Causes of the Great Depression

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by VivaLaVeronica
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Social Studies
American History

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Causes of the Great Depression

--After WWI, the victors of the Great War demanded that Central Powers (Germany and Austria-Hungary) provide war reparations. --However, Germany was already in debt, and therefore, it could not pay Britain and France back. --For this reason, Germany bought a manifold of credit from the US thus exacerbating the issue of excess credit.

Overproduction of Agricultural Goods

War Reparations from WWI

1.What were the latent political and economic causes of the Great Depression?

--The US’ agricultural sector expanded rapidly during WWI, and the US made much profit by selling crops to foreign nations- especially countries in Europe--After WWI, however, European countries began to produce their own agriculture and relied less upon American crops. This caused an overproduction of American agricultural goods, which caused prices for US farm products to plummet. --With the insufficient amount of demand present, US farmers were forced to default on their loans since they borrowed a manifold of money on new farming technology --Farmers all over the US compelled to foreclose their farms at the same time thereby causing a series of bank runs on small rural banks. This series of bank failures lead to early years of the Great Depression.

Latent Political Causes

Overproduction of Agricultural Goods

2. Protectionist Trade Policies Implemented in the US

--This act increased trade barriers by increasing import taxes from 15.2% to 36.6%. Over a two-year time period, this act increased the average import tax by 138% --Made it more difficult for European and foreign nations to trade with the US--This act was passed with intentions to protect US farmers from being undersold by European farmers.

Smoot-Hawley Tariff of 1930

Fordney-McCumber Tariff Act 1923

--dramatically raised the cost of imported goods to 50%--The average ad valorem rate of duties on dutiable imports for 1921–1925 was 25.9% but under the new tariff it jumped to 50% in 1931–1935--Made industrial products more expensive for farmers --Infuriated foreign nations- especially Europe- retaliated with protectionist policies of their own. This only further decreased international trade --US exports dramatically decreased from $5.2 billion to $1.7 billion in 1933.

War Reparations from WWI

Smoot-Hawley Tariff of 1930

--Federal Reserve raised interests to try to quell the stock market speculation (a manifold of stockholders expected the stock market to do well and over invested)--Economists argue that the Federal Reserve raised interest rates too much and induced a recession--Despite watching as the economy burned and crashed, the Federal Reserve did not utilize open market operations --They did not attempt to buy securities from local banks in order to give credit to those smaller banks. --By eliciting a recession, the US citizens’ real debt increased since the value of money increased with the deflation.

1. The Effects of WWI

3. Policies the United States DID NOT Implement

Veronica Nguyen

Fordney-McCumber Tariff Act 1923


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