Causes of the Great Depression Homburg

Inflation Most Europeans countries emerged from WWI with inflated currencies After German hyper-inflation, Europeans feared inflation as a source of social and political instability. Most European governments refused to run budget deficits when the depression struck

German economy German Mark was 5 to $ German Mark was 162 to $1 End of Mark was 7000 to $ German Mark was 294,000 to $1 End of Mark was 4.4 trillion to $1!!!

Definitions Gross Domestic Product (GDP)- refers to the market value of all final goods and services produced within a country in a given period. Recession- Decline in Gross Domestic Product (GDP) for two or more quarters Depression- Economic downturn where GDP declines by more than 10%

The depression originated in the U.S. starting with the stock market crash of It quickly spread to almost every country in the world GDP declined by more than 30 percent from Unemployment in the U.S. rose to 25% Crop prices fell by 60%

U.S. Stock Market Crash 1929 Share prices were rising throughout the 1920s. People speculated prices would rise further Many people borrowed money to buy more stocks The market turned and people began panic selling

Agriculture Problems Agricultural problems- better farming and transportation led to increased supply and lower prices Tariffs often prevented the export of grain among European countries Farmers would borrow money to buy machinery and land, they could not make payments because of falling prices

GDP

Unemployment

A recession is when your neighbor loses his job. A depression is when you lose yours. (Ronald Regan)

The Great Depression vs. The Great Recession

The Great Depression –GDP declined by more than 30 percent from –Unemployment in the U.S. rose to 25% The Great Recession –8.4 million job losses –Unemployment in the U.S. is 8.5%-15.6% –GDP declined by as much as 2.9%

John Maynard Keynes