15: The Dawes Plan
Chapter 15
The Dawes Plan
The Reforms Needed. It was clear enough to informed students of economics and international finance what Europe and the United States needed to do to get things straightened out, long before the Ruhr crisis came. The elements in the problem were the following:
Part III: The First Phase of the New Deal, 1924-1932
16: Depression and Rally of 1924—The Beginning of the New Deal
Chapter 16
Depression and Rally of 1924—The Beginning of the New Deal
There came a very sharp reaction in business in early 1924. The Federal Reserve Index of Industrial Production (1923-1925 base), which had stood above 100 in the early part of the year, dropped rapidly to 85 by the middle of the summer. Security prices dipped only moderately, and there was no real loss of financial confidence because high hopes were entertained of the outcome of the work of the Dawes Committee.
17: Money, Bank Credit, and Capital
Chapter 17
Money, Bank Credit, and Capital
Capital is created when men produce machinery instead of hats and shoes and ice cream, when men build bridges and railroads instead of making phonograph records. Capital consists of producers’ goods, of instruments to be used in further production, instead of commodities destined for immediate consumption. The growth of capital is a factor of first importance in the progress of civilization. Capital increases when the community produces more than it consumes.
18: The Extent of Bank Expansion, 1922-1928
Chapter 18
The Extent of Bank Expansion, 1922-1928
Between June 30, 1922, and April 11, 1928, the deposits of the commercial banks of the United States increased by approximately $13,500,000,000, while the loans and investments of the same banks increased by $14,500,000,000.
19: The Causes of and the Responsibility for the Excess Reserves
Chapter 19
The Causes of and the Responsibility for the Excess Reserves
Factors Feeding and Depleting Member Bank Reserves. It is possible to measure with a great deal of precision the factors involved in the increase or decrease of member bank reserves.
20: Germany, 1924-1928
Chapter 20
Germany, 1924-1928
Dramatic Upswing, 1924-1925. Following the inauguration of the Dawes Plan in 1924, there came a radical improvement in the whole German picture. The confidence of the Dawes Committee that private enterprise would work things out if only the budget could be balanced, the currency could be stabilized, and a political future assured under which the Germans could see that their reparations burdens were bearable, proved abundantly justified.
21: France, 1925-1926
Chapter 21
France, 1925-1926
Crisis in Government Credit and Currency. Germany was rallying strongly in the spring of 1926. France was plunging lower and lower in a great crisis in currency and national credit. In a previous chapter we have seen the story of French postwar deficits. Government deficits had run approximately 47 billion francs in 1919, 42 billion francs in 1920, 28 billion francs in 1921, 19 billion francs in 1922, 17 billion francs in 1923, and 14 billion francs in 1924. It was harder and harder to borrow money to fill in these gaps.
22: Great Britain, 1925-1927
Chapter 22
Great Britain, 1925-1927
Britain’s Unemployment Remains High. The United States had enjoyed, as we have seen, a full industrial recovery between 1921 and 1923. Britain followed, but did not reach full recovery. There remained a heavy body of unemployment. There remained a heavy payment of doles to the unemployed as a burden on the British taxpayer. Britain demonstrated what the present writer believes to be a universal economic law, namely, that any country can have heavy unemployment if it is willing and able to pay for it.
23: The De Facto Stabilization of the Franc, and the Gold Exchange Standard
Chapter 23
The De Facto Stabilization of the Franc, and the Gold Exchange Standard
We interrupted the story of French finance at the end of 1926 to give an account of significant developments in Great Britain in 1925 and 1926. We now return to the de facto stabilization of the French franc in December of 1926, when the French Government and the Bank of France concluded that the franc had risen as far as they dared allow it to rise, and intervened to prevent a further rise.
