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On November 19, when the US stock market storm was intensifying, Zhao Zhenzhong and Zhou Tian sorted out and analyzed some of the gains over the past period.

Among these gains, there are both ideological and knowledge, as well as material and industrial technology. Of course, what Zhao Zhenzhong and Zhou Tian value more is the understanding and analysis of the economic crisis of the United States by overseas students. After all, materials and technology can be purchased with money, but the improvement of ideological and knowledge cannot be solved by money alone.

"Haha, the member of the 'Fund Management Committee' you led has their own opinions on this economic crisis." Zhao Zhenzhong put down the analysis of the economic crisis in his hand and said to Zhou Tian with a smile: "I think some of these views are relatively reliable."

"I have read all their analysis, mainly two views: one is that the stock market is just a barometer of economic conditions, and this stock market crisis is just a concentrated reflection of the actual economic situation; the other is that this economic crisis is caused by excessive speculation in the stock market and unfavorable supervision." Zhou Tian looked at the thick crisis analysis and summarized, "The former view can be said to be an academic view, which basically analyzes the positioning of the stock market and the economy as learned in the school, and does not see the deep causes of this crisis; although the latter view sees the huge destructive effect of the stock market on the economy, it is a bit of a refutation of the free economic policy, it has not gone deep."

"I think the latter understanding still has some advantages. At least they can jump out of the book, analyze and draw their own understanding through their own observations, which is also a progress." Zhao Zhenzhong said after a brief comment: "I think you can explain your analysis to them so that they can jump out of the norm, improve and unify their understanding in this regard."

"I'm starting to prepare for this." Zhou Tian nodded, "but the consequences of this crisis are only initially emerging in the United States. The effect of the US government's response to policies and the final destruction of the capital world by this crisis have not been fully demonstrated. It is not the time to systematically discuss with them. Of course, some things can still be explained to them, for example, the monetary reasons that led to the outbreak of this crisis were planted in the first half of 25 years."

"That's so early?" Zhao Zhenzhong was a little surprised.

"To be honest, we have benefited from it." Zhou Tian said with a smile. "In 24 years, in order to facilitate the convenience of our funds, we converted all the funds in our hands into pounds. As a result, in the first half of 25 years, Britain established a gold standard and determined that one pound would be exchanged for 4.86 US dollars. We took a lot of advantage. The source of this crisis can be said to be the UK's re-adoption of the gold standard, and subsequently, Britain, the United States and other countries took a series of monetary measures to maintain the status of the pound."

In 1925, Churchill, then the British Chancellor of the Exchequer, ordered the restoration of the gold standard, and on April 28, 1925, the exchange rate of 1 pound to 4.86 US dollars was imposed. This decision was seriously overestimated by scholars in later generations. Churchill, who was not proficient in the economy, took a very wrong decision in order to reproduce the glory of the British Empire and to allow the British to use the pound in their hands to obtain the various commodities and materials needed from the United States, known as the "factory of the world" at a low price. Judging from the effects of the later generations, this decision should indeed be criticized by people, but at that time, it was also a helpless choice for the British authorities.

During World War I, the US government once hinted that European allies did not need to consider repayment issues and just borrow money with mercy, but after the war, the US violated this promise.

After the war, the United States asked its allies, especially Britain, to repay the aid borrowed from the U.S. government to purchase US arms and various strategic materials during the war. According to statistics, the British government borrowed a total of 850 million pounds from the U.S. government during World War I. Even at a preferential interest rate of 3.3%, by 1933, Britain had to pay the United States about 35 million pounds every year, and the annual payment amount increased to nearly 40 million pounds, and the debt relationship would not be fully terminated until 1984! This huge expenditure is equivalent to 2/3 of the military expenditure of the entire British Navy, or the entire expenditure of Britain in the field of education, or the total amount of Britain's pre-war debt.

At the beginning of the post-war period, the British were not worried. Although Britain owed a lot of money to the Americans, the European countries owed Britain money, and the two-fold deductions, Britain's net debt was actually zero. In order to obtain support from the European countries, the British claimed that as long as the United States abolished Britain's war debt, the United Kingdom would write off the debts owed to Britain by other countries.

But the British's initiative was not only rejected by the Americans without hesitation, but also used debts to suppress the UK. The Americans increased the interest rate of British loans, making the UK's interest burden twice that of France and 8 times that of Italy!

The British naturally would not be willing to submit. They not only wanted to prevent the further growth of the United States and the loss of the hegemony of the British pound, but also helped Germany to balance France while preventing Germany from becoming a world power. However, the French did not accept the suggestion that the British would reduce German compensation under the premise of the United States' abolishing of debts.

For France, although Germany lost its colonial and foreign property, it was forced to ced 1/7 of its territory and 1/10 of its population, 1/3 of its coal mines and 3/4 of its iron mines. However, compared with France, Germany can be said to be intact, and its main areas were not damaged by war. However, France was the main battlefield of the "World War". France's commodities and property worth 134 billion francs were gone in the war. One out of every 10 Frenchmen died on the battlefield, and three out of every 10 young people aged 18 to 28 died. Among the 4.266 million wounded people, 1.5 million were disabled for life. It can be said that Germany still maintained its advantage over France after World War I. France could not agree with the suggestion of a significant reduction in Britain and the United States, or even canceling German compensation, but was eager to split Germany into countless small states through debt shackles and unable to maintain unity.

In order to fight against American debt collection, Britain and France jointly claimed that the United States must agree to claim huge compensation from Germany so that they can repay the United States' debt in full. However, the United States refused to recognize any successive relationship between the debts of allies and the German compensation. As a result, Britain had to collect debts from France and Germany to repay the debts. France had to squeeze Germany, and even sent troops to occupy the industrial zone west of Germany's Rhine in 1921 to plunder Germany's physical products as war compensation. However, France's behavior was jointly condemned by Britain and the United States. For its own interests, Britain and the United States successively issued statements to support Germany, expressing their inability to tolerate France's aggression.

The debt burden imposed by the United States on Britain, France and other countries is actually to weaken the strength of European countries, especially the still powerful British Empire at that time, thus paving the way for seizing world economic hegemony and replacing the pound as a world currency.

In the "Dowes Plan" led by the United States in 1924, the United States instead protected Germany's interests. In fact, a few years ago, the United States had already expressed its attitude when it refused to sign the "Versailles Treaty" that severely exploited Germany. By 1921, when the United States and Germany unilaterally signed the Treaty of Berlin to restore bilateral relations, it was even more obvious. The United States asked European powers to reduce Germany's war reparations, but it did not reduce the debts of war allies. In the end, the "Dowes Plan" led by the United States not only greatly reduced Germany's war reparations, but also locked its reparations and would not pay more in-kind due to the world's credit tightening and the decline in prices.

In this way, through the Dawys plan, the United States not only sold a huge favor to Germany, but also further weakened the strength of Britain and France.

After the implementation of the Dawys Plan, private capital in the United States continued to flow into Germany. From 1924 to 1929, Germany received a total of 32.6 billion marks of foreign loans and investments, of which US capital accounted for 70%. From 1924 to 1931, Germany paid a total of about 2.7 billion US dollars in war reparations, while Germany received about 5 billion US dollars in loans during the same period, of which the United States provided Germany with 2.25 billion US dollars. At the same time, the United States recovered US$2 billion in war debts. In this way, a US dollar circulation system was formed between the United States and European powers: US dollar

From the United States to Germany, the German National Bank used these dollars to repay war reparations to European victorious countries such as Britain and France, and France used them to repay wartime loans owed to Britain. Britain and other European victorious countries paid the US government this money to pay off their war debts, and eventually flowed back to the United States. Through the circulation of this system, a larger and larger capital circulation network dependent on the US government was eventually formed. The formation and development of this system also created a communication channel for the economic crisis that originated in the United States in 1929 to sweep the capital world.

Faced with the war I, especially after the implementation of the Dawys plan, the United States was aggressive. In order to defend the financial dominance that was on the verge of collapse and maintain the hegemony of the pound world currency, the British once again introduced the gold standard.

Before World War I, 1 pound could be exchanged for US$4.86. After the war, the pound exchange rate fell, and 1 pound could only be exchanged for US$3.4. In order to strengthen the status of the pound, the Bank of England even took measures to allow gold to flow into the United States, hoping that the US credit would expand and inflation would occur, which would cause the pound exchange rate to rise. However, as early as 1914, when the "World I" began, a large amount of gold flowed into the United States, causing the gold reserves issued by US paper money to rise sharply and credit would expand accordingly. Faced with the British's approach, the Federal Reserve, when the gold reserves increased by 19%, instead sold treasury bonds and commercial paper through open market operations, reducing the US currency supply by 8%. The British's hopes became a bubble.

In order to stabilize the pound, in the spring of 1925, at the instruction of then-British Chancellor Churchill, the President of the Bank of England, Montagu Cletta Norman, stepped forward and joined forces with the President of the German National Bank, Alma Schartcht, Bank of France, Emil Morrow, and others to lobby for the Federal Reserve Chairman Benjaron Strong, and finally made him agree to adopt a policy of relaxing monetary policy to support the stabilization of the value of the pound at the pre-war level.

On April 28, 1925, Chancellor of the Exchequer Churchill solemnly announced in Parliament that Britain would return to the gold standard by parity of 1 pound to 4.86 USD at the pre-war exchange rate. In order to support the UK's recovery of the gold standard, the Federal Reserve Bank of New York provided a loan of 200 million USD to the Bank of England, and the Morgan consortium provided a loan of 100 million USD to the British Treasury, with the purpose of helping the British government to deal with the possible speculative impact on the pound. According to purchasing power parity, the market equilibrium exchange rate of the pound against the USD was about 1 pound to 4.4 USD at that time, according to the pre-war exchange rate, which means that the pound exchange rate was overestimated by at least 10%. As economist Keynes pointed out, if the foreign exchange price of the pound is increased from 10% lower than the pre-war gold value to the pre-war gold value level, no matter what kind of goods the UK exports, foreign buyers' spending will increase by 10%, and the income collected by the UK will decrease by 10%.

Regarding the harm of Churchill's implementation of the gold standard, Keynes pointed out in "The Economic Consequences of Mr. Churchill's Policy": "The inflated gold standard pound that Churchill strives to maintain has caused credit tightening, and this phenomenon transfers wealth from all borrowers, namely, industry and businessmen and farmers to borrowers. The ultimate result is to oppress taxpayers and profiteers gain benefits... If the public predicts the possibility of deflation, it will lead to quite bad consequences; once a certain expectation of deflation is produced, there will be disastrous consequences."

As Keynes expected, the export competitiveness of British goods declined severely, and credit tightening further curbed domestic investment. As a result, the unemployment rate remained high and the economy fell into stagnation.

Faced with the economic difficulties of the UK, the Chancellor of the Finance Minister Churchill, who was not proficient in the economy, carried out a series of measures like a bull who broke into a vegetable garden: compressing military expenditures, imposing more than 10 temporary tax sources, misappropriating road construction funds, and delaying credit periods... As a result, Churchill won the title of "the most cheerful tax collector since the Robin Hood era" in the UK because of his poor national financial governance capabilities, and the British economy has made even worse due to this chaos.

At the same time, in order to prevent the expectation of depreciation of the pound from causing huge speculative pressure on the pound, the Bank of England and the Federal Reserve significantly increased the interest rate spread between the two major capital markets of London and New York to prevent capital from fleeing from the UK or to strive to promote capital flow into the UK, thereby supporting the high exchange rate of the pound. However, the UK's high exchange rate and high interest rate policies greatly damaged the international competitiveness of the British industry, resulting in a severe recession and deflation of the UK economy. The low interest rates of the New York capital market and the money market have greatly expanded credit, stimulating people to borrow money to invest or speculate, which directly gave birth to the shocking bubble of the Wall Street stock market and planted the seeds of the final collapse of the Wall Street stock market and the Great Depression.
Chapter completed!