THE GLOBAL
IMPACT OF THE
GREAT DEPRESSION
1929-1939
Dietmar Rothermund
R
London and New York6
THE TRANSMISSION OF THE
CRISIS TO EUROPE
The depression was transmitted from America to Europe in
1930. The stock market crash of October 1929 did not have an
immediate effect on Europe, On the conteary, financial circles
could heave a sigh of relief as they were no longer threatened by
the rush of funds to New York, Discount rates which had been
raised to counteract that flow could be lowered once more and
this eased the strain on European financial markets. From 1925
to the beginning of 1929 the discount rate of the Bank of
England had stood ar about 4.5 per cent. By September 1929 it
had been raised to 6.5 per cent. Immediately after the crash it
was reduced to 6 per cent, It was then lowered bit by bit until it
stood at 2.5 per cent in May 1931. In France a new generous
programme of state expenditure was announced only a few
weeks after the crash. But this was not done in wise anticipation
of the impending crisis, but only because France had
consolidated its currency and was in a very comfortable
financial position. It could afford such a programme now, and
nobody thought of a crisis.
Germany faced an impending bankruptey at chat time which
was entirely unrelated to the events in America, The German
government was under political pressure to cut taxes, but on the
‘other hand it could no longer place long term government bonds
and thus depended on short term credit. In this context the
Jowering of the discount rate after the crash was very welcome to
the government. in subsequent years Germany faced a crisis of a
special kind which will be analysed in the respective section of this
chapter. Ac this stage these statements may suffice to show that the
crash of 1929 did not mark the beginning of the depression in
Europe. The mechanism of the transmission of the depression was
much more complex. Europe was affected only after a considerable
59