The Great Depression

1929-1939

Objective for January 14, 2019

I can understand the consequences of WW1 agreements and their impact on the map of the Middle East and the collapse of the worldwide economy.

TCELLs / SLOs

  • Life Skills- I will learn financial principles.
  • Learning Skills- I will learn problem solving skills.

HOMEWORK:
DUE Today: Newsela- WWI Changed World Powers

DUE Tomorrow: Newsela- Paris Conference, Versaille Treaty

A Brief Period of Prosperity

  • Some countries, like the U.S., were strong during the post-WWI era
    • What is this time period known as in U.S. History?

Causes of Worldwide Depression

    • German reparations
    • Expansion of production capacities and dominance of the United States in the global economy
      • Britain and France owed huge war debts to the U.S.
      • Better technologies allowed factories to make more products faster, leading to overproduction

Causes of Worldwide Depression

  • Excessive expansion of credit (people spending money they don’t have)
  • Stock Market Crash of 1929
  • Buying stock on margin
  • A crisis in finance that led the Federal Reserve to raise interest rates
  • Panic set in when stock prices crashed
  • Inability of the League of Nations to stop aggression

Versailles Goes Awry

  • The Treaty of Versailles was supposed to ensure peace, satisfy nationalistic desires, and exact revenge on Germany

  • Unfortunately, the terms of the treaty did not have the intended results

Ensuring Peace & Protecting New Nations?

  • The League of Nations is weak
    • It cannot convince countries to disarm
      • Why might that be the case?
    • It cannot help all of the new, struggling nations that were created
    • It does not include the U.S., Germany, or the newly created Soviet Union
      • Why would this make it weaker?

Problems in Germany

  • The punishment of Germany goes too far and cripples their post-war economy in 1923
  • Hyperinflation occurs
    • German money is worthless (when the general price level rises, each unit of currency buys fewer goods and services)

Emergence of a Global Economy

  • Germany’s hyperinflation means it cannot pay war reparations to the winners of WWI
    • What effect will this have on those economies?

  • The U.S. had a very strong economy after WWI, so they began to lend money to Germany, which helps end Germany’s hyperinflation
    • Now, who will start getting their reparation payments again?

The End of Prosperity: 1929

  • In October 1929, the U.S. Stock Market crashed – What does this mean?

Speculation: When a potential buyer of stock buys it in expectation of it reaching a higher price per share.

Margin: The buyer does not pay full value for the stock; the balance (what is not paid for) is borrowed. If the stock price goes up, this benefits the buyer who completely owns the stock and has potential for profit (without paying completely for it). However, if the stock price falls, the buyer not only suffers a loss, he/she still must pay the money borrowed for the balance. This can be RISKY – and it was this practice that contributed to the Stock Market Crash of 1929.

Why was the stock market crash such a big deal?

Causes of the Great Depression

  • The stock market crash was just one cause of the global economic downturn which became known as the Great Depression

  • Other causes included:
    • Overproduction
    • The expansion of credit
    • The linked economies due to war reparations

Results of the Great Depression

  • Affected countries across the globe
    • Unemployment, bank failures, collapse of credit, collapse of prices in world trade

  • Government responses varied
    • Some became very involved with running the economy, like in the U.S. with FDR’s New Deal
    • Some didn’t handle the crisis well, so their people began to look for other alternatives (totalitarian leaders promised CHANGE!!)
      • Communist parties grew
      • Dictators who offered simple solutions in exchange for power appeared in some countries
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