Depression Causes

Depression  Causes

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  • Excessive Use of Credit
  • Can I buy your Building?
  • Yeah, I know. I just like buying "stuff".
  • Are you sure? The economic boost might not last forever
  • Overproduction of Consumer Goods
  • I want 2 million cars produced this month
  • Yeah, I know. I just like producing "stuff".
  • Are you sure? That's a lot more than consumers will be able to buy
  • Weak Farm Economy
  • I want you to stop working on the farms and work for me instead.
  • Yeah, I know. I just like not growing food and prefer making "stuff"
  • Are you sure? We already have a lot and are missing farm labor.
  • Low-interest rates and a belief of both consumers and business that the economic boom was permanent led to increased borrowing and installment buying. This over-indebtedness would result in defaults on loans and bank failures.
  • Government Policies
  • We have officially raised tariffs by 200%
  • Business growth, aided by increased productivity and use of credit, had produced a volume of goods that workers with stagnant wages could not continue to purchase.
  • Global Economic Problems
  • we dont need to trade with foreigners, were alright
  • yeah, the global economy doesnt matter
  • The prosperity of the 1920s never reached farmers who had suffered from overproduction, high debt, and low prices since the end of World War I. As the depression continued through the 1930s, severe weather and a long drought added to farmers' difficulties.
  • Uneven Distribution of Income
  • Life is so hard
  • During the 1920s, the government had complete faith in business and did little to control or regulate it. Congress enacted high tariffs which protected U.S. industries but hurt farmers and international trade.
  • Nations had become more interdependent because of international banking, manufacturing, and trade. Europe had never recovered from World War I, but the United States failed to recognize Europe's postwar problems (The United States reacted differently after World War II. See Chapter 26). Instead, U.S. insistence on loan repayment in full and high tariffs policies weakened Europe and contributed to the worldwide depression.
  • Wages had risen relatively little compared to the large increases in productivity and corporate profits. Economic success was not shared by all, as the top 5 percent of the richest Americans received over 33 percent of all income. Once demand for their products declined, businesses laid off workers contributing to a downward spiral in demand, and more layoffs.
  • i need food
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