Hoover Moratorium facts for kids

The Hoover Moratorium was a special plan made by United States President Herbert Hoover in 1931. He wanted to help the world economy, which was facing a big crisis. The plan was to pause, or stop for a short time, all payments of war debts for one year. These debts were owed by Germany and other countries after World War I. This idea meant that countries would not have to pay back the money they borrowed, or the extra interest, for a whole year.

What Was the Hoover Moratorium?

President Herbert Hoover announced the Hoover Moratorium on June 20, 1931. He hoped this break from debt payments would give countries time to recover from their money problems. The main goal was to prevent a bigger worldwide economic disaster.

Why Was the Moratorium Needed?

After World War I, many European countries owed a lot of money. Germany had to pay "reparations" (payments for damages) to the Allied countries. These Allied countries then owed money to the United States for loans they took during the war. This system of debt was very heavy, especially as the world faced the Great Depression. President Hoover believed that pausing these payments would give everyone a chance to breathe and fix their economies.

How Countries Reacted

When President Hoover first announced his plan, not everyone liked it. France, for example, was not happy at first. Many people in the United States also didn't like the idea of pausing debt payments.

Gaining Support

President Hoover worked hard to get other countries to agree. He made many phone calls to leaders around the world. By July 6, 1931, 15 different nations had agreed to the moratorium. The United States Congress officially approved the plan in December of that year.

The Impact of the Moratorium

Even with the Hoover Moratorium, the economic problems in Europe continued to be very serious. The pause in payments didn't stop the downturn as much as hoped.

Economic Challenges Continued

Germany faced a major banking crisis. Great Britain decided to stop using the gold standard, which was a system where a country's money was directly linked to gold. The United States would also stop using the gold standard later, in 1933, as part of President Franklin Roosevelt's New Deal plan. France also planned to talk about the debt issue again once the one-year pause was over.

After the Moratorium Ended

When the one-year moratorium ended, only a few countries continued to make their debt payments to the United States. Out of all the countries, only Finland was able and willing to pay back all its loans.

A group called the Young Plan committee had already looked at Germany's war debt. They decided that Germany would not be able to pay what it owed. They suggested that Germany's debt should be completely cancelled.

At a meeting in 1932 called the Lausanne Conference of 1932, the United Kingdom and France agreed to let Germany off the hook for its reparation payments. However, this was only if they could reach a deal with the United States about their own war debts. The United States Congress voted against cancelling the debts owed by France and the United Kingdom. But because Germany stopped paying them, France and the United Kingdom also stopped paying their debts to the U.S. The world's economic situation made it very hard for them to pay anyway.