Great Depression It took capitalism half a century to come back from the Great Depression.

Historical Context: World War I

This war could be known as WWI and also The Great War. The was consisted of Germany, Austria-Hungary, and Turkey—against the Allies—mainly France, Great Britain, Russia, Italy, Japan, and the United States. The war was a war that will always be remembered as an unprecedented in the slaughter, carnage, and destruction it caused.

They used propaganda to promote the war. These two picture to the right are images of what the war looked like.

German War Reparations

Reparations were the payments required by the Treaty of Versailles, by which Germany had to pay to repair all the damage of the war. To the allies, it seemed fair. Germany had caused the war. So Germany should pay for the damage the created.

Inflation and Unemployment

As the above table shows the nominal interest rate was declining over the course of the economic decline from 1929 to 1933 but because the rate of inflation was negative the real interest rate was much higher than the nominal interest rate.

Overproduction and Underconsumption

These pictures show us that people were put to work and they produced to many items.

Many things contributed to the under consumption of goods. The production line produced a lot more goods, but people could not afford to buy them. The production lines kept producing while the people were not buying. This created extra goods, lowering the prices of the goods. Now companies were losing money on by making their products. Since there is so much of it, they have to lower their prices.

The efficiency of the production line and new farming technology both contributed to the over production of goods. The new technology in farming made each harvest much more successful. More and more farmers produced more goods. Since they produced so many crops, they had to lower the prices. The farmers ended up losing money on the crops they harvested because there was an over supply.

Stock Market Crash

When the stock market crashed, lots of people lost their money. This lose in money meant that people had less money to spend. If they have less money to spend and give to businesses, the companies will have to slow down or stop production and lay off their workers. The Stock Market crashing has made many people lose their jobs.

Banks Collapse

This shows us that the people were trying to collect any money they have in the bank before they close down the bank.

Many banks gave loans out to farmers who used the money to buy new machines. But when the crops of the farmers were not being bought, the farmers had no money to pay back the banks. Then nervous depositors withdrew their money from the banks. The bank is losing money from the withdraws and not receiving money from the loans it has given out. The bank is then forced to close because it has no money to return to their depositors. By 1933, the money from 9 million savings accounts had vanished.

Effects in the US

The impact of the Great War on the United States saw political, economic and social changes. The United States emerged from the war as a world military and industrial leader. Unlike the war-torn cities of Europe the homes and industries of the nation were relatively unscathed by the Great War. The late entry of the US meant that fewer men had lost their lives than in Europe. Production and efficiency in industries and factories had increased. Technology had advanced and the nation had entered the age of steel and electricity.

Effects in Germany

With the economy in ruins and the German government printing more and more money prices kept going up. Inflation became out of control; the price of an item could double in a matter of hours. By the autumn of 1923 a loaf of bread cost 200,000,000,000 marks. Workers paid by the hour found their wages were worthless, because prices had risen since they began their shifts.

Effects in Britain

A decision to return to the gold standard in 1925, at a rate which many believe was 10-14% overvalued. This overvaluation of Sterling reduced demand for exports, leading to lower economic growth. Many heavy industries, such as steel and coal become less competitive in this period. Deflation. The overvaluation of Sterling and relatively high real interest rates contributed to periods of falling prices. This deflation increased the burden of debt and reduced spending.

New Deal

New Deal, the domestic program of the administration of U.S. President Franklin D. Roosevelt between 1933 and 1939, which took action to bring about immediate economic relief as well as reforms in industry, agriculture, finance, waterpower, labour, and housing, vastly increasing the scope of the federal government’s activities. The term was taken from Roosevelt’s speech accepting the Democratic nomination for the presidency on July 2, 1932. Reacting to the ineffectiveness of the administration of President Herbert Hoover in meeting the ravages of the Great Depression

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