what produced the world depression of 1929, why was it so widespread, so deep, so long?
-cyclical long-term lending; the overproduction of certain primary products such as wheat;
The world economic system was unstable unless some country stabilized it, as Britain had done in the nineteenth century and up to 1913. In 1929, the British couldn't and the United States wouldn't. When every country turned to protect its national private interest, the world public interest went down the drain,
if the world economy behaved symmetrically, there could be no world depression
A decline in the price of wheat might produce losses for farmers; it would, however, lead to gains in real purchasing power for consumers
In the 1920s, United States foreign lending was positively correlated with domestic investment, not counterpoised. . The boom of the 1920s was accompani-d by foreign lending; the depression of the 193Os saw the capital flow reversed
The cut in lending actually preceded the stock-market crash as investors were diverted from the boom in foreign bonds which followed the Dawes loan to the boom in domestic stocks dating from the spring of 1928.
he Smoot-Hawley Tariff Act of 1930. At the first hint of trouble in agriculture, Hoover reached for the Republican household remedy
Britain was willing to forego reparations, to the extent that war debts were written off -an attitude of limited self-denial- but the suggestion that the French could write off reparations, after having paid them in 1871 and 1819, and after four years of cruel war,
the United States undertook a leading world role under Charles E. Hughes as early as the Disarmament Conference of 1922
America's Role in the World Economy,prescribed for the United States policies of maintenance of full employment at home and cooperation with international efforts at freer trade, restoring capital movements, improvement of the world monetary system and so on.
institutions and policies of the Organization for Economic Cooperation and Development, Group ofTen, Bank for International Settlements, International Monetary Fund, International Bank, General Agreement on Tariffs and Trade, etc. As an acquaintance on the International Monetary Fund staff put it
Role of the small countries and France
say, converting sterling into gold in the summer of 1931, or raising tariffs with alacrity after 1930. There is, however, no universally accepted standard of behaviour for small countries
France sought power in its national interest, without adequately taking into account the repercussions of its positions on world economic or political stability.
The French Gold Sink and the Great Deflation of 1929–32
the link between the gold standard and the Great Depression is widely accepted, it begs the question of how the international monetary system produced such a monumental economic catastrophe. Structural flaws in the post–World War I gold standard and the fragility of international financial stability
France was doing accumulating gold reserves while failing to monetize them
France’s impact on the international monetary system is often believed to have been much smaller than that of the United States
“the French gold imports certainly aggravated the pressure of deflation in the rest of the world,”
Banque de France placed downward pressure on global money supplies.... U.S. and French gold policies must therefore share the blame for exacerbating the monetary aspects of the Great Depression.”
French monetary EXPERTS concluded that France deserves more blame than the United States for increasing the world’s monetary stringency in the late 1920s and early 1930s.
while the United States did to hinder the decline in world prices, especially after 1928, French policy can be charged with directly causing it.” “
“That French gold policy aggravated the international monetary contraction from 1928 to 1932 is beyond dispute,”
the United States and France held excess gold, compared to 1928, equivalent to 5 percent of the world’s gold reserves in 1929, 9 percent in 1930, and nearly 13 percent in 1931, when the gold standard began to fall apart. The United States and France contributed in almost equal proportions— about 60 percent to 40 percent—to the effective reduction in the world gold stock during those years.
THE GOLD STANDARD AND FEARS OF DEFLATION
During World War I, most major countries abandoned the gold standard in order to use fiat currency to fund the war effort. As a result, those nations experienced high rates of inflation.
The desire to bring inflation under control and restore monetary stability led most countries to plan on returning to the gold standard at some point after the war.
Under the gold standard, the price level for goods and services was determined by the supply and demand for gold. The change in the price level was determined by the difference between the growth in the supply and the demand for gold: prices would rise if the world gold supply increased more rapidly than the demand for gold, whereas prices would fall if the demand for gold grew faster than the supply of gold.
Although ending inflation was a key motivation for returning to the gold standard, some leading economists of the day expressed the fear that a return to the gold standard could cause deflation
Banking crisis
The banking crises of the Great Depression, like many of their predecessors, originated with a boom–bust macroeconomic cycle. This was particularly true in the United States, where the Roaring Twenties was followed by the Great Depression. As the bust took hold, a contagion of fear led to large-scale short-term capital movements and currency and banking crises in many countries
Responding to crisis during the Great Depression was difficult because of the absence of institutions with an explicit mandate to maintain financial stability. Regulation and supervision, where it existed, was not especially effective. Deposit insurance systems did not exist
t trade collapse seems to be due to uncertainty and small trade costs changes interacting with supply chains. During the Depression, income losses, tariffs
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