The depression was transmitted from America to Europe in 1930. The stock market crash of October 1929 did not have an immediate effect on Europe. On the contrary, financial circles could heave a sigh of relief as they were no longer threatened by the rush of funds to New York. Discount rates which had been raised to counteract that flow could be lowered once more and this eased the strain on European financial markets. From 1925 to the beginning of 1929 the discount rate of the Bank of England had stood at about 4.5 per cent. By September 1929 it had been raised to 6.5 per cent. Immediately after the crash it was reduced to 6 per cent. It was then lowered bit by bit until it stood at 2.5 per cent in May 1931. In France a new generous programme of state expenditure was announced only a few weeks after the crash. But this was not done in wise anticipation of the impending crisis, but only because France had consolidated its currency and was in a very comfortable financial position. It could afford such a programme now, and nobody thought of a crisis.
Germany faced an impending bankruptcy at that time which was entirely unrelated to the events in America. The German government was under political pressure to cut taxes, but on the other hand it could no longer place long term government bonds and thus depended on short term credit. In this context the lowering of the discount rate after the crash was very welcome to the government. In subsequent years Germany faced a crisis of a special kind which will be analysed in the respective section of this chapter. At this stage these statements may suffice to show that the crash of 1929 did not mark the beginning of the depression in Europe. The mechanism of the transmission of the depression was much more complex. Europe was affected only after a