Causes of the Great Depression CHC 2DI S. Todd

1. Over-production and over- expansion – Industry in the 20s expanded too quickly – Large amounts of money spent on new factories – Canadians still couldn’t buy everything that was for sale – Result is a stockpile of products in warehouses – Businesses slow down production by laying off workers – This slowed production even more

2. Canada’s dependence on a few primary products – Canada relies too much on basic products (wheat, fish, minerals, paper) – If other countries stop buying these products economy suffers – Competition from other countries results in a decrease in prices – Droughts hurt the western producers and sets off chain reaction in secondary industries

3. Canada’s dependence on the U.S. – Economy closely linked to the U.S. – If American economy suffers, so does Canadian economy – 65% of our imports from the U.S.; 40% of exports to U.S. – Americans no longer needed our lumber, paper, wheat, etc. – Results in plants in Canada shutting down

4. High tariffs choked off international trade – A tariff is a tax put on imported products – Europeans are trying to recover from war and have no money – Need North American goods but can’t afford it – Need protection for home industries so increase tariffs – Chokes off trade

5. Too much credit buying – “Buy now, pay later” – helped conveniently buy things you didn’t have the money for – People got into debt because if job was lost or worker got sick, you could no longer afford the item – When product finally paid off it had cost far more than it was worth in the first place

6. Too much credit buying of stock – Buying on margin – take a loan out from the bank, buy stocks with the loan, stock goes up, you sell the stock, pay the loan back to the bank, pocket the profit. – Get rich quick scheme made it seem like it was easy. Everybody was doing it. – But stock prices went down and 1929 crash wiped out big and small investors in a few hours

The Stock Market Crash Black Friday: October 28, $26 billion drop in the value of the stock market -as soon as the stock prices started to fall, people couldn`t pay back their loans -many suicides