$132 billion papermarks debt faced by Germany post-WWI.
Postwar Europe saw shifts in economic power:
U.S. began to dominate economically as European countries, weakened by war, were unable to fulfill debts.
Economic exports from the U.S. grew at a pace that Europe could not match due to their instability.
New democracies emerged in Europe after WWI as absolute monarchs were overthrown.
Establishment of the Weimar Republic:
Formed in 1919 after the abdication of Kaiser Wilhelm II, marking Germany's shift toward democracy.
Named after the city where the national assembly convened.
Characteristics of the Weimar Republic:
Doomed due to lack of experience with democracy and inability to perform basic governmental functions (e.g., trash collection).
Political instability with no party capable of winning a majority.
Germany faced significant challenges due to war reparations and had to borrow heavily from the United States.
Friedrich Ebert, the first president of the Weimar Republic, faced backlash referred to as the "November Criminal" after signing the Treaty of Versailles.
Definition: Hyperinflation occurs when prices increase by more than 50% in a month.
Drivers of Hyperinflation:
Caused by overprinting of money to pay for reparations and government spending instead of tightening the money supply.
The result was a devalued currency and prices skyrocketing; there were reports of people using papermarks for kindling or wallpaper due to worthlessness.
Post-WWI, Germany could not meet reparations and continued to print money, worsening currency value.
International assistance through the Dawes Plan in an effort to stabilize the economy:
$200 million loan from the U.S.
Established a more realistic schedule for reparations payments.
Various economic weaknesses contributed to the onset of the Great Depression:
Uneven distribution of wealth.
Overproduction in factories and agriculture leading to reduced demand and layoffs.
Stock market crash in October 1929 - a significant drop in stock prices due to panic selling.
By 1932:
Factory production halved, unemployment reached 25%.
Closure of thousands of businesses and banks, with depositors losing money due to poor investments.
The Dust Bowl worsened conditions for farmers, compounding economic strain.
Franklin D. Roosevelt (FDR) took office in 1933 and introduced the New Deal:
Promoted government intervention in the economy through public works projects, modifying tax policies, and welfare programs.
Aimed to provide jobs and relief to millions of unemployed Americans.
Implemented Keynesian economic theory promoting active government involvement to circumvent the recession.
A summary of key New Deal programs and their significance:
Agricultural Adjustment Act (AAA): Helped reduce crop supply to stabilize prices.
Civilian Conservation Corps (CCC): Provided jobs in conservation projects.
Federal Emergency Relief Administration (FERA): Distributed relief funds to the unemployed.
Glass-Steagall Act: Established the FDIC to protect bank deposits.
National Industrial Recovery Act (NIRA): Promoted fair competition and minimum wages.
Social Security Act: Provided pensions and insurance for vulnerable populations.
Throughout, the New Deal aimed to restore confidence in the economy and assist Americans through direct support and job creation.