The Causes of the Great Depression in Canada: 1925-1929

• Much of what led to the Great Depression of the 1930's was a result of the unstable prosperity of the 1920's.

• Through industrialization and trade the world had changed in so many ways.

• And no one was willing to regulate the economy.

• Uncertainty and false confidence led to these underlying causes of the Great Depression:

Causes of the Great Depression: Structure• Overproduction:

1. Too many factories producing too many goods.

2. More than Canadians were able to buy

3. Too much production meant that prices dropped

4. Workers lost their jobs5. Less money in the

economy

•Too many tariffs slowed down international trade.•Tariffs made things worse once the Depression began. Why?

Structural Causes of the Great Depression II

Causes of the Great Depression: Structure

• Canada’s Economy needed two things:1. Selling raw materials

-Wood and paper

-Wheat and fish

2. Trade with the USA-Whatever happened to them, happened to us.

• Overdependence on the United States as a market and a source of investment funds

Credit Buying

• During the 1920’s people were encouraged to “buy now, pay later.”

• People got themselves into huge debts with credit buying. If you fell behind in your monthly payments on the item the person who sold you the item had the right to get it back.

• When the Depression came people

couldn’t afford to make their payments and lost everything.

Stock Market Speculation• How does the Stock Market work?

• Companies want to expand—they need money

• To raise money, they go public and issue shares (stocks) on the stock exchange (Dow Jones, NASDAQ, TSX)

• These shares can be bought and sold by anybody

• If people think a company is doing well, the price of its shares will go up.

• If people think the company is doing poorly, the value of the share goes down.

• Make money by buying shares cheap, and selling them for more money later.

“Buying on Margin”• This is when you take a bank loan to buy stocks.

• The idea is that the stocks will go up in value so much that when you sell them, you will pay back the bank loan and make money.

• Bank loans for buying on margin were easy to get!

WHAT COULD POSSIBLY GO WRONG?

“Black Tuesday”

October 29, 1929

Why Did the Stock Market Crash?• Stock prices were very high

• Investors started selling their shares to make a profit

• Everyone started selling. Why?

International Causes: The Dawes Plan

• Germany was forced to pay reparations to Britain and France for WW1.

• Britain and France owed money to the USA

• Germany could not afford to pay reparations.

• The USA loaned money to Germany via the Dawes Plan

The End of the Dawes Plan

• When the Crash of 1929 happened, the USA could no longer afford to loan money to Germany. Why?

• Bank failures

• Government belt tightening

Summary: Causes of Great Depression in Canada

• No regulation of the economy• Overproduction, unemployment, less money

in the economy• Canada relied too much on raw materials

exports– Trade tariffs

• The US economy collapsed:– Credit buying– Stock Market Speculation, banks collapse

• International collapse of the Dawes Plan