The Great Depression Causes

• The Great Depression was a severe economic recession that began in the United States in 1929, with global repercussions, especially in Europe.

Causes of the Great Depression

• Factors leading to the Great Depression included World War I, changing American attitudes toward debt and consumption, and a loosely regulated stock market.
• World War I transformed the United States into a global financial center due to its support of the Allied war effort.
• The U.S. became the main supplier of goods, including weapons, to Europe during the war, leading to European countries accumulating significant debt to the U.S.
• After the war, the U.S. adopted a policy of diplomatic isolation, raising tariffs in 1921 and 1922 to protect American industries.
• In the 1920s, American consumers incurred significant personal debt, assuming continued economic prosperity and factories depended on consumer purchases to continue.
• The stock market lacked regulation, leading to manipulation of stock prices by speculators.
• Many investors bought stocks "on the margin," borrowing money to cover most of the share value, which worked until stock values decreased.

The Stock Market Crash of 1929

• The stock market crashed on October 24, 1929, known as "Black Thursday," marking the start of the Great Depression in the U.S.
• On October 24, 1929, stock prices plummeted, losing 11% of their value in one day.
• News of falling stock prices prompted lenders to demand loan repayments, triggering a massive sell-off and panic.
• By mid-November 1929, the stock market had lost 33% of its value.
• Banks suffered as investors and businesses failed, leading to a shortage of cash to pay customers.
• Average citizens reduced spending on non-essential goods by 20% in 1930, decreasing demand and causing more business failures.
• Unemployment rates doubled, and households faced bankruptcy as loans were called in.

Impact on the United States

• By 1933, nearly 15 million Americans were unemployed as a result of the Great Depression.
• The Southern Plains experienced severe drought and dust storms in the 1930s, known as the "Dust Bowl" destroying crops and displacing farming communities.
• President Herbert Hoover reduced government spending and signed the Smoot-Hawley Tariff in June 1930, which backfired by prompting retaliatory tariffs and decreasing foreign markets for American goods.
• The Hoover administration rigorously enforced the "likely to become a public charge" (LPC) clause from a 1917 immigration law, restricting immigration during the Depression.
• Consular officials rejected visa applicants who could not prove financial stability, limiting immigration.
• The anti-semitic Nazi's stripping Jews of their financial holdings made it difficult for them to pass the rigorous financial qualifications for entry to America.
• The majority of Americans opposed increasing immigration during the 1930s, fearing job competition.

Global Impact

• The Great Depression spread globally, hitting Europe hard due to the debt owed to the United States from WWI.
• The United States demanded repayment of loans from Allies like Britain and France, worsening their economies.
• Germany faced intense inflation in the 1920s due to Versailles Treaty reparations and borrowed from the U.S. to manage payments, accumulating more debt.
• American loan repayment demands had disastrous effects on Germany's economy, causing bank failures and increased unemployment.
• Germany cut spending, exacerbating the economic crisis.

Impact on Germany

• The Great Depression contributed to the rise of Adolf Hitler in Germany.
• Deteriorating economic conditions created an environment where people were open to extreme political systems like fascism and communism.
• Hitler's antisemitic and anticommunist rhetoric blamed Jews for the Depression, gaining support.
• Economic instability and uncertainty contributed to Hitler's rise to power by creating an environment in which he gained support.