termination of long-term foreign lending, which declined by 68% Transatlantic flow of money has impact on the entire world Cycle of money: U.S. provides loans to Germany and German national Bank Germany uses the money to pay reparations to France, UK, Belgium etc. European countries repay U.S. for War loans Most nations did not feel impact of depression immediately Germany was directly dependent on U.S. Bank and American businesses for investment; source of loans completely disappears overnight Only beginning in the 1930s do western countries not as dependent on U.S. market begin to default on their loans By 1934, every European country had stopped paying back the U.S. for borrowed money (except Finland) Abrupt decrease in U.S. trade also led to a decline in British foreign investment 12 European banks had enacted various types of restrictions on the transfer of capital abroad British abandoned gold standard in Sept 1931 - marked the crumbling of the international monetary system that had been established after WW1 New INTL Economic System: 1. U.S., France, Belgium, the netherlands, and Switzerland, which remained on the gold standard and enacted protectionist tariff barriers 2. Britain and its trading partners and imperial holdings, left gold standard and tied currency to the pound 3. Germany and many of the impoverished non industrialized nations of central europe and latin america, imposed rigid exchange controls that rendered currencies inconvertible How did US and foreign govts. react to these developments? The UK, France, etc. were not tied to the American economy So not an immediate problem for them LAter on they say they can’t repay loans to the US 1931 Moratorium Pres Hoover puts all loans on hold for a year 1932: France and Belgium: “we can’t pay u back” 1934: everyone, but one country (Finland) has stopped paying the US Johnson Act: Hiram Johnson Any country who owes war debt to the US can not borrow in the US
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American businesses, charities, and people stop investing (and visiting) in these countries American liquidation: 1929 - 1932: US banks sell off foreign investment 1932: Bank Panic Creditanstalt (Austria bank) assets frozen, declared bankruptcy: accelerated financial panic in European markets, first big bank failure, also good propaganda for Nazis bc the owners of Kreditanstalt were Jewish American businesses, banks, and people leave Austria
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