What caused the Great Depression, and why did it spread?

THE GREAT DEPRESSION

Essential Question

What caused the Great Depression, and why did it spread?

The World in Prosperity & Depression

Europe changed drastically after WWI Imperial governments were gone New countries emerged: Poland,

Czechoslovakia, Hungary, Yugoslavia, & the Baltic States

Russia was in the middle of a civil war

Reconstruction & Prosperity

In Europe, first years after war were tough

Central Europe – Famine caused by wartime blockade of food

Soldiers returning home from war faced unemployment

Next 5 years spent rebuilding & recovering from the war

The German Economy

The Treaty of Versailles forced Germany to pay huge amounts in reparations to France & Britain

This slowed the recovery of their economy Printed extra money to pay the debt,

which resulted in hyperinflation Hyperinflation – A decrease in the value

of currency resulting from printing too much money. Prices increase in the affected area, so it takes more money to purchase things.

The U.S. Economy

America emerged as world’s greatest economic power

Britain & France owed the U.S. a large amount of money – Bought war supplies on credit

Americans bought mass produced goods made in American factories

Automobile was most important factor in prosperity – Sold to Americans & Europeans

Americans invested overseas, especially in Germany Women had more freedom (Voting, College) because

they worked in place of men during the war

The Great Depression

Stock market crash in New York sent world economy into a Great Depression

Depression – Economic downturn in which a large number of businesses fail & workers are unemployed

Prices of stocks started falling, & people scrambled to sell before they lost too much

The Great Depression

People who lost money quit buying goods Banks & investors recalled loans from

Europe – Caused depression to spread worldwide

40,000,000 workers became unemployed Farmers could no longer sell cash crops

Causes of the Great Depression

Prosperity was due to stock market & real estate over speculation

Over Speculation – People spend money they don’t have yet, assuming they will earn the money from what they are buying

Overproduction – More goods were produced than consumers could buy

Relationship of loans & debts between Europe & America ensured the recession would spread

Causes of the Great Depression

Government leaders quit spending, tightened credit, & cut off international trade

This made the recession worse People had no security net, like

unemployment insurance & social security, if they lost their job & savings

Franklin Roosevelt elected President in 1932 – Created New Deal to try to provide jobs for unemployed citizens