The immediate effects of the Wall Street Crash

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Unemployed men lining up to register for work, Berlin 1929.

By 1932 unemployment in Germany reached more than six million. Despite the partial recovery from 1924 to 1929, the Wall Street Crash plunged Germany back into crisis.

Activity

Make a flowchart or mind-map of the events of the wall street crash.

For each stage try to explain why the Wall Street Crash affected Germany so badly.

With hindsight, was Stresemann wrong to use American loans to rebuild and develop Germany's economy during the 1920s?

Over-heated

During the 1920s, the economy of the United States was booming. It was the largest and richest economy in the world. People made fortunes by buying stocks and shares on the United States' stockmarket. Many borrowed money so that they could invest.

Prices kept increasing, making people richer. But, too much money was chasing too few stocks resulting in the market becoming over-heated. On 3 September 1929, stock prices reached an all-time high.

Shortly, prices began to drop, leading to panic and mass-selling. By October 1929, the value of the market had nearly halved. This is known as the Wall Street Crash.

American loans

Suddenly everyone wanted to get their money out. Banks did not have enough money to repay everyone or to lend to businesses. As a result businesses failed, leading to high unemployment across America. As economies were linked together, the rest of the world suffered too.

During the 1920s, the German economy had been supported by loans from American banks. After the Wall Street Crash, the Americans wanted their money back and called in the loans. America gave Germany just 90 days to start repayments. Germany could not pay. 

As in America, German businesses failed. Unemployment reached more than four million by 1931Germany suspended payment of reparations to the Allies.

Links for October 2014