LONG TERM CAUSE #1: OVERPRODUCTION AND OVEREXPANSION AGRICULTURE AND INDUSTRY AT HIGH LEVELS OF PRODUCTION HUGE SUPPLIES (FOOD, NEWSPRINT,MANUFACTURED GOODS) SIMPLY STOCKPILED CANADIANS COULD ONLY AFFORD SO MANY GOODS! FACTORY OWNERS BEGAN TO PANIC – SLOWED DOWN PRODUCTION AND LAID OFF WORKERS INDUSTRY HAD FORGOTTEN ABOUT THE LAW OF SUPPLY AND DEMAND – ONLY PRODUCE AS MUCH AS YOU CAN SELL THIS STARTED A CYCLE (NO JOBS – NO MONEY – NO BUYING – FACTORIES CLOSE DOWN)

LONG TERM CAUSE #2: CANADA DEPENDED ON A FEW PRIMARY PRODUCTS Our economy relied heavily on STAPLES (basic products) WHEAT, FISH, MINERALS, PULP AND PAPER We HAVE to sell these staples to survive During the 20s, demand going down and we had new competition from Argentina and Australia Resource based regional economies suffered – WEST (Wheat) and the EAST (Fish)

LONG TERM CAUSE #3: CANADA DEPENDED HEAVILY ON THE U.S.A. We already know our economy linked to U.S. economy (recall: what is a branch plant?) 65% of our imports from America and 40% of exports go there! USA replaces Britain as buyer of Cdn goods USA replaces Britain as investor in Canada There is a famous saying that reflects this reality: “When the U.S. sneezed, CANADA got a cold”

LONG TERM CAUSE #4: HIGH TARIFFS CHOKED OFF INTERNATIONAL TRADE -A possible solution was looking to Europe to buy our surplus goods -BUT…. -European countries were still in debt from the war and couldn’t afford to buy -Countries adopted protective tariffs (What is a tariff?) -Example: Country X’s goods are kept out of Country Y by high tariffs and so Country X did the same thing to Country Y -Soon: international trade was choked off

LONG TERM CAUSE #5: TOO MUCH CREDIT BUYING Recall: Consumerism? Everyone was buying now and paying later AND got themselves in debt Impossible to keep up with the payments and then you lost everything The same thing was happening with stocks – everyone was invested and had a feeling of confidence (Recall: eternal prosperity) But nobody knew what they were doing! If stocks went up, everything okay BUT the market crashed and everyone had to pay their margin calls Everyone PANICKED and pulled out – the market went lower and lower

And the result was… The Great Depression began