1. Causes of the Great Depression

3. Germany must pay reparations to Europe
Europe must pay back debt to U.S.
Germany doesn’t have money; U.S. loans it to them
Germany uses money to pay Europe
Europe uses money to pay U.S.

4. Great Depression; no more loans to Germany
Germany defaults on reparations; no more money to Europe
Europe defaults on debt; no more money to U.S.
Economic vulnerability and instability

5. Overproduction in agriculture
Used machines, produced more crops
Demand drops but supply goes up
Prices fall
Continue growing; import tariffs so even fewer customers

6. Stock market crash “Invincible economy”; buy more and more stocks
Borrow more money to buy more stocks; “on margin”
Stock values are not accurate
Bubble bursts, prices fall, everyone sells
Lose massive amounts of money; can’t pay banks; banks lost most investments

8. Inequitable income distribution
Economy underwent massive expansion
Top 5% of earners controlled 30% of wealth
Lots of money in few hands
Wages still low, buying on credit
Demand goes down because workers don’t have money
Tariff led to higher prices and more layoffs

10. Protectionism Hawley-Smoot Tariff raises import taxes
Less products coming in from overseas, more American goods
Less competition so higher prices
Higher prices and low demand = excess; fire workers
Unemployment rises and economy shrinks; hurts poorer countries that rely on exports