How Did the Withdrawal of US Loans During the Phase of the Great Depression Affect the Rest of the World? Explain in Three Points.

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During the First World War, the US financed through loans a number of countries. The withdrawal of US loans affected the rest of the world in the following three ways:

1. It caused the failure of some major banks and collapse of currencies in Europe.

2. The banks in US slashed domestic lending and called back loans but many households were unable to repay the loan due to decline in sale of agricultural products.

3. Collapse of business and falling income which finally resulted into collapse of the US banking system.

To protect its economy, the US doubled the import duties which led to another severe blow to the world trade.

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