1. The Great Depression, 1929- 1939 Democracy on the Ropes

2. Economic Cycles post-WWI 1919-22— unemployment and inflation 1923—hyperinflation in Germany (4.2 trillion DM = $ 1!!) & Ruhr invasion 1924-29—temporary recovery and growth 1929-late 30s— depression

3. Structural Economic Problems S trong inflationary pressures (rationing, depreciated currencies, borrowing) L ow commodities prices (world glut) I ndemnities/Reparations—disrupts investment, creates circular flow of capital D isrupted markets—due to WWI, Asia, North and Latin America gain relative to Europe E conomic nationalism—tariffs and protectionism (Smoot-Hawley Tariff, 1930)

4. The Hinge Reparations cause fluctuations in currency values Gold standard returns after war (British pound overvalued) Currency values affect trade and cause drain of gold on treasuries French v. British financial policies Depression causes currencies to abandon gold standard

5. Role of United States Unwillingness to act as financial leader 1924—Dawes Plan (U.S. begins to supply 2/3 of German capital) 1929—Young Plan Tariff and trade policies Easy money policy and stock market bubble (purchasing on margin) Stock market crash of 1929 (shuts off capital flow)

6. Elements of Great Depression Massive unemployment and the downward spiral (33-40% in U.S./Germany) Investment dries up Bank and financial failures (Credit-Anstalt, 1931) Protectionism and tariffs—world trade plummets

7. Muddled Responses Classical economics—deflationary policies and budget cuts (cf. J.M. Keynes, 1936) Reparations finally canceled in 1931 British pound collapses in 1931—off gold standard (U.S. in 1934) Weak response of the democracies Rise of extremist movements, especially in Central and Eastern Europe