The Great (Global) Depression By: Ruth Orduno

Historical Context: World War 1

World War 1 was from 1914 to 1918. Austria-Hungary declared war on Serbia. The conflict between this two countries spread rapidly; Germany, Russia, Great Britain, and France were all drawn into the war. In the west, Germany attacks Belgium and the France. In the east, Russia attacks both Germany and Austria-Hungary. In the south, Austria-Hungary attacks Serbia.

The United States last straw that caused them to declared war on Germany was the Zimmerman Note. The Bolshevik Revolution prompted Russia to pull out of the war. The member countries of the Central Powers signed armistice agreements. As a result of these agreements, Austria-Hungary was broken up into several smaller countries. Germany, under the Treaty of Versailles, was severely punished with hefty economic reparations, territorial losses, and strict limits on its rights to develop militarily.

German War Reparations

The western powers imposed a series of harsh treaties upon the defeated nations. These treaties took away the Central Powers of substantial territories and imposed significant reparation payments. German leaders signed the armistice.

When the heads of the governments of the United States, Great Britain, France, and Italy met in Paris to discuss treaty terms, they made Germany as the chief instigator of the conflict, the European Allied Powers ultimately imposed particularly stringent treaty obligations upon the defeated Germany.

The treaty forced Germany to concede territories to Belgium, Czechoslovakia, Poland and Alsace and Lorraine. Germany was liable for all material damages. The German army was to be limited to 100,000 men. The most humiliating portion of the treaty for the defeated Germany was Article 231, commonly known as the "War Guilt Clause," which forced Germany to accept complete responsibility for initiating World War I.

Inflation and Unemplyment

Germany tried to recover from the war by way of social spending. Germany began creating transportation projects, modernization of power plants and gas works. These were all used to battle the increasing unemployment rate. The municipal finance collapsed in 1930.

With the income Germany could have gained by selling goods in foreign countries, for relatively low prices, reparation payments could have become feasible. They faced payments they could not afford. Germany began printing amounts of money. This threw Germany into a state of inflation

Overproduction and Underconsumption

The production line made a lot more goods, but the people could not to buy the goods. The production line kept producing even though the people did not buy anything. The companies would lose money on making their products

Stock Market Crash

The Dow dropped, but bankers reassured investors. The Federal Reserve Bank of New York raised the discount rate to 6 percent. The Dow peaked at 381.17. That was a 27 percent increase over the prior year. The Bank of England also raised its rate to protect the gold standard. The Hatry Case threw British markets into panic. Great Britain's Chancellor of the Exchequer Phillip Snow den called the U.S. stock market a "speculative orgy."

The Wall Street Journal and The New York Times agreed with Snow den. Then there was Black Thursday, Black Monday, Black Tuesday. President Roosevelt launched the Federal Deposit Insurance Corporation to insure bank deposits. After the crash, banks only had enough to honor ten cents for every dollar. That's because they had used their depositors' savings, without their knowledge, to buy stocks.

Banks collapse

One immediate result of bank closures was the contraction of the money supply. More than 13 million American workers were unemployed. Anxious citizens withdrew their deposits from banks and hoarded cash and gold by the end of 1932. Causing more than 9,000 banks to fail.

Effects in the US

Expanded Role of Government was an effect. The role of government increased in people’s lives to unprecedented levels, levels that continued long after America had recovered from the Great Depression. Mass Migration was an effect. Dust Bowl conditions in the 1930s led to farmers abandoning their fields, mass migration patterns emerged during the Great Depression, with populations shifting from rural areas to urban centers. Societal Change was also an effect. Many people who survived the Great Depression would remain frugal throughout the rest of their lives.

Effects in Germany

Germany became a democratic republic known as the Wiemar Republic. The government was unable to deal with the economic crisis left by the war. The economic situation in Germany briefly improved between 1924-1929. Germany remained politically and economically unstable.

Effects in one other European country

Since France was not a country that was heavily dependent on trade, France was not immediately affected by the depression. Not until 1932-1933 France was crushed by the depression. The depression had some effects on the local economy.

The New Deal

Franklin D. Roosevelt, Governor of New York, was nominated as the presidential candidate of the Democratic Party. Roosevelt addressed the problems of the depression in his acceptance speech. The New Deal Roosevelt had promised the American people began to take shape immediately after his inauguration in March 1933. New Deal programs helped improve the lives of people suffering from the events of the depression. It included union protection programs, the Social Security Act, and programs to aid tenant farmers and migrant workers.

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