Podcast
Questions and Answers
What contributed to the fragility of the global economy post-WWI?
What contributed to the fragility of the global economy post-WWI?
What was a consequence of the stock market crash of 1929?
What was a consequence of the stock market crash of 1929?
Why did many banks fail during the Great Depression?
Why did many banks fail during the Great Depression?
What was a result of the surge in industrial production in the 1920s?
What was a result of the surge in industrial production in the 1920s?
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What was a contributing factor to the credit crisis during the Great Depression?
What was a contributing factor to the credit crisis during the Great Depression?
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What was a consequence of the passage of the Smoot-Hawley Tariff Act in 1930?
What was a consequence of the passage of the Smoot-Hawley Tariff Act in 1930?
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Study Notes
Causes of the Great Depression
Global Economic Conditions
- Post-WWI global economy was fragile and vulnerable to shocks
- Many countries, including the US, had experienced a period of rapid economic growth in the 1920s, leading to a buildup of debt and speculation
Stock Market Crash of 1929
- On Black Tuesday (October 29, 1929), stock prices plummeted, leading to a massive loss of wealth and a sudden contraction in consumer spending
- The crash marked the beginning of the Great Depression, but it was not the sole cause
Banking System
- Many banks had invested heavily in the stock market and had loaned money to speculators
- When the stock market crashed, banks found themselves with large amounts of worthless stocks and unpaid loans, leading to widespread bank failures
Overproduction and Underconsumption
- In the 1920s, there was a surge in industrial production, leading to a surplus of goods
- However, many Americans were unable to afford these goods, leading to underconsumption and a buildup of inventory
Credit Crisis
- Easy credit and installment buying had encouraged Americans to buy more than they could afford
- When the economy began to decline, many people were unable to pay their debts, leading to a credit crisis
Monetary Policy
- The Federal Reserve, the central bank of the US, raised interest rates in 1928 and 1929 to combat speculation, which reduced borrowing and spending
- The Fed's response to the crisis was initially inadequate, allowing the economic downturn to worsen
International Trade
- The passage of the Smoot-Hawley Tariff Act in 1930, which raised tariffs on imported goods, is also seen as a contributing factor to the Great Depression
- The act led to retaliatory measures from other countries, resulting in a sharp decline in international trade
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Description
Explore the various causes of the Great Depression, including global economic conditions, the stock market crash, banking system failures, overproduction, underconsumption, credit crisis, monetary policy, and international trade. Learn how these factors led to one of the darkest economic periods in history.
