AP US History
The Economy of the Roaring Twenties
The economy of the United States during the Roaring Twenties looked reassuring to the entire nation. Because of this, the Great Depression was a shock to the seemingly healthy nation. The depression, which began in 1929, was the harshest economic turn that the United States had ever seen. Almost instantly, the country's unemployment rate jumped from four percent to an overwhelming twenty five percent. Many believe that the depression was caused by the crash of the stock market in 1929. Although this is partly true, the stock market did not just crash spontaneously. There were many factors during this time period that led to its collapse.
A small but important factor in the United States' economic problem was the enormous debt that Germany never re-paid. After World War I, both France and Great Britain demanded that Germany make reparations. They totaled around $32 billion as compensation for war-inflicted damages. With the money they received from Germany, France and Britain hoped to settle their debts with the United States. The problem with this plan was that Germany simply could not afford the debts it owed the Allies. The Dawes Plan of 1924 seemed to be a solution to this economic problem - it created a financial cycle between the United States, Germany, France and Great Britain. U.S. bankers would loan money to Germany, Germany would then pay reparations to France and Great Britain, and the former Allies would pay war debts to the United States. The source of this cycle was the seemingly endless flow of 1920’s American credit. However this flow came to a halt after the stock market crash of 1929. As a result, the U.S. was never repaid it debts in full from its Allies in Europe (except from Finland).
Another major factor that contributed to the economic crash that began in 1929 was the unequal distribution of wealth among United States'...
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