At the end of world war one much of the world was recovering. Many had died and infrastructure had been destroyed, additionally much infrastructure had been built that was no longer needed such as the massive farms used to supply soldier with food during the war.
Germany also owed millions of dollars of war debts to france and britain on an unmeetable time table which made it necessary to borrow money from american banks on credit. With so much american money being put over seas less of it was available in the US.
As less people had money they bought less products and with less products being bought less workers are need causing lose of jobs which meant people had even less money to buy things with. This caused inflation to steadily rise.
Because the quantity of goods being produced during the war was so high going back to regular productions speeds took time. During this recovery period there was a huge quantity of products to be sold but not many people were buying things because they were still living in a rationing mentality.
Much of the money being used to invest in stocks was credit from banks. As the stock market increased eventually all the money in it was credit and when people started to sell stocks and leave the market the banks did not have the money to pay their stocks off which made the market start to drop up until its crash.
The banks kept giving out more and more credit that they didn't have the money to pay off. When people started to get worried about their money they began taking it out of the banks and because people's money was mainly in bank credit the banks didn’t have enough cash to give out to everyone. A few people were able to get there money out but most couldn’t. Once all the money was gone the banks closed which caused everyone to lose any money that was left in there accounts.
In america this caused a rapid downfall in economics. No one was buying anything, people were being laid off of jobs causing less money to be in the consumer class, banks closed meaning people lost a lot of there money and the stock market was at rock bottom and frozen due to its reliance on credit which at this point was completely gone.
Germany was far behind in its debts to the world war powers it had lost to. To combat this it was using credit from american banks to pay of the debts. When the credit in america ended germany could no longer pay causing it to quickly lose money.
As the effects of The Global Depression began to take hold great britain saw a sharp decline in its economy. Its trades with america became to decrease as tariffs were placed on american imports which caused global trade to come to stop with only a few imports and exports trickling in.
The new deal was instituted by roosevelt and allowed the american people to have relief, recovery, and reform. These three items was the goals of the plan in order to recover from the depression and to prevent it from happening again.
Credits:
Created with images by young shanahan - "Commerating the Great Depression."