WW1 influence on The Great Depression:The U.S. Government needed to raise money in preparation for their participation in World War I - the first major war between the countries of Europe in modern times. To do that, the Government raised taxes.The Government also raised money by selling "Liberty Bonds." Americans bought the bonds to help the Government pay for the war. Later, they were paid back the value of their bonds plus interest. By the end of the war, the Government's debt was more than $25 billion.
German war Reparations impact:In the early 1930s, European nations owed the U.S. roughly $11.5 billion in World War I debt , mostly for food and war materiel.Germany's payments to France or Britain could be shipped to the U.S., reducing war loan balances. German payments were slow and small, and the arrangement fell apart after the stock-market crash of 1929.
Inflation and unemployment:Farmers who had lost their land and homes to foreclosure as a result of the Dust Bowl made up a large part of the idle workforce.The Federal Reserve Act gives the nation’s central bank two main tasks: maximize employment and maintain long-term price stability. While both are worthy goals, economists have known for a while that achieving both low inflation and maximum employment simultaneously is, at best, difficult.Unemployment Statistics For The Great Depression. In 1933, at the worst point in the Great Depression years, unemployment rates in the United States reached almost 25%, with more than 11 million people looking for work.The output of an economy is measured by its Gross Domestic Product.
Overproduction and under consumption:Farmers in the United States began producing more food during World War I to help supply allies in Europe with food. This overproduction continued through the 1920´s. At this time, more and more farmers were trading their work animals for tractors and other machinery, which increased production even more. The overabundance of wheat, meat and other farm goods on the market drove the price down without increasing demand, which left farmers poor.It allowed investors to purchase a stock for only a fraction of its price and barrow the rest. The brokers then charged high interest and could demand payment of the loan at any time. But on the other hand, if the stock went up, you could pull your money out to pay off the loan and interest charges and still make money.
Stock market crash:On August 24, 1921, the Dow Jones Industrial Average stood at a value of 63.9. By September 3, 1929, it had risen more than sixfold, touching 381.2. It would not regain this level for another 25 years. By the summer of 1929, it was clear that the economy was contracting and the stock market went through a series of unsettling price declines. These declines fed investor anxiety and events soon came to a head on October 24, 28, and 29 known respectively as Black Thursday, Black Monday, and Black Tuesday.On Black Monday, the Dow Jones Industrial Average fell 121 points to 260, a drop of 31.8%. The deluge of selling overwhelmed the ticker tape system that normally gave investors the current prices of their shares. Telephone lines and telegraphs were clogged and were unable to cope. This information vacuum only led to more fear and panic. The technology of the New Era, much celebrated by investors previously, now served to deepen their suffering.The following day, Black Tuesday was a day of chaos. Forced to liquidate their stocks because of margin calls, overextended investors flooded the exchange with sell orders. The Dow fell 30 points to close at 230 on that day. The glamour stocks of the age saw their values plummet. Across the two days, the Dow Jones Industrial Average fell 38%.By the end of the weekend of November 11, the index stood at 228, a cumulative drop of 40 percent from the September high. The markets rallied in succeeding months but it would be a false recovery that led unsuspecting investors into further losses. The Dow Jones Industrial Average would lose 89% of its value before finally bottoming out in July 1932. The crash was followed by the Great Depression, the worst economic crisis of modern times that plagued the stock market and Wall Street throughout the 1930´s.
Banks collapse during The Great Depression:As the economic depression deepened in the early 30´s, and as farmers had less and less money to spend in town, banks began to fail at alarming rates. During the 20´s, there was an average of 70 banks failing each year nationally. After the crash during the first 10 months of 1930, 744 banks failed 10 times as many. In all, 9,000 banks failed during the decade of the 30´s. 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.By the end of 1932, more than 13 million American workers were unemployed. Anxious citizens withdrew their deposits from banks and hoarded cash and gold. By early the next year, more than 9,000 banks had failed.On March 6, 1933, in order to keep the banking system in America from complete collapse, the President used the powers given him by the Trading with the Enemy Act of 1917 and suspended all transactions in the Federal Reserve as well as other banks and financial institutions. The bank holiday was the opening step in the New Deal. At the same time, he embargoed the export of silver, gold, and currency until March 9, at which time Congress would meet in special session. On that day, the Emergency Banking Act was passed by Congress and Roosevelt signed it. The President was given the power to recognize all insolvent banks and was provided with the means to reopen sound banks without delay.
Citizens rush to local banks to deposit their savings!
Effects in the US:The Great Depression represents one of the darkest periods in American economic history. Most people think the Great Depression started in October 1929, with the famous Black Tuesday stock market crash, but economists and historians point to an economic downturn which took hold in early 1929. The stock market crash led to unprecedented runs on banks, and by 1933, more than 11,000 of the nation’s 25,000 banks had failed.From 1930-1936, American farmers struggled with conditions of the Dust Bowl, a drought that affected more than a million acres of farmland, and the result was mass migrations of people from rural lands to urban areas.Franklin D. Roosevelt’s New Deal is largely credited with bringing America out of the Great Depression by providing jobs and relief, but in truth, the country didn’t fully recover until 1941, when munitions and ammunition factories geared up for World War II.That means the Great Depression timeline spanned approximately twelve years, with unemployment reaching its highest point in 1933, when 25% of American workers were idle. Photos of the Great Depression depict harsh conditions, for men, women, and children.
Effects in Germany:The government was unable to deal with the economic crisis left by the war. The economic situation in Germany briefly improved between 1924-1929. However, Germany in the 1920´s remained politically and economically unstable. The Weimar democracy could not withstand the disastrous Great Depression of 1929.The Great Depression affected all capitalist economies in the world. American banks immediately withdrew the loans they had made to Germany. Businesses closed, unemployment rose and inflation was rampant. German money had so little value, that it might take a wheelbarrow full of notes to buy a few groceries!
The UK and the depression:The 1930s economy was marked by the effects of the great depression. After experiencing a decade of economic stagnation in the 1920, the UK economy was further hit by the sharp global economic downturn in 1930-31. This lead to higher unemployment and widespread poverty. However, although the great depression caused significant levels of poverty and hardship (especially in industrial heartlands), the second half of the 1930s was a period of quiet economic recovery. In parts of the UK (especially London and the South East, there was a mini economic boom with rising living standards and prosperity.The rates of economic growth from 1934 onwards look relatively impressive. There was also a significant fall in the unemployment rate from 15% in 1932 to 8% in 1936. However, the great depression was only partly averted. Certain regions of the UK were badly affected, especially in Wales, the north and industrial areas. In certain areas, regional unemployment rates were cripplingly high, with few employment prospects. In the 1930´s, the meagre unemployment benefits meant unemployment was a time of real economic hardship. It was this economic hardship which motivated the famous “Jarrow Crusades” of unemployed workers marching to London.
The New Deal:By 1932, one of the bleakest years of the Great Depression, at least one-quarter of the American workforce was unemployed. When President Franklin Roosevelt took office in 1933, he acted swiftly to try and stabilize the economy and provide jobs and relief to those who were suffering.On March 4, 1933, at the height of the Great Depression, Franklin Roosevelt delivered his first inaugural address before 100,000 people on Washington’s Capitol Plaza. “First of all,” he said, “let me assert my firm belief that the only thing we have to fear is fear itself.” He promised that he would act swiftly to face the “dark realities of the moment” and assured Americans that he would “wage a war against the emergency” just as though “we were in fact invaded by a foreign foe.” His speech gave many people confidence that they’d elected a man who was not afraid to take bold steps to solve the nation’s problems.On December 7, 1941, the Japanese bombed Pearl Harbor and the United States entered World War II. The war effort stimulated American industry and, as a result, effectively ended the Great Depression.