Wall Street Crash and Germany (1929)

Events in the USA played a significant role in the growth of support for the Nazis in Germany, starting with the Wall Street Crash of October 1929, when share price falls lead to significant losses amongst financial institutions, individuals and a decline in confidence.

The chain reaction from Crash spread far beyond the USA and lead to economic turmoil in Germany for the second time in around a decade. The stronger economy created by Stresemann was severely damaged.

Why did the Crash affect Germany so badly?

German banks had been large investors in US companies and suffered huge losses as the share prices of these companies fell. This in turn created a banking crisis in Germany as savers began to fear for their savings. Several banks went bust as savers attempted to recover their savings (a so-called “run on a bank”). To avoid also going out of business, German banks started to recall loans from businesses which in turn lead to many businesses failing, triggering a sharp rise in unemployment.

Rising unemployment lead to falling demand for goods and services - making the initial problem even worse. Overall, unemployment rose from 1.3 million in September 1929 to 6.1 million in January 1933.