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Great Depression

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					Great Depression –
             Part I
             Mr. Baker
    Causes of the Great Depression –
    Poor Presidents and
    Government Policies
       Warren G. Harding (1921-1923), Calvin Coolidge
        (1923-1929), Herbert Hoover (1929-1933)
         Not paternal
         For self-help
         Favored laissez-faire
         Appointed people sympathetic to big businesses
         Anti-trust laws were ignored
         Didn’t support labor
         Raised tariffs
         Trickle-down policy – helped banks rather than the people
    Causes of the Great Depression –
    WWI Debt
    Key problem was the $10 billion that the U.S.
     government had loaned to the Allies during and after
     the war
    The U.S. wanted to be paid back
    Britain & France protested that the demand for
     repayment was unfair:
        The French and British had taken most of the deaths in
         WWI
        The debtors complained that their dollars had fueled the
         wartime boom in America, so they should be happy
    Causes of the Great Depression –
    High Tariffs
   European countries were bankrupt after WWI and
    needed to sell their products to the U.S. to recover
   America raised tariffs, which didn’t give foreign nations a
    chance to make a profit so they could repay debts they
    owed to the U.S.
   It turned into a cycle, where the U.S. would raise their
    tariffs and Europe would do the same
   Created a decline in exports
   Plunged both America and other nations deeper into the
    depression
Causes of the Great Depression –
Globalization
   As the price of natural resources fell, the
    poorest parts of the world earned less and
    less, giving them less to spend on goods
   India and Japan were beginning to
    industrialize, and their low labor costs drove
    countries out of many traditional markets
    Causes of the Great Depression –
    Reparations
    Because the Americans were demanding
     repayment, the French and British demanded
     that the Germans make reparations payments
     equaling $32 billion
    The French, hoping to increase lagging
     reparation payments, sent troops into Germany’s
     industrialized Ruhr Valley in 1923
    As a result, Germany printed lots of money,
     causing hyperinflation
    Causes of the Great Depression –
    Reparations
   Dawes Plan of 1924
       Temporarily helped Germany pay loans until the stock
        market crashed
       It created a cycle:
           U.S. banks loaned money to Germany
           Germany paid reparations to France and Britain
           France and Britain paid war debts to the U.S.
       The plan would play a part in the development of the
        Great Depression, because when America had financial
        problems, it caused financial problems with the entire
        world due to this cycle
    Causes of the Great Depression –
    WWI Debt
   Results of the Dawes Plan
       It helped restore some faith in the
        Weimar Republic (until 1929)
       The U.S. never was fully repaid its money
       The U.S. caused European countries to
        be resentful of them
       The whole episode contributed to the
        U.S. wanting to remain neutral during the
        1930s
    Causes of the Great Depression –
    Overproduction
   Too many products, too
    little demand -
    Industries were
    producing goods much
    faster than people
    could buy them
   The automobile and
    related industries
    began to slump as
    early as 1925 because
    of overproduction
    Causes of the Great Depression –
    Weak Farm Economy
       Prosperity During Wartime
           Much of the food was shipped to the Allied soldiers
            from the U.S. and other nations
           Europe couldn’t support themselves with food during
            the war because:
             Men were fighting in the war
             The war was being fought where they’d grow crops
           Government guaranteed prices
           Now that the war was over, foreign production
            reentered world commerce
    Causes of the Great Depression –
    Weak Farm Economy
   Machines Threaten Farmers
       The gasoline-engine tractor helped cultivate many crops
        than they could with a horse-drawn plow. Farmers
        owned 10 times as much equipment in 1930 as they did
        in 1920
       The wartime boom had encouraged farmers to bring
        vast new tracts under cultivation, especially in the
        “wheat belt” of the upper Midwest
       Improved efficiency and expanded agricultural acreage
        helped to pile up more surpluses
       In the 1920s, 1 in 4 farms was sold for debt or taxes
    Causes of the Great Depression –
    Speculation
   “Get rich quick” attitude- The
    rising stock prices encouraged
    speculation, the practice of
    making high-risk investments in
    hopes of getting a high return
   Before WWI, only the wealthy
    played the stock market. Now,
    more and more ordinary people
    were risking their money on the
    stock market
    Causes of the Great Depression –
    Buying on Credit and Margin
   Buying on credit - People began to
    buy items whether they could
    afford them or not, resulting in an
    increase in personal debt
   Buying on margin- Allowed
    investors to purchase a stock for
    part of its price and borrow the rest
    until they could pay it off.
    Investors hoped that the stock
    price went up so that they could
    both pay off the loan and still make
    money
    Causes of the Great Depression –
    The Last Straw
   The British raised interest rates so
    that people who spent money on
    American investments would save
    their money rather than invest in
    American businesses/stocks
   Businesses/stocks might start to
    decline and not make as much of a
    profit as before because the British
    are no longer investing in them, so
    people started selling as quickly as
    possible in order to not lose all
    their profits
    Causes of the Great Depression –
    Stock Market Crash (1929)
   Black Thursday - Investors began to sell, causing
    stock prices to fall. Investors who had bought a
    share at $400 were now selling at $283
   Black Tuesday - On October 29th, a record 16.4
    million shares were sold, compared to the usual
    average of 4-8 million that were bought and sold
    each day earlier in the year
   Great Crash - The collapse of the stock market.
    By Nov. 13th, the Dow Jones had gone from 381
    to 199. Loses totaled $30 billion
    Causes of the Great Depression –
    Stock Market Crash (1929)
   Some banks began to fail because they had
    invested people’s savings in the stock market
   As a result, people went on a bank run to
    withdraw their savings because they thought
    their bank would go bankrupt
   Between 1929-1932
       11,000 of the U.S.’s 25,000 banks had failed
       90,000 businesses went bankrupt
       The GDP went from $104 billion to $59 billion
       Unemployment went from 3% to 25%
    Reality of the Stock Market Crash
   The U.S. weathered the Crash
       Fewer than 5% of people in the United States owned
        stock so most were not affected
       By April 1930 share prices had actually regained a fifth
        of the losses of the previous autumn
   The really disastrous fall came in 1931–1932 and
    lasted until the mid-1930s
   Arguably the Crash was more a symptom than a
    cause of the Depression
Causes of the Great
Depression – Canada
   33% of Canada’s GDP came from exports, so
    this was hurt when countries began using
    more tariffs
   As a result, the price of wheat fell. Four
    western provinces were completely
    dependent on the export of wheat
   Because of their close links with the United
    States and their need to export, it caused
    economic upheaval
    Effects of the Great
    Depression – Canada
   Canada improved in national industry in order to
    replace the importation of industrialized products
    (industrialization)
   1 in 5 depended on gov’t relief
   30% were unemployed
   Net farm income went from $417 million to $109
    million
    Effects of the Great
    Depression – Canada
   The government turned to intervention and
    management in the economy (New Policy in
    Canada)
   Massive movement to cities, urbanization
   Mechanization of agriculture made it more
    profitable to find other work
    Causes of the Great
    Depression – Latin America
   Speculation in the U.S. in
    the 1920s led to less
    investment in Latin
    America
   Depended on trading
    cheap exports
   Their main trading partner
    was the U.S., so when the
    stock market fell it had a
    bad affect on them
    Effects of the Great
    Depression – Latin America
   Almost every Latin American country had a
    revolution in the early 1930s. Most doubted the
    current system and blamed the government for the
    economic chaos
   Thus, there was a heightened ideological conflict –
    many solutions were socialism, communism,
    fascism, native solutions
   Dictators arose in most Latin American countries.
    They tried to intervene to help the economy
   Import substitution – tried to produce the item in
    your own country

				
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