The Great Depression Comes to Canada

In the Beginning The prosperity of the 1920's stopped on Oct. 29, 1929, when the stock market crashed (stock prices had such a dramatic decline that the value of many companies became worthless). Though the stock market crash did not cause the Great Depression, it signaled the start of the Great Depression.

There are four basic stages to the cycle: The Business Cycle Economic conditions constantly change; in other words, there are good times and bad times. There are four basic stages to the cycle:   Business Cycle Prosperity Recession Depression Recovery

Black Tuesday The day the stock market crashed, Oct. 29, 1929 During the 1920's many people dreamed of getting rich playing the stock market. It seemed simple enough: buy plenty of stocks at a low price, then sell when the stock when price is high. The only problem with this plan is that it requires knowledge, skill and good luck.

Causes of the great depression

Over-Production/Expansion During the 1920's large amounts of profits and investments resulted in the expansion of existing factories or construction of new ones. As a result huge supplies of goods became overstocked. Soon factory owners panicked and slowed down production by laying off workers. Workers and their families had even less money to spend therefore sales slowed down even more. Wages simply were not high enough to buy all the products made. Industrialists had forgotten the basic economic rule: only make as many items as you can sell.

Canada’s dependence on a few primary products Canada’s economy depended on a few basic products such as wheat, fish, minerals, and pulp and paper. When the depression hit countries around the world, demand for Canada’s products fell. Fishing the Maritimes and wheat in the West were especially hard hit. Terrible droughts on the prairies destroyed crops. Farmers could not pay mortgages. Industries such as flour mills, railways, also slowed down without the production of wheat.

Canada’s Dependence on US Because Canada’s economy is closely linked to the U.S., when the American economy got sick, Canada suffered. Americans did not need our fish, lumber, wheat, minerals and pulp and paper. U.S. investors pulled out of Canada and branch plants closed, leaving thousands out of work.

Too Much Credit Buying Throughout the 1920's buying on credit became more popular. With added interest payments many families got themselves hopelessly into debt. If the breadwinner became sick or was laid off, it was impossible to keep up payments.

Credit Buying of Stocks Many people gambled on the stock market in the 1920's. People began "buying on margin." You only needed 10% of the money you invested, the broker loaned you the rest at a high interest rate. The idea was that as soon as your stocks went up in value, you could sell them then pay back your broker and keep the profits. Unfortunately, stocks do not always go up; in fact they sometimes go down. This is what happened in October 1929. When stock prices dropped, people panicked and sold their shares; as a result prices fell even lower. Most stocks nosedived more than 50%. Many people were wiped out, broke.