Causes of the Great Depression

Germany must pay reparations to Europe Europe must pay back debt to U.S. Germany doesn’t have money; U.S. loans it to them Germany uses money to pay Europe Europe uses money to pay U.S.

Great Depression; no more loans to Germany Germany defaults on reparations; no more money to Europe Europe defaults on debt; no more money to U.S. Economic vulnerability and instability

Overproduction in agriculture Used machines, produced more crops Demand drops but supply goes up Prices fall Continue growing; import tariffs so even fewer customers

Stock market crash “Invincible economy”; buy more and more stocks Borrow more money to buy more stocks; “on margin” Stock values are not accurate Bubble bursts, prices fall, everyone sells Lose massive amounts of money; can’t pay banks; banks lost most investments

Inequitable income distribution Economy underwent massive expansion Top 5% of earners controlled 30% of wealth Lots of money in few hands Wages still low, buying on credit Demand goes down because workers don’t have money Tariff led to higher prices and more layoffs

Protectionism Hawley-Smoot Tariff raises import taxes Less products coming in from overseas, more American goods Less competition so higher prices Higher prices and low demand = excess; fire workers Unemployment rises and economy shrinks; hurts poorer countries that rely on exports