Great Depression Warning: You are not logged in. Your IP address will be publicly visible if you make any edits. If you log in or create an account, your edits will be attributed to your username, along with other benefits.Anti-spam check. Do not fill this in! ==== German banking crisis of 1931 and British crisis ==== The financial crisis escalated out of control in mid-1931, starting with the collapse of the [[Creditanstalt|Credit Anstalt]] in Vienna in May.<ref>[[Charles Loch Mowat]], ''Britain between the wars, 1918β1940'' (1955) pp. 379β385.</ref><ref name="William Ashworth 1962 pp. 237-244">William Ashworth, ''A short history of the international economy since 1850'' (2nd ed. 1962) pp. 237β244.</ref> This put heavy pressure on Germany, which was already in political turmoil. With the rise in violence of Nazi and communist movements, as well as investor nervousness at harsh government financial policies,<ref name="Isabel Schnabel 1931">Isabel Schnabel, "The German twin crisis of 1931". ''Journal of Economic History'' 64#3 (2004): 822β871.</ref> investors withdrew their short-term money from Germany as confidence spiraled downward. The Reichsbank lost 150 million marks in the first week of June, 540 million in the second, and 150 million in two days, 19β20 June. Collapse was at hand. U.S. President Herbert Hoover called for a [[Hoover Moratorium|moratorium on Payment of war reparations]]. This angered Paris, which depended on a steady flow of German payments, but it slowed the crisis down, and the moratorium was agreed to in July 1931. An International conference in London later in July produced no agreements but on August 19 a standstill agreement froze Germany's foreign liabilities for six months. Germany received emergency funding from private banks in New York as well as the Bank of International Settlements and the Bank of England. The funding only slowed the process. Industrial failures began in Germany, a major bank closed in July and a two-day holiday for all German banks was declared. Business failures were more frequent in July, and spread to [[Kingdom of Romania|Romania]] and Hungary. The crisis continued to get worse in Germany, bringing political upheaval that finally led to the [[Adolf Hitler's rise to power|coming to power of Hitler's Nazi regime]] in January 1933.<ref name="V. Hodson, 1938 pp. 64-76">H. V. Hodson (1938), ''Slump and Recovery, 1929β1937'' (London), pp. 64β76.</ref> The world financial crisis now began to overwhelm Britain; investors around the world started withdrawing their gold from London at the rate of Β£2.5 million per day.<ref name="David Williams 1963">{{cite journal |last1=Williams |first1=David |year=1963 |title=London and the 1931 financial crisis |journal=Economic History Review |volume=15 |issue=3 |pages=513β528 |doi=10.2307/2592922 |jstor=2592922}}</ref> Credits of Β£25 million each from the Bank of France and the Federal Reserve Bank of New York and an issue of Β£15 million fiduciary note slowed, but did not reverse, the British crisis. The financial crisis now caused a major political crisis in Britain in August 1931. With deficits mounting, the bankers demanded a balanced budget; the divided cabinet of Prime Minister Ramsay MacDonald's Labour government agreed; it proposed to raise taxes, cut spending, and most controversially, to cut unemployment benefits 20%. The attack on welfare was unacceptable to the Labour movement. MacDonald wanted to resign, but King George V insisted he remain and form an all-party coalition "[[National Government (United Kingdom)|National Government]]". The Conservative and Liberals parties signed on, along with a small cadre of Labour, but the vast majority of Labour leaders denounced MacDonald as a traitor for leading the new government. Britain went off the [[gold standard]], and suffered relatively less than other major countries in the Great Depression. In the 1931 British election, the Labour Party was virtually destroyed, leaving MacDonald as prime minister for a largely Conservative coalition.<ref>Mowat (1955), ''Britain between the wars, 1918β1940'', pp. 386β412.</ref><ref name="John Oxborrow 1976 pp. 67-73">Sean Glynn and John Oxborrow (1976), ''Interwar Britain : a social and economic history'', pp. 67β73.</ref> Summary: Please note that all contributions to Christianpedia may be edited, altered, or removed by other contributors. If you do not want your writing to be edited mercilessly, then do not submit it here. You are also promising us that you wrote this yourself, or copied it from a public domain or similar free resource (see Christianpedia:Copyrights for details). Do not submit copyrighted work without permission! Cancel Editing help (opens in new window) Discuss this page