Understanding the Depression

1. Understanding the Depression 10.6.2 - Describe the effects of the war and resulting peace treaties on the international economy 3/1/12 Leave a blank page for your new table of contents

2. Economics at the end of World War I • After the war, USA strongest economy in the world • 50% of world’s industrial production! • Lent $ to UK, France, and Germany • Problem: Overproduction • Demand could not keep up with production • Factories lay off workers • Workers and families purchase less • Leads to further business closures and job loss

3. Inflation in Germany

4. Stations: All work goes into your notebook10.6.2 - Describe the effects of the war and resulting peace treaties on the international economy

5. DO NOW Grab a textbook. Open to page 472. Read the “History in depth” box. Scan the text on pages 472 - 473. Answer in complete sentences: Why might Americans have been buying less in the years just before the stock market crash? How did margin buying contribute to the stock market crash?

6. A Worldwide Depression • WORK TOGETHER and use textbook (p. 470-475) to state REASONS for the following developments Yes, copy them down, • In new postwar democracies, there were frequent changes in government • In Germany, the Weimer Republic was weak from the start • Postwar Germany suffered from severe economic inflation • The US had a flawed economy • October 29, 1929 the US stock market crashed • A long depression followed the crash in the US • Collapse of the US economy affected countries worldwide. • In Britain, the National Government rescued the economy • In France, the Popular Front was formed as a coalition government • Socialist gov’ts in Scandinavian countries dealt with the economic crisis successfully

7. A Worldwide Depression • In new postwar democracies, there were frequent changes in gov’t • Had little experience with representative gov’t; having many political parties made it difficult to reach agreements in gov’t • In Ger, the Weimer Republic was weak from the start • Lacked a strong democratic tradition; many political parties; ppl blamed Weimer Republic for defeat & Treaty of Versailles • Postwar Ger suffered from severe economic inflation • Gov’t printed $ for war expenses & reparations; devalued money • The US had a flawed economy • Uneven distribution of wealth, overproduction of goods and agriculture lessened demand for consumer goods • October 29, 1929 the US stock market crashed • Investors believed stock prices would drop so they tried to sell high-priced stocks they had bought on margin but no one wanted to buy

8. A Worldwide Depression • A long depression followed the crash in the US • Unemployment rates rose as production, prices, & wages fell; businesses & banks closed; savings and farms were lost • Collapse of the US economy affected countries worldwide. • Countries had war debts and depended on US for loans and investments; worried US banks would demand loan repayments; US investors pulled their $ out of Europe; US market for imported goods fell; high tariffs decreased world trade and market demand • In Brit, the National Government rescued the economy • High protective tariffs, increased taxes, regulated currency, lowered interest rates to encourage industrial growth • In France, the Popular Front was formed as a coalition gov’t • Economic crisis in France led to political instability & leaders feared growth of antidemocratic forces • Socialist gov’ts in Scandinavian countries dealt with the economic crisis successfully • Tradition of cooperative community action & gov’t sponsored public works programs kept ppl employed and producing; gave $ to those who needed it

9. Stations: All work goes into your notebook10.6.2 - Describe the effects of the war and resulting peace treaties on the international economy

10. A Worldwide Depression • Postwar Europe • New political realities • Unhappy people did not really favor particular parties • Coalition gov’ts necessary • Had to give in to workers demands (fight off revolutionaries) • Weimar Republic has trouble • Ger ppl unhappy with the Treaty of Versailles • War debts helped create inflation • Inflation is stopped by Dawes Plan • US banks loaned GER $200 mil • Stabilizes Ger economy Coalition gov’t: temporary alliance of several parties Party: group of people with same political ideas Inflation: value of money goes down & price of goods goes up Stabilize: to make stable, not shaky

11. Great Depression • Apparent in the Stock Market Crash • False wealth: people buying stock with borrowed money raised stock prices artificially • Eventually falling prices created a panic and then the crash (prices wiped out wealth) • US economy falls & spreads to world • Uneven distribution of wealth • Surplus of factory & agricultural products • Banks and investors took their $ back from Europe Stocks: ownership of a company Distribution of wealth: how wealth is spread between rich and poor Surplus: extra Public works projects: jobs created by the gov’t

12. Reviewing Global Responses