Transcript A Global Depression - mrs-saucedo

A Global Depression
Ch. 31.2
Europe After the War
• WWI was extremely expensive and left nearly every
European country bankrupt.
• Only Japan and America came out of the war in a
better financial state.
– Neither country had battles occur on their homelands.
– They both were able to expand trade during WWI.
Other Problems In Europe
• From 1914 – 1918, Europe’s last absolute rulers had
been overthrown.
• The new democracies in Europe were inexperienced
and unstable.
Weimar Republic
• Germany’s democratic government set up in 1919
and they also signed the Treaty of Versailles.
• Germany had several major political parties, which
left it weak and ineffective.
• German people blamed the Weimar Republic for
their country’s defeat and post-war humiliation.
Inflation
• To pay the expenses of war, the Germans simply
printed more money.
• After Germany’s defeat, this paper money lost its
value.
• Burdened with heavy reparations payments to the
Allies, Germany printed more money.
The result was the value of the mark
decreased and severe inflation set in.
Germans needed more money to buy basic
goods
•People took
wheelbarrows full
of money to buy
food.
•The mark had
become
worthless.
1918
Loaf of bread
Less than 1
mark
1922
Loaf of bread
160 million
marks
1923
Loaf of bread
200 billion
marks
• Woman feeding
German marks into
her stove
• Children using
stacks of money
as blocks.
The Dawes Plan
• Created by Charles Dawes, an American banker.
• The Dawes Plan provided for a $200 million loan
from American banks to stabilize the German
currency and strengthen its economy.
• The plan also set a more realistic schedule for
Germany’s reparations payments.
As the German economy began to
recover, it attracted more loans and
investments from the U.S.
By 1929, the German factories were
producing as much as they had before
Peace Treaty
• Germany met with Switzerland, Belgium, Italy, and
Britain.
• They signed a treaty that promised France and
Germany would never go to war against each other.
• Germany also agreed to respect the existing borders
of France and Belgium.
•Then Germany was admitted into
the League of Nations.
Kellogg-Briand Pact
• Created by Frank Kellogg, U.S. Secretary of State
and France’s foreign minister Aristide Briand.
• This treaty renounced war, except for in defense
purposes only.
• Almost every country in the world signed it including
the Soviet Union.
• The League of Nations was supposed to enforce it.
Kellogg
Briand
American Economy
• By 1929, American factories were producing nearly
half of the world’s goods.
• The richest 5% received 33% of the income.
• 60% of American families earned less than $2,000
per year.
A Downward Economic Spiral
• Most families were too poor to buy the goods being
produced.
• Unable to sell their goods, store owners eventually
cut back their orders from factories.
• Factories reduced production and laid off workers.
Farming Crisis
• Scientific farming methods and new machinery
dramatically increased food supply.
• A worldwide surplus of agricultural products drove
prices and profits down.
• Unable to sell their crops at profit, many farmers
could not pay off bank loans.
•Their unpaid debts weakened banks
and forced some to close.
The Stock Market
• In 1929, Wall Street in NYC was the financial capital of the
world.
• There was a massive economic boom going on in the U.S.
1920s
• To get in on the boom, many middle income people began
buying stocks on margin.
This meant they paid a small percentage
of the a stock’s price as a down payment
and borrowed the rest from a stockbroker.
The system worked well as long as stock
prices were rising.
If they fell, investors had no money to pay
off the loan.
New York Stock Exchange
PANIC
• In September 1929, some investors began to feel
that stock prices were unnaturally high.
• They started selling their stocks, believing the rates
would soon go down.
• By Thursday, October 24, the gradual lowering of
stock prices had become an all out slide downward.
.
Black Tuesday
• Everyone wanted to sell stocks, and no one wanted
to buy.
• Prices plunged to a new low on Tuesday, October
29.
• A record 16 million stocks were sold.
• Then the market collapsed.
• People could not pay the money they owed on
margin purchases.
• Stocks they bought at high prices were now
worthless.
• Unemployment skyrocketed, prices, and wages
declined.
• By 1932, factory production had been cut in half.
• Thousands of businesses and banks failed
• 9 million people lost their savings accounts when
banks had no money to pay them.
• Many farmers lost their land when they could not
make mortgage payments.
•25% of American workers had no jobs.
World trade dropped 65%
• The collapse of the American economy sent shock
waves around the world.
• American investors withdrew their money from
Europe.
• Congress placed high taxes on imported goods.
• Other nations also raised taxes on imported goods.
Europe’s economies plunge
• Because of war debts and dependence on American
loans and investments, Germany and Austria were
hit hard.
• In1931, Austria’s largest bank failed.
• This started a financial panic in central European
countries and sent their economies plunging.
Japan’s economy plunges
• Crop failures of 1931 led to famine.
• Starving families ate tree bark and the roots of wild
plants.
• City workers suffered as the value of exports fell.
• 3 million workers lost their jobs and had to return to
their rural villages.
Latin America’s economy plunges
• European demand for Latin American products dried
up. (sugar, beef, copper, tin)
• Prices for these goods collapsed.
• Cost of imported goods rose, pushed by high taxes.
• Latin American nations had borrowed heavily and
could not repay their debts.
Great Britain Responds
• They increased taxes and regulated the currency.
• They also reduced interest rates to encourage
industrial growth.
• By 1937, unemployment was cut in half, and
production had risen.
France Responds
• By 1933, give different governments had come and
gone.
• In 1936, another coalition formed of moderates,
socialists, and communists – The Popular Front.
• They passed reforms for workers: Pay increases,
holiday pay, 40 hour work week.
•Prices increased, and it didn’t really
do anything for the unemployment rate.
Scandinavia (Denmark, Sweden, Norway)
Responds
• In Sweden, the government sponsored massive
public works projects that kept people employed.
• All of Scandinavia raised pensions for elderly and
increased unemployment insurance, subsidies for
housing, and other welfare benefits.
• The government taxes the citizens to pay for the
costs of these programs.
U.S. Responds
• Franklin Delano Roosevelt began a program he
called the New Deal.
• Large public works projects helped provide jobs
• New government agencies gave financial help to
businesses and farms.
• Large amounts of money were spent on welfare and
relief programs.
• FDR
• Regulations were imposed to reform the stock
market and the banking system.
• The New Deal did eventually reform the American
economic system, although the recovery was slow.
• It also established FDR as a world leader for
democracy.
• These countries were able to preserve their
democracies during this global crisis, while other
countries fell to dictatorships.