3 - From the 1930 Financial Crisis to World War II

Summary

The 1930 Crisis

There is no real consensus regarding when and where the financial crisis began. For some, it is the moment when the New York Stock Exchange crashed, that infamous Black Thursday in October 1929. Others point to the bankruptcy of Credit Anstaldt in Austria, which had immediate repercussions in Germany and the Central European countries, where there was an enormous loss of reserves. The Anstaldt bankruptcy would ultimately exert pressure on the British pound, which in turn would lead England to abandon the gold standard in October 1931. According to Sauvy, the crisis began in France, yet Kindleberger asserts that the origins of the crisis can be found in the agricultural depression of the mid-1920s. In the United States, the stock market crash was followed by a banking crisis in 1930 and bank closures, which froze deposits. These closures were repeated in 1931.

From the mid-1920s, there were serious imbalances in the international goods and capital markets. Protectionist measures not only led to the accumulation of primary product inventories, which created downward pressure on prices, but, in the case of the United States, with passage of the Smoot-Hawley Law, decreased imports from the rest of the world. In response to this, demand for U.S. exports would have logically dropped, but this situation was averted initially because imports from the United States were financed with loans, which in turn increased the world's indebtedness to the United States. This was particularly the case for Germany and Latin America.