World War l
The government need to raise more money in order to be able and participate in World War l. In order to achieve what they wanted they needed to raise taxes. There was also things called "Liberty Bonds" which they sold to gain money. People bought the bonds to help the Government pay for the war. Then later on they were paid back the value of their bonds. The government was in debt for over 25 billion dollars.
German War Reperations
Germany initially owed $64 billion as reparations, which was reduced to $27 billion in a 1929 revision. Germany's payments could've been shipped the U.S., reducing war-loan balances, but German's payments were slow and very little which caused everything to fall apart after the stock-market crash of 1929. By mid-1931, fear was spread that Germany’s economy and government would collapse soon.
The Stock Crash
Unemployment had risen, leaving stocks in great excess of their actual value, also production had declined. Other causes of the eventual market collapse were low wages, the proliferation of debt, a struggling agricultural sector and an excess of large bank loans that could not be liquidated.
After the crash during 1930, 744 banks failed. In all, 9,000 banks failed during the years of the 1930s. It's estimated that 4,000 banks failed during the one year of 1933 alone. By 1933, depositors saw $140 billion disappear through bank failures. Some historians have argued that the bank collapse caused the Great Depression, but others have looked at other factors and argued that banks failed as a result of the economic collapse.
Effects in the U.S.
Not until the Wall Street Crash in October 1929 did the effects of the declining economy were felt, and a major national economic downturn began. The market crash marked the beginning of a decade of high unemployment, poverty, low profits, deflation, and lost opportunities for economic growth and personal advancement.
The New Deal
The New Deal aimed to restore some measure of dignity and prosperity to many of the Americans who were affected by The Great Depression. By 1932, one of the worst years of the Great Depression, at least one-quarter of the American workforce was unemployed. When President Franklin Roosevelt came into office in 1933, he acted swiftly to try and stabilize the economy and provide jobs and relief to those who were suffering.
Overproduction and Underconsumption
A major cause of overproduction in the early 1900s was the boost of new technology available to farms, businesses, and homes. At this time, more and more farmers were trading their work animals for machinery, which increased production even more. The overabundance of wheat, meat, and other farm goods left farmers poor. Supply surpassed demand, and workers were laid off in great numbers.