Lecture 7: 1914-1950 Flashcards
Where did the Great Depression start? When did it reach its peak?
From the US but spread throughout world (trade, banks), point was reached in 1932/33
What is the causation path of the Great Depression?
Roaring twenties with huge consume and investment, build on credit, stock markets rose beyond real economy, also over-production → crashed as it couldn’t keep up with real economy → impact on economy as capital investment was taken out (also from other countries) to pay new high debts, banks got bankrupt (could only operate in one state → badly hit) which hindered new investment
What role had the Wall Street in the Great Depression?
Wall Street couldn’t handle its new power: made for capital imports to US, not global finance hub
What role did the Gold Standard play before and during the Great Depression?
UK, FR went back to Gold Standard (France benefited from an undervalued currency, UK opposi.)
The faster a country left the gold standard, the faster they recovered
UK (and NZ, Scandin) in 1931, US in 1933, BE/NE/FR in 1935/36
Central banks couldn’t intervene due to Gold Standard (lower interest rate → outflow of gold)”
What was the triangle of Capital Flow in the western world?
A triangle of int. capital flows: US invests in GER, GER repays FR/UK, FR/UK pay debt from US
