U.S. Gold Certificate (1882-1933)
Gold “parity” in 1913:
₤1.00 = $4.86 = RM 23.07
(8.26 grams) (1.70 grams) (0.358 grams)
The gold standard was imposed on Germany with the Dawes
Plan in 1924 and readopted by France & Great Britain in 1926.

1926-29: The “Price Scissors” (prolonged decline of world commodities prices vs. those for manufactured goods)
October 25-29, 1929: Wall Street Crash
March 1930: Fall of the Great Coalition in Germany; resort to government by presidential emergency decree
April-June 1930: Outbreak of tariff wars (new food tariffs in
Germany provoke the U.S. Smoot-Hawley Tariff)
May-July 1931: Bank Crisis in Austria & Germany stimulates the Hoover Moratorium
September 1931: Great Britain abandons the gold standard, prompting competitive devaluations
1932: Unemployment rate nears 40% in Germany and USA

Wall Street on “Black Tuesday,” October 29, 1929

“Black Tuesday” was the third trading session of the last four in which the market lost more than 10% of its value

Hunger Marchers have arrived in Chester on their way to
Washington DC, December 2, 1932

In Germany the Great Coalition formed in June 1928 united
Social Democrats and liberals, but they could not agree on measures to finance unemployment insurance in March 1930

Stresemann explains the Young Plan in a turbulent
Reichstag session, 1929; unfortunately, its final version was not much different from the Dawes Plan.
Germany would continue to owe around 2 billion marks per year in war reparations for 50 years….

DNVP chairman Alfred Hugenberg and the leaders of the
allied with the NSDAP to combat the Young Plan
“Unto the third generation must you slave away!”
(“Freedom Law” referendum campaign poster, 1929)

GERMANY’S UNEMPLOYED
(IN MILLIONS OF WORKERS)

In the election campaign of July 1932, many felt that Germany was on the brink of civil war.
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
1919 1928 1930 Jul-32 Nov-
32
Communist
Social Democrat
Moderate (Libs + RC)
Con./Nationalist
Nazi

Chancellor Heinrich
Br üning
(1885-1970):
The Center Party’s expert on fiscal policy; a decorated combat veteran with a Ph.D. in economics.
He lived an austere life and preached austerity.

That Germany’s budget must be balanced, because any deficit would cause a run on the mark-- (TRUE, because memories of hyper-inflation made investors panicky and ruined German government’s credit)
That deflation, i.e., systematic lowering of German wages
& prices, would revive German export industries and employment– (but deflation also slows the velocity of the circulation of money)
That the government could distribute sacrifices fairly among all social classes– (FALSE, because Hindenburg insisted that landowners receive debt relief and food tariff hikes, and the military was spared any budget cuts)
That reparations must be abolished before the German economy could recover (?).

Ramsay MacDonald (1866-1937)
 Raised a Scottish
Presbyterian, became a
Christian pacifist
 Resigned as Labour Party chair in August 1914
 First Labour prime minister,
1924 and 1929-31
 Formed a National
Government with the
Conservatives in September
1931
 Sponsored Round Table
Conference with Gandhi and
Statute of Westminster in
1932

Statement issued by Brüning as he left to meet with
MacDonald at Chequers in June 1931
“The limit of the privations which we can impose on our people has been reached. The premises on which the
Young Plan was based have proved to be erroneous as a result of the development undergone by the world.
The Young Plan has failed to give the German people the relief which according to the intentions of all concerned it was meant to give and of which it at first held out promise. The Government realizes that the extremely precarious economic and financial situation of the Reich imperiously requires Germany’s relief from unbearable reparations obligations. This is also a prerequisite for the economic recuperation of the world.”

President Herbert Hoover (1874-1964)
A wealthy mining engineer, he organized food relief for wartime
Belgium and for millions of Central Europeans after 1918.
In June 1931 he offered a one-year moratorium on the collection of war debts, if France & Great
Britain suspended collection of reparations.

Henry L. Stimson (on right),
Hoover’s Secretary of State, with predecessor Frank Kellogg
Brüning & Foreign Minister
Curtius bid Stimson farewell, Berlin, July 1931

Brüning secured Mussolini’s support for the abolition of reparations during a visit to Rome in August 1931

“Resignation &
Discussion,” photo by Walter
Ballhause from the series
“Unemployment”
(1930)

Brüning united a broad front from the SPD to moderate conservatives to secure Hindenburg’s reelection against Hitler in April 1932

Hindenburg was deeply wounded when most of his monarchist friends endorsed Hitler for President.
In April 1932 Brüning banned the SA and sought to partition bankrupt agricultural estates for homesteaders.
Hindenburg appointed the right-wing Catholic monarchist Franz von Papen to replace Brüning at the end of May, hoping that his government would be tolerated by the Center Party and NSDAP.
Brüning’s many friends in Washington, London, and
Rome interpreted these events as a military coup and anticipated a dangerous revival of German militarism.

Chancellor Franz von
Papen and his defense minister,
General Kurt von
Schleicher, openly sought German rearmament, not
French disarmament.

World Disarmament Conference, Geneva, February
1932-January 1934: appears to make progress in
April/May 1932 but then deadlocks; Hitler withdraws
German delegation in October 1933.
Lausanne Reparations Conference, June 1932: abolishes reparations permanently, but USA refuses to prolong the Hoover Moratorium on war debts; France &
Great Britain soon default on their debts to the USA.
World Economic Conference, London, June-July
1933: collapses after FDR prohibits U.S. delegation from signing any agreement on tariffs or exchange rates.

King George V welcomes delegates to the World Economic
Conference, London, 12 June 1933. Alfred Hugenberg’s demand for the return of Germany’s African colonies led to his dismissal from the Hitler cabinet on June 27.

“The Accused”
(French cartoon, early 1934)
When Hitler walked out of the Geneva
Disarmament Conference in October 1933,
American and British leaders blamed France.