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Causes of the Great
Depression
Homburg
Inflation
• Most Europeans countries emerged from
WWI with inflated currencies
• After German hyper-inflation, Europeans
feared inflation as a source of social and
political instability.
• Most European governments refused to
run budget deficits when the depression
struck
German economy
•
•
•
•
•
1914- German Mark was 5 to $1
1922- German Mark was 162 to $1
End of 1922- Mark was 7000 to $1
1923- German Mark was 294,000 to $1
End of 1923- Mark was 4.4 trillion to $1!!!
Definitions
• Gross Domestic Product (GDP)- refers to
the market value of all final goods and
services produced within a country in a
given period.
• Recession- Decline in Gross Domestic
Product (GDP) for two or more quarters
• Depression- Economic downturn where
GDP declines by more than 10%
• The depression originated in the U.S.
starting with the stock market crash of
1929. It quickly spread to almost every
country in the world
• GDP declined by more than 30 percent
from 1929-33
• Unemployment in the U.S. rose to 25%
• Crop prices fell by 60%
U.S. Stock Market Crash 1929
• Share prices were rising throughout the
1920s. People speculated prices would
rise further
• Many people borrowed money to buy
more stocks
• The market turned and people began
panic selling
Agriculture Problems
• Agricultural problems- better farming and
transportation led to increased supply and
lower prices
• Tariffs often prevented the export of grain
among European countries
• Farmers would borrow money to buy
machinery and land, they could not make
payments because of falling prices
GDP
Unemployment
• A recession is when your neighbor loses
his job. A depression is when you lose
yours. (Ronald Regan)
The Great Depression vs. The
Great Recession
• The Great Depression • The Great Recession
– GDP declined by more
than 30 percent from
1929-33
– Unemployment in the
U.S. rose to 25%
– 8.4 million job losses
– Unemployment in the
U.S. is 8.5%-15.6%
– GDP declined by as
much as 2.9%
John Maynard Keynes