What two developments of the 1920s are considered underlying causes of the 1930s depression?

Answer 1

There are actually six underlying causes that are believed to be the reason for the Great Depression. Of course people assume that it started on Black Tuesday, Oct. 29, 1929, when the stock market crashed, but here are six of the UNDERLYING causes.

-Over-production and over-expansion

-Canada's dependence on the United States

-Canada's dependence on a Few Primary Products (Staples)

-Too much buying on credit

-Too much buying on credit of stocks

-High tariffs choked off international trade

There is a simple rule of economics that industrialists seemed to have forgotten: only produce as many goods as you can sell. They became overwhelmed, i suppose. Even in the general prosperity, many families could still not afford to purchase the many goods that were being produced. The goods became an overflow that had to be stored in warehouses. Factory workers were laid off, meaning their families has even less money to spend on goods.

The United States is one of Canada's most important trading partners. When the depression hit the United States, banks closed. Industries collapsed, and people were out of work as factories closed down. No longer did Americans need to buy Canada's supplies. It was inevitable that Canada's economy suffer as well.

Canada's economy depended heavily on a few primary products, known as staples. These included wheat, fish, minerals, and pulp and paper. In the late 1920s, Canada faced competition with other wheat-exporting companies such as Argentina and Australia. With a surplus of wheat in the world marker, the price of wheat began to fall. To add to the problem, western farmers were faced with terrible droughts in the summers of 1929, 1931, and 1933-1937. Without adequate rainfall, crops failed. with little income, farmers could not afford to purchase machinery and manufactured goods from eastern Canada.

All through the 1920s, Canadians were encourage to "buy now, pay later," unaware of the consequences it would have in the future. By 1929, credit buying was a well established custom. With credit buying, many families got them self hopelessly into debt. With interest payments, items often ended up costing far more than they were worth. As the depression worsened, many people lost everything. Their refrigerators, stoves, cars, and even homes were repossessed by their creditors.

Many people thought that the Stock Market was an easy way to get rich quick. This was because you did not have to have a lot of money to purchase a stock. All that was needed was a small down payment. A broker would lend you the rest of the money at a high interest rate. The idea was that as soon as your stocks went up in value, you could sell them. Then you pay back your broker, and pocket the profits. The risky process was called "buying on margin." Many people did not anticipate a nosedive in the stock prices. That is until Oct. 29, 1929. For a few hours that day, the value of most stocks in Toronto and Montreal nosedived by more than 50 percent.

While trying to rebuild after WWI, many countries adopted a new policy known as protective tariffs. To protect their home industries from foreign competition, they placed high tariffs on foreign imports. Export countries countered these policies with those of their own. The trades between countries began to slow down because no one could afford the tariffs.

Answer 2

Overproduction & Excessive Speculation