Great Depression (1 jan 1929 ano – 1 jan 1934 ano)

Descrição:

The great depression was a financial and currency crisis that started in the USA in 1929 and spread all over the world.
It caused deflation, unemployment, bank runs, bank failures, sharp increase in poverty and decrease in industrial output as a result of diminishing demand.
Four factors played a massive role:

The first one is the stock market crash of 1929, where many people gambled away their savings on margin and got margin called, leaving the stock market scene in debt.
This led to a decrease in consumption and subsequently in output.

Banking panics such as bank runs led to many banks having liquidity issues, as people were withdrawing all their money and keeping it cash. Many banks failed (about 20% of all existing banks in the US)

The gold standard imposed economies to higher interest rates in order to counteract trade imbalances with the USA (which was not importing as much as it did), depressing spending and investments in those countries.

The Smoot Hawley Tariffs in 1930 which raised trade barriers on many imported goods, which caused other states to retaliate, causing a decrease in trade.


- financial & currency crisis
- gradual decline in growth outside the US
- huge speculation on the US stock market
- FED decided to raise interest rates to avoid
speculations
in stock market and to restore trade imbalance(which led to less lending
and reduced money supply )
- huge stock market crash led many common
people who bought on margin to lose most
of their positions, leading to less
consumption and spending, further
worsening the crisis
- growth of unemployment
- massive farm bankruptcies and rural unrest in US
- liquidationist: "Let's not do anything, crisis will correct
itself" --> didn't happen
- In Germany discontent was growing, Nazis on the rise
- financial failures of banks, one pulling the other down
- lenders stopped lending, businesses couldn't borrow (credit crunch)
- money wasn't moving, reinforcing the debt-deflation cycle
- gold standard was impeding many to act on their internal
problems
- gold standard was speeding the spreading of the crisis
- "hot money" moving from one country to another causing
money shortages & bank failures

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