The American economy collapsed between 1929 and 1932. U.S. gross domestic product fell almost by half, from $103.1 billion to $58 billion. Consumption dropped by 18 percent, construction by 78 percent, and private investment by 88 percent. Nearly 9,000 banks closed their doors, and 100,000 businesses failed. Corporate profits fell from $10 billion to $1 billion. Unemployment rose to 25 percent. Fifteen million people were out of work by 1933, and many who had jobs took wage cuts. “Hoover made a souphound outa me!” sang jobless harvest hands in the Southwest.

The depression respected no national boundaries. Germany had preceded the United States into economic contraction in 1928, and its economy, burdened by heavy World War I reparations payments, was brought to its knees by 1929. France, Britain, Argentina, Brazil, Poland, and Canada were hard hit as well (America Compared). The legacies of World War I made recovery difficult in two respects. First, Britain’s central bank was in no position to resume its traditional role in managing the international financial system. Second, the war disrupted the international gold standard. The United States and most European nations had tied the value of their currencies to the price of gold, and the amount of gold held in reserves, since the late nineteenth century. This system had worked fairly well for a few decades, but it was vulnerable during economic downturns, when large financiers withdrew their investments and demanded gold payments. The gold standard rendered the international monetary system inflexible at a moment that required great flexibility in global finance.