Main Causes of the Great
Depression in the U.S.
o Overproduction of business and farm goods in the
United States.
o Uneven distribution of wealth in the United States.
o Lessened demand for consumer goods.
o Protectionism – 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.
o Bank 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 system
People 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
Political
Lost Overseas
Colonies
Social
Food Rationed
Economic
Must pay billions
In Reparations
German Inflation after WWI
War 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 sewage
filling the holes in the wall
GREAT DEPRESSION IN
GERMANY
• http://www.youtube.com/watch?v=mTuIzG
e2Nz8
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….
• With people panicking
about their money…
Stock Market investors tried to sell
Crash of 1929 - their stocks
$30 billion loss – This leads to a huge
decline in stocks
in FOUR days
– 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=x2CiD
aUYr90
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 MASSIVE SPENDING
PROGRAM
• 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
International Response of
Government’s to the Great
Depression
Great 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