Causes of the Great Depression

1. Causes of the Great Depression Basic Economic Principles Overproduction Dependence on Exports Tariffs and US Protectionism WWI Debt Stock Market Speculation

2. Basic Economic Principles • Oct 29th 1929 Marked the beginning of a recession which progressed to a decade long Depression

3. Market vs Mixed Market Economy Mixed Economy • free enterprise system • Means of production owned by Individuals • Products, services and prices determined by individuals • The government has some involvement • Government-owned industries • Limitations on worker’s right to strike • Subsidies to support certain industries

4. Supply and Demand Prices are determined by Supply and demand • Supply - how much of a product is available • Demand – how much people want the product • When supply is low demand is high and visa versa - Ex Wheat during WWI

5. Economic Cycles • A regular cycle of Prosperity , Recession and Recovery • Expansion in economic activities results in a period of prosperity • followed by a slowdown in the economy called a recession • Recovery is when the economy begins to grow again

6. Causes of the Great Depression

7. Overproduction WWI and the Boom of the 1920s caused massive expansion in industry When the economy slowed down, many companies faced overproduction • Produced more goods than sold

8. Overproduction Solution? Industries: • Lowered prices/stockpiled goods • Decreased production leading to layoffs Layoffs meant fewer people could afford to buy consumer goods so sales slowed down more!

9. Dependence on Exports • 1920s Canada dependent on export of Primary resources • Wheat from the Prairies • Wheat became overproduced internationally leading to fall in demand and therefore price

10. US Tariffs and Protectionism • US was Canada’s largest trade and investment partner • US imposed high Tariffs • Made imports more expensive (wheat) • This protectionism made other countries impose tariffs causing a slowdown in world trade

11. WWI Debt • US lent several countries money during WWI • Many now relied on trade to with the US to raise money to pay back • As protectionism grew, the ability to trade and pay back loans decreased GERMANY WAR REPERATIONS!!

12. Stock Speculation Process • 1920s Companies want to expand so they sell stocks Many investors bought “on margin” • Pay 10% of the stock price assuming that when the price of the stocks increased the remaining 90% would get paid • Loans easy to get, demand drove up price of stock beyond real value

13. Stock Market Crash Oct 29th 1929 • Investors start selling stocks to cash in! • Rush of followers As a result Stock prices fell • Massive panic as people rushed to sell • Causes stocks to fall even more Oct 29th 19129 Black Tuesday New York Stock Exchange collapsed - Caused world wide collapse

14. The Dust Bowl • Prairie land during the 1920s-Alberta, Saskatchewan • WWI and the 1920s Many farmers planted only wheat due to high demand and prices • One crop farming is very hard on the soil • 8 year Drought on the Prairies • High winds blew away top soil • Plague of Grasshoppers • Wiped out any crops that managed to survive

15. The Dust Bowl