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the Treaty of Versailles produced an unstable Europe

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a goal of it was the rebuilding of a global economy

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but many focused on establishing the economic world as it had existed before the war

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the idea was that restoring the Victorian boom was a condition for the political peace

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people looking for new coordinates began to be nostalgic for the old world

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it was the crash of 1929 that would heighten the tensions within Europe

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but the big question in 1919 was: how to rebuild

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while Wilson and Lenin were looking forwards towards utopias, the economists and business people were looking backwards

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Keynes argued that the Allies had made some fundamental mistakes

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that Germany pay far too much in indemnity payments

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that British economy could not sustain the &gold& standard

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and Keynes argued that we needed

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flexible foreign exchange rates

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capital controls that would control money across borders

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so that countries would not have to turn to nationalistic policies

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Keynes saw this as the folly of the ruling classes

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end the end, the crisis finally came, in 1929

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but there was a pause for recovery in the 1920s

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had less to do with the gold standard

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had more to do with massive American lending to Europe

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flow of capital to the United States

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the largest borrower was Germany, to pay the other European countries

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the United States was an immature lender

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one that enjoys both trade surpluses and is an exporter of capital

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gold flows in

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the only way to keep the rest of the world expanding was to recirculate money to other destinations

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it was a vulnerable system

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as China is now

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Britain before the war was a mature lender

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the rest of the world was borrowing too much money

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Germany had just recovered somewhat from the hyperinflation of 1923-1924

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German and Austrian banks began to fail

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they needed emergency loans from the United States

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then came the crash on Wall Street in 1929

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Vienna: The Credit Anstalt

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a virus of bank failures across Europe

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governments were too weak save them

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1931 almost everyone had defected from the gold standard

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1933 the United State joined getting off the gold standard

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the world economy had lost its core

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increasing protectionism

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Reed Smoot / Willis Hawley

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Smoot-Hawley Tariff

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over 1000 economists signed an petition to denounce this

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shrinkage in global trade

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1928 world only reached 112%

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in 1932 it was only 60% of 1929

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factories shut down since they couldn't export to other markets

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1932 there were 52 million workers were without a job

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a destruction of the global system that had built up over centuries