-this was the second question
-when FDR decided not to take part in helping the global depression, I was wondering why when the US withdrew from exchange-rate stabilization, how was this a bad thing for other countries?
why couldn't they continue what they were doing, why did they give up when the US dropped out?
When FDR decided not to take part in helping the global depression, it had significant consequences for other countries. One of the key actions that the US took was withdrawing from exchange-rate stabilization. To understand why this was a bad thing for other countries and why they couldn't continue what they were doing, we need to delve into the concept of exchange-rate stabilization and its importance for global economic stability.
Exchange-rate stabilization refers to the practice of countries working together to maintain a stable value for their currencies relative to each other. This helps to facilitate international trade, investment, and economic growth. The stability of exchange rates is crucial because it allows businesses to predict and plan for future transactions based on the established currency values.
However, when the US decided to drop out of exchange-rate stabilization, it created several problems for other countries. Here's why:
1. Dominance of the US economy: During the Great Depression, the US was the world's largest economy and held a dominant position in the international monetary system. Therefore, any actions taken by the US had far-reaching implications for other countries. When the US withdrew from exchange-rate stabilization, it caused a significant disruption in the system and undermined the efforts of other countries to maintain stable exchange rates.
2. Loss of a market anchor: The US, as a major trading partner for many countries, served as a crucial anchor in the international trading system. By withdrawing from exchange-rate stabilization, the US created uncertainty and volatility in currency values, making it difficult for other countries to determine the appropriate exchange rates for their currencies.
3. Speculation and currency devaluation: When the US dropped out of exchange-rate stabilization, it triggered a wave of currency speculation and devaluation. Other countries, fearing that their currencies would lose value, started devaluing their own currencies to maintain competitiveness in international trade. This led to a "beggar-thy-neighbor" policy, where countries competitively devalued their currencies, ultimately exacerbating the global economic downturn.
4. Impaired international cooperation: The US decision to withdraw from exchange-rate stabilization undermined international cooperation and coordination in addressing the global depression. It created a lack of trust and cooperation among nations, as other countries were uncertain about the commitment and consistency of US policies.
In summary, the US withdrawal from exchange-rate stabilization during the Great Depression had adverse effects on other countries. It caused disruption in the international monetary system, currency devaluation, uncertainty, and impaired international cooperation. Other countries couldn't continue what they were doing because the US played a pivotal role in the global economy, and its actions significantly influenced the stability and functioning of the international monetary system.