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1929 crisis, The London Conference (1933) after the US left the GS,…
1929 crisis
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Consequences
Peripheral countries
Exports drop and peripheral countries have to choose between saving the currency or saving the debt.
To save the currency, they should raise interest and reduce investiments and keep gold inside.
To save the debt, they should pay their debts and keep a good reputation for investors.
Most peripheral countries choose to save the debt, using their reserves and weakening their currencies, accidentaly protecting their industries.
Central countries
With no one wanting to increase imports, central countries have to choose between saving the currency and saving the industry
To save the currency, they must raise interest and attract capital, which is what most did.
To save the industry, they must keep interest low and increase liquidity.
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Germany and Austria decide to save the industry, but to avoid impacts on their exchange rate, they leave the GS.
To prevent investors from taking their gold elsewhere, the CB seizes their dollars and turns them into marks.
Britain enters the crisis with a weak pound and few gold and dollar reserves, with ruling Tories wanting to save the currency while Labour wants to save the industry.
The increased interest seems suspicious to investors, and austerity makes them sure of a Labour victory next election and an end of the GS. Thus, the Tories fail to solve the crisis, even after ending the GS in 31.
The world market
With the crisis, 3 monetary zones arise: gold, pound, and controlled.
Gold (US, France, Belgium, etc) tries to be a safe haven for investors, but with the pound and floating currencies at a low price, they can't attract investors.
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Pound (the British empire) has floating ER and plenty of versatility, plus low value currencies. They perform very well, showing how outdated the GS was.
Controlled (Weimar and Nazi Germany) only allows certain imports and exports, and is focused on creating a war economy.
The London Conference (1933) after the US left the GS, discusses a high dollar (Roosevelt disagress) and both US and Britain returning to the GS. It is a failure.
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