Transcript Causes of a worldwide depression

Causes of a worldwide depression
“P.O.O.R.S.”
Causes of a worldwide depression
1) P. = Protectionist Trade Measures / Protective
Tariffs
Causes of a worldwide depression
2) O. = Over-Speculation / Excessive Expansion of
Credit
Causes of a worldwide depression
3) O. = Over-Production
Causes of a worldwide depression
4) R. = German War Reparations / International Debt
Crisis
Causes of a worldwide depression
5) S. = Crash of the U.S. Stock Market in 1929
Bank Failures
1) The economic boom of the 1920s only
led banks to further increase the
availability of credit. President Herbert
Hoover discouraged regulation of bank
loaning practices because he rigidly
adhered to “laissez-faire” economic
policies that minimized government
intervention. Without government
oversight, many banks dangerously
loaned out too much of their reserves.
Bank Failures
2) The crash of the U.S. Stock Market caused many loans to go
unpaid while struggling Americans withdrew more cash than
they deposited. As the Depression worsened, many banks failed
when they lacked the funds to handle the excessive demand for
withdrawals.
Bank Failures
3) The first bank failures created a “banking panic” that
led to a public run for withdrawals across the country.
Thousands of more banks failed nationwide when
frantic depositors rushed to close their accounts.
Bank Failures
4) Americans lost
confidence in the
banking system when
numerous bank failures
caused tens of thousands
of citizens to lose their
life savings. Banks that
survived the waves of
panics became
exceedingly vigilant in
their demands for timely
loan payments.
Bank Failures
5) Credit evaporated as banks drastically tightened the
requirements for loans. The collapse of credit further strained
the economy and made recovery much more difficult. This
prolonged the depression because credit was a vital instrument
of economic growth. For example, businesses required credit in
order to pay the costs of production and meet payrolls while
consumers needed credit to make major purchases like real
estate, automobiles, education, etc.
Impact of the Depression
1) By 1932, U.S. industrial
output had been cut in
half, hourly wages had
fallen by 50%, and over
one-fourth of the labor
force was unemployed.
The crash of European
markets and the failure of
major over-seas banks
soon brought similar
conditions to the
industrialized nations of
Western Europe.
Impact of the Depression
2) In the months after the Wall Street crash, desperate stock
brokers and investors committed suicide from city highrises with alarming frequency. The ensuing depression put
such incredible psychological stress on the individual that
the national suicide rate noticeably increased.
Impact of the Depression
3) When citizens failed to
meet their loan payments,
banks repossessed
automobiles and
foreclosed on homes and
farms. Scores were
forcefully evicted from
their homes and faced the
humiliation of having their
homes auctioned at public
sale.
Impact of the Depression
4) Homelessness naturally increased and thousands wandered from town to
town looking for work. Shantytowns sprang up when groups of the
homeless decided to squat and settle on open lots. In America, these
squatter villages became known as “Hoovervilles” as many directed the
blame at President Herbert Hoover.
Political Unrest
1) American society was
completely unprepared for the
severe challenges posed by the
Depression. Beliefs in the
values of personal thrift, selfreliance, and rugged
individualism could not solve
the crisis as they had in
generations past. Most
Americans believed that they
only had themselves to blame
and they initially resisted
charity and government
welfare. However, it was the
economic system that had
failed, not individual initiative.
Political Unrest
2) The Great Depression fundamentally challenged America’s
national identity. The capitalist economic system seemed to
be failing, trusted values like self-reliance were seriously
tested, and the government seemed incapable of caring for
the general welfare of the people in their hour of crisis.
Political Unrest
3) Such widespread economic
turmoil invariably caused
political unrest. In the United
States, Democrat Franklin
Roosevelt defeated incumbent
President Herbert Hoover by a
landslide in the election of 1932.
Roosevelt seemed to embody the
confidence that so many
Americans had lost. This was
clearly evident in his inaugural
address when he stated, “Let me
assert my firm belief that the
only thing we have to fear is fear
itself.”
Political Unrest
4) Roosevelt rejected the “laissez-faire”
philosophy of unregulated capitalism
and he put forth a variety of
economic reforms and government
programs designed to stimulate
economic recovery. For example, he
immediately took action by closing
all banks for four days and rushed
them government loans to ensure
that they would not fail when they
reopened. Roosevelt also supported
welfare programs and established
government agencies like Social
Security in order to ensure that all
working citizens would have
retirement savings.
Political Unrest
5) The revolutionary economic changes by the Roosevelt
Administration became collectively known as the “New
Deal.” Government intervention and the creation of the
welfare state revealed a left-wing shift in American politics
toward liberalism.
Political Unrest
6) The political unrest in European nations became more polarized as many
appealed to extremist groups on the fringes of the political spectrum.
Widespread poverty led many in the working-class to support Socialist
and Communist groups that promised a more equitable redistribution of
wealth. However, the fear of a Marxist revolution led many middle-class
Europeans to support fascist, right-wing dictators that promised to
restore law and order.
Causes of World War II
A) Aggression by the totalitarian powers of Germany,
Italy, Japan (the Axis Powers)
Causes of World War II
B) Nationalism – all of the Axis powers firmly believed in
the supremacy of their nation. This attitude often
fueled their acts of conquest.
Causes of World War II
C) Failures of the Treaty of Versailles – the punitive nature of the
treaty humiliated Germany and made it economically unstable.
Growing poverty and unemployment fueled an angry and
vengeful form of nationalism to grow in the ranks of the Nazi
Party.
Causes of World War II
D) Weakness of the League
of Nations – acts of
military conquest by
Germany, Italy, and
Japan clearly violated
several international
treaties, but the League
failed to take any
significant action against
these belligerents.
Causes of World War II
E) Appeasement – Britain and France adopted a policy of
“appeasement” in order to avoid another war.
Allowing Hitler and Mussolini to expand their
empires only further fueled their aggression and
desire for conquest.
Causes of World War II
F) U.S. isolationism – Many
Americans believed that the
Great Depression was partially
caused by U.S. involvement in
the First World War. This led
many to support an
“isolationist” foreign policy
that kept the nation out of
European affairs. Much like
Western European
appeasement policies, U.S.
isolationism only gave Hitler
and Mussolini greater
confidence to further expand
their empires without
consequence.