The Great Depression
The Great Depression
Before it happened Businesses internationally dependent Foreign loans Foreign goods
Mutual confidence & mutual exchange If you lend $, expect to get it back
Causes
A) False Sense of Prosperity U.S. people thought they were more prosperous than they really were. Enjoyed isolation from WWI
Over-production of products If ppl did buy products, they often used credit
B) Stock Market Pre-Crash Rise of stock market was driven by false hope & optimism Stock prices kept rising Buying on Margin – Buying stocks by borrowing
Oct 1929 – Stock Market Crashed Initially started by ppl realizing the prosperity was just an illusion Ppl panicked & tried to sell their stocks -> dropped prices
C) Farmer/Agric Depression US farmers could sell their goods for high prices during WWI Wanted more land to produce more goods -> borrowed $ from banks
WWI ended, demand & prices severely dropped Couldn’t pay back loans Banks struggled
Farmers forfeit on loans D) Banks Struggle Farmers forfeit on loans Panic -> People wanting to withdraw their $ 11k of 25k banks go bankrupt
Oct. 1929 NYSE crashed Speculation driven stocks high Even average citizens invest Bought w/ borrowed funds Money not really theirs Borrowed from BANKS!!!
Panic – everyone tries to sell to get back their $ Everyone selling drops the price of stock
Effects
US $ no longer being sent abroad Germany sent into tailspin On Rest of World US $ no longer being sent abroad Germany sent into tailspin Germany stopped paying reparations Rest of Europe suffers
Americans stopped buying foreign goods Prices tumbled! European banks close
Worker loses job Business stops making money Worker stops buying things
Unemployment 1932 30 million world wide Young people couldn’t find jobs Skills grew rusty Discouraged Embittered Frustrated Resentful Turned to new ideas & leaders that promised a better future
Econ Depression hits GB & many European countries hard Great Britain Econ Depression hits GB & many European countries hard GB relied on foreign trade, suffered greatly 10-12% unemployment Increased gov’t welfare programs
General Strike 1926 miners feared a dramatic drop in their low wages Public supported them by striking
Failed but symbolic of the struggle of the common man & the unity that was prevalent
Growth of social welfare Unemployment benefits Subsidized Housing Medical Aid Increased old-age pensions
Labour party rose as a champion of the working classes & of greater social equality replaced the Liberal Party as main opposition to conservatives