Why did the US cooperate with Great Britain in its effort to keep the exchange rate for the pound at the pre-WWI level? Was that an economic event? A monetary event?
A monetary event. And Benjamin Strong's admiration for Montagu Norman and his theories had a lot to do with it. Norman was the governor of the Bank of England, and Strong was head of the New York Fed. Strong essentially set Fed policy.
US businesses loaned a lot of money to businesses in other countries for the purpose of financing exports - essentially selling their goods on time, and on spec. At the same time the US government erected substantial trade barriers to foreign countries selling their goods to the US. How could the loans be repaid?
It would have been difficult to repay the loans. But even if the loans had failed it shouldn't have done much. The Pre-Revolution Russian bond issue was huge and nothing much happened when it defaulted 10 years earlier.
The US was, during the 1920's, a net exporter, not importer. I can't put my finger on the data but my recollection is that 25% of US finished goods were exported.
If this were true the US would have had gold inflows equal to that 25% figure, because that's how gold exchange systems work. You'll have to find some numbers to back a trade number that high. I rather doubt it.
Russia further depressed world wheat prices by dumping wheat. The Depression began in agriculture in the mid-1920's. Hitler's party got 18% of the popular vote in 1930.
Farms products were in a decade long deflation that started with the end of WWI. Wheat prices in particular fell sharply a year before the market crash (Rothbard, America's Great Depression). The Soviet collectivization began in late 1929 and the Great Famine occurred in '32-'33. (Dolot, Execution by Hunger)
Hitler didn't become Chancellor until January 1933, well into the Depression. His 18% in 1930 didn't get him much.
I can't believe you don't consider communism to be an economic force. As a libertarian, I sort of lump socialism and communism into the same category. I don't like to lump trade unionism into it because I don't think the association is necessary, but in fact there was quite a bit of philosophical overlap
It's relevant to the people that have to live under it, but communist nations have little economic impact on the world trading system. The USSR and it's satellites contributed very little to the Gross World Product, if there is such a term, other than poverty for their own citizens. Someone called the USSR a Third World country with nuclear arms. If it weren't for the weapons, they would have been insignificant.
>>Followed by 10 years of prosperity that mysteriously ended.<<
I really don't think the answers are all that mysterious. You could find them in something like Bagehot's Lombard Street written 60 years earlier. It's a classic that should have been known to the bankers. The Fed governors should have known how to react to the crises and they didn't. Benjamin Strong died just before the market collapsed, and he had been the man who set Fed policy. The Fed governors simply failed to act to stem the collapse of the banking system. |
