Meanwhile in Europe

When the American economy collapsed in 1929, triggering the Great Depression, nobody could have predicted the gravity of the situation facing the country, and the world. In fact, as the first Google images result for "america great depression gdp" shows, the fall of the American economy was not broken until 1933. In many ways, the crash of 1929 was both the culmination of global economic weaknesses and the catalyst of collapse across the world. As we learned in class, the economies of the US, UK, France, and Weimar Germany were closely tied together by loans, reparations and debts; a cycle fueled primarily by private American investors. However, although Europe certainly did feel the collapse of American credit immediately following the events of 1929, it took a few more years for the Depression to fully settle in across the Atlantic.

In many ways, the terms of Versailles made the Depression an inevitability. Had the currency of Weimar Germany not inflated faster than a Patriots football (ok i'm sorry that was horrible i promise i'll never try to make another joke ever again), the Dawes and Young Plans might never have been necessary, and the world's economies might never have been so irreparably tied together. When American capital and investment dried up as quickly as it did due to the Depression itself and higher interest rates, the rest of the world followed. In Great Britain, where growth had already been slow in the decade after the war, the economy fell into the Depression shallower than the rest of the world as industrial production declined only 16% compared to America's 46%.(1) By contrast, France prospered as postwar reconstruction necessitated modernization and better, more efficient techniques of production. Of course, all this became irrelevant as France suffered from protectionist policies that killed demand for French goods.(2) As a result, the elected government was overthrown in 1934 and eventually replaced by a popular front.

The 1929 Crash alone cannot be held responsible for all of Europe's troubles. Europe's problems really began with the collapse of Credit-Anstalt, Austria's biggest bank, in 193`. Just as in America, regulations on banks were not only weak but in fact decreasing as regulators asked for even less accountability. A combination of hyperinflation, bad loans, bad mergers, and bad regulation created a bank that one modern-day economist called "too big to fail, but too big to save."(3) Eventually, a bank director called for a reevaluation of the bank's assets, revealing rising losses. When the Austrian government stepped in to guarantee the bank's assets, the credibility of the government as well as the bank was called into question and triggering a run on the bank. The panic in Vienna rapidly spread across the continent, leading to a run on the US dollar as European central banks began liquidating it for gold.(4) This caused the American dollar to depreciate, and created even more bank runs in the already devastated American economy. Hoover and Roosevelt did their best to break the fall of the American banks, but runs on the American dollar continued until the Depression reached its trough in April 1933.(5)

Sources:
(1) http://www.britannica.com/event/Great-Depression#toc234447
(2) http://www.dhr.history.vt.edu/modules/eu/mod04_depression/context.html
(3) http://www.bloomberg.com/bw/magazine/content/11_18/b4226012481756.htm#p1
(4) https://www.creditwritedowns.com/2009/03/1931.html
(5) http://www.forbes.com/sites/richardsalsman/2011/04/06/the-bank-runs-of-the-early-1930s-and-fdrs-ban-on-gold/