The Great Depression

Causes 1. War debt. European countries either owed a lot of money for losing WWI (Germany) or they owed the U.S. a lot of money in loans to pay for WWI (Britain, France).

causes Because all major world powers were so inter-connected, all it took was one to fail on payment and it would have rippling effects.

causes When things started to get bad, the U.S. refused to make any more loans to foreign countries. That made it worse there, and less likely they would pay us back.

causes 2. Overproduction of agriculture. Farmers were producing too many crops (in part due to better farming technology). There was too much supply, not enough demand.

causes As a result, prices kept dropping. Eventually, farmers could not make enough money to pay their mortgages. Farms started to fail. Farming was still the backbone of many economies.

causes 3. Unequal Distribution of Wealth. Only a few people were well off in the 1920s-most were struggling. The invention of credit did not help.

causes Factories and businesses were making too much stuff (the rich could only buy so much). When they realized this, they made major cut-backs (laid a lot of people off).

causes As unemployment went up, less people could afford to buy things. So, businesses made more cut-backs. It was a vicious cycle.

causes 4. Stock Market Crash. People thought the Stock Market was a sure thing. They bought stocks like crazy…even if they couldn’t afford it.

causes As soon as the crash happened, people panicked. They pulled all their money out of the stock market.

causes People also pulled all their money out of the banks. Banks began to fail.

causes 5. Protectionism. Countries placed high taxes on foreign goods (so people would buy products from home). However, it made things worse.

causes Soon, all countries had similar taxes. So, for example, in America we wanted Americans to buy American products. We made foreign products more expensive.

causes But, all other countries in the world put high taxes on American products. So, we were not selling enough overseas.

causes Also, when European countries were short on money, they would not re-pay their loans to us. Again, we were all inter-connected.

effects Unemployment sky-rockets Businesses Fail Farms Fail Banks Fail

effects People lose confidence in capitalism and democracy…they turn towards authoritarian leaders. Fascists Nazis World War II breaks out!