A Worldwide Depression Section 2 Ch.31

Postwar Europe After the end of WWI there was a sudden rise in the number of new democracies. Most of these countries had little experience with democratic institutions. A large number of political parties made governing these types of democracies almost impossible. Coalition governments had to be formed; these are temporary alliances between several political parties.

The Weimar Republic The new democratic republic that was set up in Germany. It was weak from the start because the Germans did not have a strong democratic tradition. To cope with their economic problems, Germany simply printed more money.

The Weimar Republic Inflation became a problem as the amount of marks (German currency) in circulation increased. 1918- price of bread less than one mark 1922- price of bread 160 marks 1923- price of bread 200 billion marks

The Weimar Republic An international committee headed by American banker Charles Dawes put together an economic package to help the Germans. This included loans from American banks which had a new schedule for reparation payments.

The Weimar Republic France and Germany soon signed a non- aggression pact and was admitted into the League of Nations. In 1928 the Kellogg-Briand pact was signed by almost every country in the world. These countries pledged “to renounce war as an instrument of national policy.”

Causes of the Financial Collapse Weaknesses in the U.S. economy uneven distribution of wealth overproduction by business and agriculture decreased consumerism. Competition and overproduction caused prices to fall to a level where farmers and businesses no longer made a profit.

Financial Collapse In 1929, New York City’s Wall Street was the financial capital of the world. Middle-income people began buying stocks on margin They paid a percentage of the stock and borrowed the rest of the money from a stockbroker. This would only work as long as the stocks kept going up.

The Great Depression On Oct 29, 1929 stock prices fell so low that most were worthless. (stock market crash) Unemployment rose as industrial production, prices, and wages declined. Around 9 million people lost their savings. By 1933, one-fourth of all American workers had lost their jobs.

Europeans React to the Crisis Great Britain passed high tariffs, increased taxes, regulated the currency and lowered interest rates. France was mainly agricultural and formed a coalition government to stop anti- democratic forces from taking over.

Europeans React to the Crisis Socialist governments in Scandinavia relied on their traditional system of gov. spending. Sweden started a public works program to keep people employed. All Scandinavian countries raised pensions, increased unemployment insurance, gave subsidies for housing, and taxed all citizens.

America Reacts to the Crisis American bankers and investors withdrew their money from Europe and raised the tariffs on foreign goods. The economies of Austria and Germany were affected the most. They relied on American dollars for their economic success.

America Reacts to the Crisis In 1932, Franklin D. Roosevelt (FDR) won the presidential election by seeking to restore peoples faith in the nation. The New Deal was a series of programs designed to help get the U.S. economy strong again.