The gold standard is when money is fixed against an actual amount of gold. “In order for it to work, countries must maintain high interest rates to attract international investors who brought foreign assets with gold. “Causes of the Great Depression” (7). When interest rates do not stay high a country must abandon the gold standard to prevent deflation from worsening. During the great depression none of the countries abandoned the gold standard which increased the scale of the great …show more content…
Not only did they have to pay back their loans to the US, but they also had to pay for war reparations due to the Treaty of Versailles. Their economy took another blow when President Hoover signed the Smoot-Hawley tariff and ended world trade. Germany’s economy was built out of foreign capital and depended greatly on foreign trade. This meant that Germany could not control their economy. With their industrial economy evaporated, Germany’s production level fell resulting in an increase in unemployment. With the value of Germany’s dollar depleting, their banks across the country closed causing savings accounts to be wiped out. Inflation quickly followed which made it difficult for families to make expensive, necessary