Great Economic Depressions

Causes and Effects

Group Members Name of the member Roll Number

Himanshu Phatnani 54

Atharva Ponkshe 55

Yogesh Prajapati 56

Tarun Rohra 57

Sumit Sabhasandasani 58

What is Recession then?

• An economic contraction when GDP declines for two consecutive quarters

• much frequent than economic depressions

• much easier to deal with!

Notable Economic Depressions

• Panic of 1837 (1837 – 1845)• Long Depression (1873 – 1896)• The Great Depression (1929 – 1945)• Greek Depression (2009 - Present)

Panic of 1837• Causes : Domestic :Speculative lending practices in western statesSharp decline in cotton pricesBanks Stopped taking payments in Gold and

silver

International :International specie flowRestrictive lending practices in Great Britain

Effects

• It’s effect lasted for 5 years from 1837-1842• New Jersey and Delaware districts were reported to

have greatest stress of the panic• Within two months the losses from bank failures in

New York alone aggregated nearly $100 million• Out of 850 banks in the United States, 343 closed

entirely, 62 failed partially• Unemployment touched the entire nation during this

period

Long Depression

Causes• Boom in railroad

construction

• Large infusion of cash in speculative railroad industry

• 1873 coinage act reduced domestic money supply

Effects• Involvement of capital in

projects provide no early returns

• Increase in interest rates thereby hurting farmers

The Great Depression

• the longest, deepest, and most widespread depression of the 20th century

• The depression originated in the U.S., after the fall in stock prices that began around September 4, 1929, and became worldwide news with the stock market crash of October 29, 1929.

THE GREAT DEPRESSION :

CAUSES

Stock Market Crash 1929

Bank Failures

Drought Conditions

American Economic Policy with Europe

Reduction in Purchasing Across the Board

Stock Market Crash 1929 • Black Tuesday, October 29, 1929.

• Stockholders lost more than $40 billion dollars.

• By the end of 1930, America truly entered what is called the Great Depression.

• Dow Jones industrial average dropped over 12%.

• Result of mass panic selling of stocks, causing prices to plummet .

• Flood of sell orders provided stock prices to traders.

Bank Failures

Reduction in Purchasing

• Throughout the 1930s over 9,000 banks failed.

• People who had their life savings in the banks – lost their money.

• Individuals from all classes stopped purchasing items.

• Reduced Production leading to reduction in Workforce.

• Unemployed were unable to pay installments on their items, which were ultimately repossessed.

• Unemployment rate rose above 25%.

American Economic

Policy

• Government created the Smoot-Hawley Tariff in 1930.

• Charged a high tax for imports thereby leading to less trade between America and foreign countries.

Drought Condition

s

• Drought occurred in the Mississippi Valley in 1930.

• People could not even pay their taxes or other debts . • Forced to sell their farms for no profit to themselves.• The area was nicknamed "The Dust Bowl."

Economical Effects

World-wide economy collapse

Decrease in International trade by 30%

30 million people were unemployed around the world.

Political Consequences

Fascism and militarism

Totalitarian communism

Welfare capitalism

• Increase in Crime rate.• No Professional Education.• Migration of people for better standard of

living.• Formation of labour unions.

Social and Cultural Effects

Greek Depression

• Also known as ‘ Eurozone crisis’• a group of 10 central and eastern European

banks asked for a bailoutCauses : Globalization of finance Easy credit conditions during the 2002–2008 International trade imbalances Poor fiscal policy choices

How to deal with the problem?

• Creation of the common treasury for Eurozone nations

• The ECB would direct the banks to maintain their credit lines and outstanding loans, while closely monitoring risks taken for their own accounts.

Yes..There are more solutions!!

• The ECB would enable countries such as Italy and Spain to temporarily refinance their debt at a very low cost

• These steps would calm the markets and give Europe time to develop a growth strategy

Thank You!Questions??

Sources

• Wikipedia• http://blogs.ft.com/• http://www.digitalhistory.uh.edu/• http://americanhistory.about.com/