Critical Thinking Question Please discuss the question below with your neighbor. When something bad happens to you how does it effect the people close to you?
The “Great Recession” Today United States Net Worth—by Households Industrial Production--USA
INTERWAR YEARS Many countries are devastated following World War I. The U.S. emerges as a world leader. Countries grow to rely on them. The stock market crash in 1929 reaches beyond the U.S. borders and the world which has become a global nation suffers as well.
BlackTuesday • Fall of 1929 • Consumer spending slowed, sales suffered. • Many feared drop in stock prices. • Nervous investors began to sell off stocks. • October 29, 1929 • Black Tuesday, 16 million shares of stock sold in one single day. • Few people wanted to buy stock, stock prices collapsed. • Investors who had borrowed to buy stocks forced to sell at loss.
How the stock market can crash • 1) When people buy “stock” in Coca-Cola, they are buying a percentage of the company. • 2) The more people buy Coca-Cola, the more value ($$$) Coca-Cola has. • 3) The more people sell their Coca-Cola stock back to the company, the less value ($$$) Coca-Cola has. • 4) If stockholders (people who own stock) see the value of a company drop, they are more likely to sell their stock.
Understanding the DepressionGlobally • Disruption in world trade • Wall Street Crash, October 1929 • Subsequent collapse of American financial system • Depression was a global breakdown of economic systems. • Common patterns of economic crisis: • Decreased trade • Cutbacks in production and consumption • Increased unemployment • Widespread deprivation/frustration • Radical political agitation
Smoot-Hawley Tariff Act • A Slow Down in Trade • President Hoover signed the Smoot-Hawley Tariff Act. (1930) • Act placed heavy taxes on imported goods. • Purpose of the act was to attempt to encourage Americans to buy American made goods and products. • American goods would be cheaper • than taxed imported goods.
BACKFIRE!! • An Unintended Effect • Smoot-Hawley Tariff resulted in other countries increasing their tariffs on American goods. • World trade slowed to a standstill. • Loss of foreign trade crippled many nations’ economies. • Trade slowed and prices collapsed. • EX: In Japan, the price of silk dropped sharply. Silk is a major export and responsible for 20% of income.
Political Impact: Britain • Economy was weakened by: • World War I. • Persistent economic problems in 1920s. • Shipping and banking weakened by collapse in world trade. • Political instability. • British government responds by: • Protecting industries. (decreased trade) • Resisted calls for spending on services.
Political Impact: France • Economy was weakened by: • World War I. • Persistent economic problems in 1920s. • Political instability. • French government responds by: • Protecting industries. (decreased trade) • Resisted calls for spending on services.
Political Impact: Italy • Economy was weakened by: • World War I. • Persistent economic problems in 1920s. • Shipping and banking weakened by collapse in world trade. • Bank failures. • Industries on the brink of failure. • Italian government responds by: • Benito Mussolini seizes power in 1922. • Mussolini tightens control on his nation. • Attempts to modernize agriculture.
Political Impact: Germany • Economy was weakened by: • World War I • Post-WWI settlement. (Treaty of Versailles) • Inflation of the 1920s. • Extensive borrowing by central bank. • Political instability of Weimar government. • German government responds by: • Cutting public services. • Use of emergency powers to maintain order.
Political Impact:the Soviet Union • Economy GROWS: • Joseph Stalin implements his Five Year Plan’s. • A massive infrastructure overhaul stimulated the Soviet economy. • Joseph Stalin used slave labor and • had appalling working conditions to • complete his massive undertakings.
Let’s Think! • 1) How did the depression affect the world? • 2) Why would the conditions created by the depression be dangerous? • 3) Apply the following lyrics to the global environment in the 1930’s: • I see a bad moon arising; I see trouble on the way. • I see earthquakes and lighting; I see bad times today. • Don’t go around tonight, its bound to take your life, • There’s a bad moon on the rise.