Main Causes of the Great Depression in the U.S.

oOverproduction of business and farm goods in the United States.

oUneven distribution of wealth in the United States.oLessened demand for consumer goods.oProtectionism – Series of tariffs passed by the U.S.

Congress between 1913 and 1930 to protect American business against European competition; Smoot-Hawley Tariff of 1930 led to 66% decline in global trade between 1930 and 1934.

oBank failures resulting from farmers’ inability to pay back loans

Life in The Roaring 20’s

• The new concept of “credit”

• People were buying:– Automobiles– Appliances– Clothes

• Fun times reigned– Dancing– Flappers– Drinking

Why was this bad?

Credit systemPeople didn’t really

have the money they were spending. Most were spending

beyond their economic means.

How World War I Contributed to Great Depression

• United States emerged as a major creditor and financier of post-War restoration.

• US banks were more than willing to loan money.

• However, once US banks began failing ... the banks not only stopped making loans, they wanted their money back. This put pressure on European economies, which had not fully recovered from WWI, contributing to the global economic downturn.

Effects of losing WWI on Germany

SocialFood Rationed

EconomicMust pay billionsIn Reparations

PoliticalLost Overseas

Colonies

German Inflation after WWIWar reparations were required by the Treaty of Versailles, specifically Article 232, to be repaid in hard currency and not the rapidly depreciating Papiermark, so one strategy Germany employed was the mass printing of bank notes to buy foreign currency which was in turn used to pay reparations, greatly exacerbating inflation rates (value decreased) of the paper mark and resulting in economic depression.

PRINTING MASSIVE AMOUNTS OF PAPER MONEY CAUSING INFLATION

• Look at page 802 Inflation causes Crisis in Germany

The Great Depression greatly effected inflation in Germany

• Germany did not increase their wartime taxes

• To pay for the war Germany simply printed $$$

• After Germany’s defeat, the paper money steadily lost its value

• Sever inflation set in. Germany needed more & more $$$ to pay for basic goods

In Berlin the price of a loaf of bread cost …

• 1918 less than 1 mark

• 1922 160 marks

In Berlin in 1923 the price for a loaf of bread cost 200 Billion marks

Sweeping money into the sewagefilling the holes in the wall

GREAT DEPRESSION IN GERMANY

• http://www.youtube.com/watch?v=mTuIzGe2Nz8

The Stock Market and the Great Depression

• People bought stocks on margins– If a stock is $100

you can pay $10 now and the rest later when the stock rose

• Stocks fall– Now the person has

less than $100 and no money to pay back

And then….

Stock Market Crash of 1929 - $30 billion loss in FOUR days

• With people panicking about their money… investors tried to sell their stocks– This leads to a huge

decline in stocks– Stocks were worthless

now• People who bought on

“margins” now could not pay.

• Investors were average people that were now broke.

• Farmers were already feeling the effects of depression– Prices of crops went down– Many farms foreclosed

• People could not afford luxuries– Factories shut down– Businesses went out

• Banks could not pay out money

– Bank failures resulting from farmers’ inability to pay back loans

– Overproduction of business and farm goods in the United States

• People could not pay their taxes– Schools shut down due to lack of funds

• Many families became homeless and had to live in shanties

Many waited in unemployment lines hoping for a job.

People in cities would wait in line for bread to bring to their family.

Some families were forced to relocate because they had no

money.

“Hooverville”• Some families were

forced to live in shanty towns– A grouping of

shacks and tents in vacant lots

• They were referred to as “Hooverville” because of President Hoover’s lack of help during the depression.

Welcome to Hooverville

http://www.youtube.com/watch?v=sfylLnHjcu0

• https://www.youtube.com/watch?v=x2CiDaUYr90

A drought in the South lead to dust storms that destroyed

crops.

“The Dust Bowl”

The South Was Buried

• Crops turned to dust = No food to be sent out

• Homes buried

• Fields blown away

• South in state of emergency

• Dust Bowl the #1 weather crisis of the 20th century

International Response of Government’s to the Great Depression

• United States– Franklin Roosevelt’s New

Deal: Government spending would create jobs and start a recovery

• Public works projects• Government agencies

that gave financial help to businesses and farms

• Welfare and relief programs including Social Security

• Regulations to reform the stock market and banking

MASSIVE SPENDING PROGRAM

International Response of Government’s to the Great DepressionGreat Britain

•The National Government: multi-party coalition led by Ramsay MacDonald, Stanley Baldwin, and Neville Chamberlain

•High protective tariffs•Increased taxes•Regulation of currency•Lowered interest rates

France•The Popular Front (1936): Coalition of moderates, Socialists, and Communists

•Workers reforms including pay increases, 40 hour work week, paid holidays•Unemployment remains high as price increases offset wage increases

Scandinavian countries•Cooperative community action including public works projects•Pensions for the elderly•Increased unemployment insurance and housing subsidies•All citizens taxed to pay for benefits•All of these models resulted in keeping democratic governments intact