A Worldwide Depression

Postwar Europe Unstable New Democracies Germany and new countries formed from Austria-Hungary No experience with democracy Existing democracies Too many political parties Frequent changes in leadership Long term goals never met

The Weimar Republic: Germany’s new democratic government Serious weaknesses No experience with democracy Blamed by Germans for their defeat in war and the humiliation of the Treaty of Versailles Inflation causes crisis in Germany Didn’t raise taxes during war Tried to pay for war by printing more money Paper money lost its value after war Printed even more money to pay reparations Value of money dropped (inflation) Money became almost worthless

Using German marks (money) to heat a home

Attempts at Economic Stability US loans money to Germany to stabilize German currency Sets more realistic schedule for paying reparations German economy starts to recover US banks make loans and investments in Germany By 1929, Germany doing as well as before war

Efforts at Lasting Peace France and Germany sign treaty saying they’ll never attack each other Germany promises to respect existing French borders Germany allowed to join League of Nations Almost every country in world signs Kellogg-Briand Pact promising not to use war to solve conflicts

Financial Collapse Flawed US Economy Although it was prospering, there were problem with the US economy Wealth was not evenly distributed A few very wealthy people, but most poor Poor people can’t afford to buy stuff Factories decrease production Workers laid off Laid off workers = more poor people = less stuff bought = more layoffs, etc...

Unequal distribution of wealth - a lot of poor people Less stuff bought Factories reduce production Lay off workers Laid off workers become poor

Similar Problem in Agriculture Overproduction on farms American farmers producing more food than needed, leading to a surplus Too much supply causes prices for food to drop Farmers can’t make enough money to pay back loans from bank Farmers lose their farms Banks weakened when loans not paid back Banks close

Stock Market Crashes Optimism about US economy caused stock prices to soar Middle income people borrowed money to buy stock September, some investors think stock prices have gone too high Started selling their stock, believing prices would soon start to go down Became an all-out slide downward Led to panic Everyone wants to sell, BUT no one wants to buy Prices plunge Stocks become worthless

Wall Street after the crash New York Times

The Great Depression As industrial production, prices, and wages declined, unemployment rose Led to Great Depression - a long business slump Stock market crash didn’t cause the Great Depression, but it marked the beginning of it By 1932 Factory production cut in half Thousands of businesses and banks fail People lose their savings when banks closed 1/4th of all US workers are unemployed!

A Global Depression American banks demand repayment of overseas loans Investors withdraw money from Europe US puts high tariff on European goods Other countries put high tariff on US goods Result is 65% drop in world trade Germany and Austria particularly hard hit Also felt in Asia and Latin America

The World Confronts the Crisis Britain and France retain their democracies Socialist governments in Scandinavian countries put programs in place to help their citizens, and they retain their democracies US President Franklin D. Roosevelt introduces the New Deal Public works projects to provide jobs Welfare and relief programs Regulations on stock market and banking system Preserved faith and retains democracy

Questions: 1. Why were many of the new democracies in Europe weak? 2. What was the main economic problem in Germany? 3. What did the Kellogg-Briand Pact say? 4. What were some of the weaknesses in the US economy? 5. What caused the stock market to crash? 6. How was agriculture affected by the Great Depression? 7. What caused the stock market to crash? 8. What was the main problem in the Great Depression? 9. How did the Great Depression spread around the world? 10. What happened to the established democracies in Europe? 11. How did the US deal with the Great Depression?