World War One:
World War One ended around the 1920's. Europeans lost the Great War financially. Every major country went nearly bankrupt. They were being aided by loans from the United States. Japan and the United States came out of the war financially prosperous. Europeans lost their domination in world affairs after the war.
German War Reparations:
Germany was burdened with heavy reparations payments for its Allies. Germany did not increase his taxes like the other countries. To pay, they simply printed more money, and over time the value of marks decreased. In 1925, Germany and France signed a treaty after the war promising that they would never make war against each other. Germany admitted to the League of Nations and respected Belgium and France's borders.
Inflation in Germany
Germany's new democratic government, the Weimar Republic was established in 1919. it was a terribly weak government. After printing money, Germany's currency fell sharply. Germans printed money for everything, a loaf of bread cost 200 million marks in 1923, as opposed to less than one mark in 1918. Unemployment rates for Germany were drastically decreasing.
Overproduction & Underconsumption
The U.S. economy grew weak due to the uneven distribution of wealth, and overproduction by business and agriculture. 60% of the population was too poor to buy the surplus of food from the factories, the factory workers lost their jobs, causing a descending spiral in the economy.
Stock Market Crash
At Wall Street, NY, the financial capital of the world, stock prices were unusually high and stocks were up for sell for a lower price. Stockbrokers panicked and tried their best to sell their stocks and no one wanted to buy. In September of 1929, 16 million stocks were sold and the stock market collapsed.
By 1932, thousands of businesses failed and banks closed. nearly 9 million people lost the money in their savings account because the banks had no money to pay them. The collapse of these businesses, farms and banks sent shock waves globally. World trade dropped by 65 percent.
Effects in Germany
Germany was hit hard by the collapse on Wall Street. They had too much dependence on American loans and investments. They were also still suffering in war debts.
Effects in France
France promptly developed a self-sufficient economy, not relying on other countries. By 1935, one million people were unemployed. In 1936, the Popular Front was established. The Socialists and Communists formed a coalition. But, unemployment rates remained high for France.
Effects in the United States
American bankers wanted their money back from European countries who had loans from them. U.S. Congress raised their tariffs on their goods, and their plan backfired. It caused a chain-reaction, and other countries raised their tariffs. Local governments and charities opened soup kitchens to provide them food. By 1933, one-fourth of all Americans had lost their jobs. They lost their houses, work-spaces and almost all money. They had to make shacks out of the belongings they had that they couldn't sell, like picture frames.
Franklin D. Roosevelt is elected President of the United States in 1932.
This great nation will endure as it has endured, will receive and will prosper... let me assert my firm belief that the only thing we have to fear is fear itself- nameless, unreasoning, unjustified, terror which paralyzes needed efforts to convert retreat into advance. -Franklin Roosevelt, First Inaugural Address
The New Deal
The New Deal is a new program of government reform that started public work projects to provide jobs for the unemployed. Farms and businesses got financial help from agencies. Money was merely spent on welfare and relief programs. Roosevelt's plan was to create jobs and start a recovery, he succeeded. The American economic system was reformed.