The document summarizes several key causes of the Great Depression:
1) After WWI, European nations owed huge debts from the war to the US but lacked wealth to repay. The US encouraged credit expansion, making repayments reliant on the US economy.
2) In the 1920s, low interest rates and widespread availability of credit fueled overproduction, risky investments, and consumer debt.
3) The stock market crash of 1929 exposed the debt problems and wiped out many individuals' savings, severely reducing consumer spending and demand. The passage of restrictive tariffs in 1930 further damaged global trade and the economy.
This presentation informing about great depression 1929. Telling us reasons of great depression, what happen in this processand How to find a solution for the crisis?
This presentation informing about great depression 1929. Telling us reasons of great depression, what happen in this processand How to find a solution for the crisis?
OLD The Saratoga Neighborhood Surveillance Camera initiativeRishi Kumar
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THe FAQ and Process to Saratoga's Neighborhood Surveillance Camera - by the Safe Saratoga Citizen's committee
This paper was published in the International District Energy Association (IDEA) magazine 4th quarter 2015. The article describes the planning philosophy, design challenges and evaluation of performance of the system.
The Great Depression was a major monetary droop in the 1930s. Numer.docxrtodd33
The Great Depression was a major monetary droop in the 1930's. Numerous Americans lost their positions, their investment funds, and their homes. In any case, the United States was not by any means the only influenced nation. The business droop influenced the whole world. Many quality Black Tuesday, when the New York Stock Exchange slammed in 1929, as the significant reason, yet one can not disregard the way that there was not only one single factor causing this financial defeat. Most antiquarians and financial analysts concur that the securities exchange crash was only one of numerous supporters of the droop. As a general rule, it was all the more a sign that things had just turned out badly. To comprehend the Depression's causes, one must go further back. The Great Depression came about because of a blend of efficient and political causes that had been developing since months preceding the accident.
After World War I finished, American ranchers made some troublesome memories making benefits. The homestead despondency of the 1920's was a contributing financial factor to the Great Depression. Ranchers were delivering a surplus and well over what American customers were obtaining. Costs of rural items fell around 40% by 1921 and stayed low for the remainder of the decade. A few ranchers were in so much deficiency they couldn't take care of the home loan on their homestead and needed to lease the land or even leave. Harsh occasions had hit other significant pieces of the economy, also, including vitality, coal mining, railways, shipbuilding, and materials. Organizations had a lot of stock and too barely any purchasers.
Likewise, high taxes and war obligations were political reasons for the Great Depression. America had loaned cash to the United Kingdom and other
European countries in World War I
reparations. This made numerous different economies become dependent on the U.S. economy. As the United States encountered this monetary downturn, numerous different countries were influenced as America demanded reimbursement. European nations couldn't bear to reimburse their obligations. Pressures were additionally exacerbated when the Hawley-Smoot Tariff Act was passed in 1930. In view of the goals of protectionism, this demonstration raised import obligations to secure American ranchers and specialists, bringing about world exchange decrease by 66% from 1929 to 1934 and worldwide financial strain.
The 1920's were a period of incredible financial and innovative development in America. World War I had quite recently finished, and Americans were prepared to take a break from the nervousness of world legislative issues. During this time, known as the Roaring Twenties, Americans were centered around bringing in cash and having a fabulous time. Manufacturing plants worked to make weapons and ammo for the war were restored to produce purchaser items. In any case, overproduction in industry brought about a financial reason for the Great Depression. .
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The presentation tells about all the aspects that led to the great economic depression in 1929. All the historical, financial and other factors are looked upon with the help of online available data.
The Great Depression (1929-39) was the deepest and longest-lasting economic downturn in the history of the Western industrialized world. In the United States, the Great Depression began soon after the stock market crash of October 1929, which sent Wall Street into a panic and wiped out millions of investors. Over the next several years, consumer spending and investment dropped, causing steep declines in industrial output and rising levels of unemployment as failing companies laid off workers. By 1933, when the Great Depression reached its nadir, some 13 to 15 million Americans were unemployed and nearly half of the country’s banks had failed. Though the relief and reform measures put into place by President Franklin D. Roosevelt helped lessen the worst effects of the Great Depression in the 1930s, the economy would not fully turn around until after 1939, when World War II kicked American industry into high gear.
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Great Depression of the American Economy
Great Depression was an austerely down trend in the economic activity of the world in the decade foregoing World War II. The time duration or rather the time for the Great Depression Was not fixed. It varied from countries to countries. However, in many countries it was experienced in the year 1930 and it lasted till the midst of 1940. The time duration for the Great Depression was for a longer period of time and it was considered the longest as well as the deepest depression of the twentieth century
The beginning point of the Depression was the fall or the crash in the stock market in U.S. The fall in the prices of stock began in the year 1929 on 4th September and the stock market crashed on the 29th of October in the year 1929. This day was known as the Black Tuesday.
The Great Depression affected severely all the sections and the class of the society in the countries including the rich and the poor. Profit Margin and the prices of the goods and services severely dropped and if the amount of revenue and taxes collected also had a devastating fall which had severe negative effect on the economy. The level of Unemployment rose in U.S. and it was depicted that around twenty percent of unemployment rate increased in U.S. whereas, in other countries the level of Unemployment rose to thirty three percent which was the highest ever increase in the rate of the unemployment process.
All the cities around the world were suffering due to this depression and especially those cities or countries whose backbone was heavy industry, construction industries because this industry totally turned downed and halted in various countries. Due to the depression the agriculture sector was also effected as because the prices of the crop also fell to around sixty percent.
Due to unemployment the primary sector was also affected, activities such as mining, logging and cash cropping was effected a lot.
There were various causes for the depression in the year 1929. These comprised of the primary weaknesses and definite events that led to a major depression and the way in which the severe depression profused from country to country was simply devastating. According to the historians the main cause or the real reason behind the great depression was failure of the bank and the crash or the fall of the stock market. However, the various monetarist economist such as Milton Friedman, Peter Temin and Barry Eichengreen states that the major cause behind the depression was the inappropriate action considered or adopted by the US Federal Reserve and the limited supply of the money and the decision of Britain for returning of gold standard before the World War.
The activity of business and the period of Boom and depression in the business and recession are considered or rather regarded as the normal activity for the business and are considered normal. However, what are t.
Osisko Development - Investor Presentation - June 24
Causes of the great depression
1. J E E M A N G H A N I
Causes of the Great Depression
2. What was the Great Depression?
A deflation in asset and
commodity prices
Dramatic drops in demand
and credit
Contraction of the money
supply
Disruption of trade
Widespread poverty and
unemployment
Generally agreed that it
started in 1929
Lasted until 1942
3. First things first
To understand why things
collapsed in 1929, you have to
understand the 1920s.
And in order to understand the
1920s, you have to go back to
the aftermath of World War
One.
4. World War One
During the war, European countries had to finance
the expensive war.
Most of the countries, including Germany, France,
and England abandoned the gold standard.
They also borrowed hefty sums of money from
America.
5. Paying back their debts
The Versailles Treaty forced Germany to repay the full cost of the war to Great
Britain and France.
(The original bill was 269 billion marks to be paid off by 1984. The allies reduced it
to 132 billion marks. Full repayment of all debts will be finished in 2010)
In turn, G.B. and France would pay their debts to the USA.
None of these countries had the wealth to pay back their debts. Thus, the US let
them borrow money to rebuild their industrial infrastructure, thereby increasing
their debts.
To help fuel this pipeline of repayments, the US helped to fuel a credit expansion in
Germany, which made the repayment of debts to the US reliant on the US.
6. American Tariffs
During WW1, American farmers enjoyed very healthy
exports of food.
After WW1, they suffered under over-expansion and
many farmers struggled to stay solvent.
European countries were trying to pay their debts by
flooding the American market with their cheaper
products.
As a result, the Fordney-McCumber Tariff was
passed, putting 38% tariffs on all imported goods.
This actually encouraged Americans to buy American
goods, creating a fairly health economy.
However, this prolonged European recovery.
7. 1922-1925
America was in the growth phase of the economic
cycle.
America was enjoying steady but unspectacular
growth as Americans bought American products.
The DJIA went from 78.91 to 120.51 during these 6
years.
8. Returning to the Gold Standard
Great Britain’s pound was the reserve currency of
the world at the time. To return prestige to the
pound, they wanted to return to the Gold Standard
at pre-WWI convertibility.
Gold reserves had been flowing out from England
and into the US. Thus, there were too many pounds
for each unit of gold, causing deflation as the excess
pounds were being destroyed by the lack of backing.
Increasing their already high interest rates would
have decreased their corporate investment
environment and increased their high
unemployment.
9. Returning to the Gold Standard,
continued
Montagu Norman, head of the Bank of England, had
an especially good relationship with Benjamin
Strong, the head of the Federal Reserve.
In late 1924, Strong lowered US interest rates in
order to make US rates of return less attractive,
while GB increased their rates.
Gold started to flow into Great Britian, strengthening
the pound.
10. Fuel to the Fire
American interest rates
dropped from 4.5% in 1924 to
3% in 1925 during a strong
economic cycle.
This encouraged more trading
in the stock and commodities
markets.
This encouraged the growth
of corporations and bankers
extending credit to borrowers.
11. Fuel to the Fire, cont’d
The “Roaring Twenties”
went into overdrive as
people who normally
couldn’t afford cars,
radios and electricity,
were now getting loans to
buy.
Corporate profits
continued to jump, as did
the GDP.
Optimism was unbridled
as most people believed
that the good times would
never end.
12. Debt is a good thing?
With credit being so cheap, corporations and
bankers borrowed money and lent them out to the
populace to finance a high standard of living.
The rate of production and expansion increased
rapidly to meet the growing demand, which was
fueled mainly by debt.
Banks took part in speculative investments in the
stock market with their depositor’s money.
Small investors “leapt giddily into the stock market
in large numbers” with a margin requirement of 10%
in the mid 1920s.
13. 1927
Great Britain was encountering
more economic problems in
returning to the gold standard.
The Fed had increased rates in
1926 back to 4%, but cut them in
late 1927 to 3.5% to help Great
Britain.
This set off the final frenzy of
stock trading.
The DJIA went from 156.41 to
200.7 in 1927.
14. 1928
In 1928, greater numbers of people
jumped into the stock market as
everything could only “go up”.
The DJIA went from 200.7 to 300.
The Federal Reserve was concerned
about the mania on the market and
raised interest rates fairly promptly
after dropping them in 1927.
By the summer of 1928, they were at
5%.
Margin requirements were raised
from 10% to 50% of the loan,
although this was loosely followed.
15. 1929
By February, cracks were beginning
to show in the economy.
Inventories were piling up, leading
to concern about consumer
sentiment.
Common sentiment was that the
nation had reached a “permanent
plateau of prosperity”.
The DJIA continued to climb from
300 to a high of 381 September 3rd.
The average P/E of the S&P was
32.6.
16. The Federal Reserve Moves
Interest rates stay steady at 5% for most of 1929.
In August, they raise it to 5.78%, and in September,
to 6%.
17. Babson Break
September 5th, 1929, economist Roger Babson gave a
speech saying that “Sooner or later a crash is
coming, and it may be terrific“.
That day, the market fell 3% and the “smart money”
realized fear was starting to creep into the markets.
They started selling their positions.
That day was to be known as the “Babson Break”, as
it marked the start of the high volatility in the
markets.
18. Black Thursday
The decline from the Babson Break to Oct. 24 was 20%, after a
series of rallies and drops.
October 23, the market fell 6.3% in one day to 305.85, with a
volume of 6 million shares, leading to panic the next day.
October 24 was known as Black Thursday where a record
12.9 million shares were traded. However, the market
dropped only 2% to 299.47 on that chaotic day.
Around 1:30pm, the market was down from 312 to 277, as the
NYSE Vice President, Richard Whitney came onto the floor
and loudly bid for shares, causing a rally. The DOW ended up
down only 2%.
Friday, October 25 largely traded flat and many people
thought that the worst was over.
19. Smoot-Hawley Tariff Act
Weekend reporting on the stock market dropped
caused a lot of alarm and concern as investors
digested the news.
More destructive, however was the news on the
Smoot-Hawley Tariff Act on the same weekend.
With the drop in economic output during 1929,
Congress and Hoover were considering increasing
tariffs on imports from 40% to 60%, to encourage
Americans to prefer American goods.
Most economists predicted that retaliatory tariffs
would be raised by other countries, seriously
damaging American exports, and frowned on this
bill.
1,000 prominent economists sent a plea to the
government to refrain from passing the bill.
The weekend between Black Thursday and Black
Tuesday, word leaked the Hoover would not veto
Smoot-Hawley.
20. Black Monday and Tuesday
Monday, October 28, based on
the declines since September
and the news of Smoot-Hawley,
more investors got out of the
market.
A record loss of 13% on the
DOW for that day, falling to
260.64.
October 1929, 16.4 million
shares were traded as the
market fell another 12% to 230.
21. Hoover Steps In
Hoover rejected Treasury Secretary Andrew Mellon’s
“leave it alone” approach.
In November, amid billions in losses for the average
person, Hoover meets with business leaders.
In the summit, he encouraged businesses to keep
wages steady to keep consumer spending at elevated
levels.
However, the debts of many Americans had
devastated their own finances.
Many Americans lost a lot of money in the market
and curtailed their own spending by over 10%.
22. Consumers are Tapped Out
Consumers also couldn’t not repay their debts, and
their assets were repossessed.
Ramped up over-production, dropping consumer
demand along with repossessed collateral led to
excessive inventories.
Businesses could not keep their payrolls at the level
Hoover requested while their revenues and the
prices of their products were dropping.
23. DJIA Struggles for its Former Glory
Bottom feeders came back into the market after the
crash.
Even though the over-rosy optimism was shattered, the
general sentiment was that the market would self-
correct.
The DOW nearly hits 300 in May of 1930, a 50% gain.
It was quite possible for quick recovery…
24. DJIA Struggles for its Former Glory
5. "Stock prices have reached
what looks like a permanently
high plateau.” – Irving Fisher,
10/17/29
7. "Hysteria has now disappeared
from Wall Street."
- The Times of London,
November 2, 1929
9. "[1930 will be] a splendid
employment year."
- U.S. Dept. of Labor, New
Year's Forecast, December 1929
15. "While the crash only took
place six months ago, I am
convinced we have now passed
through the worst” - Hoover,
5/1/1930
Google: “Pompous Prognosticators”
25. Smoot-Hawley Passes!
June 17, 1930, the excessive tariffs pass
Hoover’s desk with a signature.
Investors knew this would hurt the
already struggling businesses as world
trade would plummet.
The DOW falls that month to from 275 to
226
26. America Stops Investing Overseas
The engine that kept the world economy humming stopped as deficits in
the US budget needed to be amended.
Germany was hung out to dry, as American investment disappeared.
Imports into America dropped precipitously with the new tariffs, and
other economies start to struggle.
Over the coming months, many countries by passing their own tariffs on
American imports. World trade slows.
27. American Business Start Layoffs
Combined with weak domestic demand and the
retaliatory foreign tariffs, American businesses start
laying off.
28. US Budget Deficits
In 1930 and 1931, Hoover:
1) Increased subsidies to farmers
2) Created unemployment assistance.
3) Increased public works spending.
4) Created a series of organizations to help distressed
Americans.
The increased spending caused deficits, and Hoover
agreed to the largest tax increase in American history.
The top income earners saw their taxes jump from 25%
to 63%.
29. Monetary Contraction
During this time, fractional reserve banking was working
in reverse as defaults increased.
Credit was being destroyed faster than anyone thought.
The tax increases inhibited investment as the risk
outweighed post-tax rewards.
The Fed dropped rates from 6% in Oct. ‘29 to 1.5% in mid
1931.
30. Bank Reserves
Bank reserves were distressed due to defaulted loans.
Banks also lost depositor cash by speculative trading.
Dropping rates kept them solvent for some time,
even though bank failures were climbing.
Number of Bank Failures
1929 – 659
1930 – 1352
1931 – 1456
31. The Fed raises rates
Concerns in 1931 about the dropping value of the
dollar and inflation prompts the Fed to raise rates
from 1.5% to over 3%.
32. Bank Failures
The increase in rates cause bank balance sheets to
worsen.
Americans, having no insurance on their deposits, rush
to withdraw at the same time.
Banks usually carried 10-20% of deposits at any time.
With the increased Fed funds rates, banks are unable
to survive.
Number of Bank Failures
1929 – 659
1930 – 1352
1931 – 1456
1932 – 2,294
1933 - 5190
33. The Perfect Storm
Defaulting consumer debt, plummeting world trade,
consumer fear, failing banks, and destroyed savings all
combined to monetary contraction and deflation.
Deflation caused falling wages, making it harder for them
to service their debt, causing more defaults and more
monetary contraction.
34. Schools of Thought
Early theories – Overproduction and under-consumption.
Money should be pumped into consumer pockets. Hoover
and Roosevelt ascribed to this, however, most consumers
put their money into repaying debts.
Keynesian – Government should run deficits in times of
trouble. The tax and fed rate increases caused the most
problems.
Moneterists – The fall in the money supply caused the
Depression. The Fed should have increased liquidity, but
didn’t reach far enough.
Gold Standard – Pegging the currency rigidly to a fixed
amount of gold tied the hands of the Fed.
Austrian School – The credit bubble in the 1920s led to
unsustainable boom in asset prices and capital goods.
35. Depression lasted until 1942
Despite some amount of recovery during FDR’s
administration, a 2nd severe recession occurred after
his first term.
The New Deal intended to help the average man at
the expense of business, leading to high levels of
unemployment.
America didn’t pull out of the Depression until the
over-supply of labor became soldiers and the need
for productivity jumped for the war effort.