World Depression

World Great Depression

Macro Economics

June 2005

The depression that plagued the United States in the 1930's was distinctive in its enormity and its consequences. Europe and other countries suffered in the depression due to three main areas of discussion. The effects of trade contributed to depression throughout Europe and America. United States and other countries unemployment soared. With the ravages of world war one many countries where in debt in post war world one or became in debt due to reparations.

It has been said that the Great Depression began in 1929 after a cataclysmic collapse of the New York Stock Exchange. It began in the United States but quickly spread across the world causing an economic slump. "During the collapse of the world the German case is perfect example of what happen virtually everywhere in the 1930s. The international economy broke up into trading blocks determined by political allegiances and currencies." Britain's economy suffered with the loss of the over seas market and the country's choice to not to devalue the pound. When face with falling exports earnings governments began overreacting and began severely reducing trade. Nearly all countries needed to protect their domestic production and began imposing tariffs. By doing this it greatly reduced the amount of international trade and furthered them into debt. The high tariffs hindered the payments of war debts, which were only paid off by loans from the United States and Britain for war reparations. The destabilization of the European economy came through the international debt structure that appeared after World War one. (http://www.english.uiuc.edu/maps/depression/about.htm), (http://www.kwaves.com/kond_analysis.htm) (http://mars.acnet.wnec.edu/~gremel/Courses/wc2/lectur

Many countries that where allies with the United States during the war owed large amounts of money to American banks. The amount of money was so immense that it is one reason that the Allies insisted at Treaty of Versailles that repartitions be paid which they thought would be able to pay off their debts. After America fell into the depression they recalled their loans making many German banks to close their doors and the whole system to collapse. Not being able to pay off their reparations to the Allies due to Germany and Austria being in the debt themselves. Along with Germany the United States started to remove money from Europe, leading to the selling for European monies and collapse of European banks. (http://www.english.uiuc.edu/maps/depression/about.htm), (http://www.kwaves.com/kond_analysis.htm)

As the countries loss money and began to fall into debt the unemployment began to rise. In the United States between 1929 and 1933 unemployment climbed form three to twenty percent, also in other countries the unemployment rate was anywhere from fifteen to twenty five percent. To combat the unemployment many countries became interventionist.