Overproduction in factories: Factories were also producing more goods than they could sell. Result: They began to cut production. Result: Workers lost their jobs. Result: Families had less money to spend. Result: Even fewer factory goods were sold. Result: Production was cut even more…
USABritainFranceGermany Industrial production -46%-23-24-41 Wholesale prices -32%-33-34-29 Foreign trade-70%-60-54-61 Unemployment+607%+129+214+232 Change in economic indicators 1929-32
Tariffs: The USA imposed high tariffs on foreign goods to make them expensive. Why? To make Americans buy American goods, so that American jobs would not be lost. But… This protectionism hurt more than it helped. Other countries, including Canada, did the same thing. Result: Every country found it difficult to export goods. Fewer goods were produced in all countries. Workers lost their jobs. People had less money to spend. Even fewer goods were sold…
German Reparations Germany was not able to pay the money it was supposed to give the Britain and France. England and France needed that money to pay back their debt to the USA. Result: The USA was not getting its money back as quickly as it needed it.
All of these signs of trouble led to theStock Market Crash of 1929. In late October of 1929, cautious investors began to sell their stocks. When this happened, other people began to follow their example. Result: The value of the stocks crashed. This affected everyone, but especially the middle class and working class people who had bought stocks on margin. Buying on Margin: Buying stock with a 10% down payment. (You borrow 90% of the money from a bank). This also had a huge impact on banks: Banks invest most of their money in stocks. This money disappeared. Banks also lost most of the money they had lent to people who bought stocks on margin. Result: When people tried to get their money out of the banks, the banks had no money to give them! Within a few days, millions of people had lost everything! This was the start of the Great Depression.