The Party's OverThe Depression is a world-wide event. All the major nations in Europe are deeply affected, with persistent high unemployment rates similar to those in America. The entire world economy, it seems, has stalled. President Franklin Roosevelt tries to restore prosperity in America with government programs on a scale never before attempted. This helps to blunt the worst misery, but unemployment remains stubbornly high. Germany takes advantage of the turmoil in Europe to start another great war, which finally breaks the fever. Massive new wartime spending ends the Depression. But the war is followed by a sinister new threat. Communism. |
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Wakeup Call The graph (in RED) shows the extent of the market crash, dropping 90% before recovering to previous levels. Compare the big box (at right on graph) with the much smaller box of the 1907 Panic (at left). Before the crash, the market rises sharply on surging investor enthusiasm, beginning in 1925. Ordinary people are buying stocks for the first time, sometimes on credit, hoping to cash in on America's first bull market. Banks are also rushing in, investing money from customer deposits. With the crash, people immediately begin cutting back on spending, with a snowball effect. Nearly half the nation's banks fail, wiping out family savings. The situation is especially dire for farmers, as crop prices plummet, and banks foreclose on farm mortgages. | |||||||||
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Worst Ever The 1929 crash makes all previous panics seem mild, by comparison. This is largely because of the unprecedented runup in stock prices prior to the event, driven by two new factors. One is the rush of ordinary Americans, who lacked any financial experience, into the stock market. Market trading had previously been limited to institutional professionals. Perhaps equally important, however, is the huge amount of money that market brokers are suddenly lending for the specific purpose of buying stock, using the stock itself as collateral. This adds to the new money flooding into the market, driving up prices in a wild buying frenzy. Stock prices eventually return to normal levels, but it takes five years. Damage to the economy persists even longer. | |||||||||
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Fixing the Mess Herbert Hoover is president when the market crashes in 1929, and the entire economy suddenly plunges into free-fall. Hoover is widely admired for his no-nonsense, engineering approach to solving problems. It's something of a surprise, therefore, when his efforts to stabilize the situation prove ineffective. After three years of effort, with the Depression at its worst, Hoover is replaced as president by Franklin Roosevelt. Roosevelt's massive 'New Deal' spending program, which begins with new banking guarantees, immediately halts the slide. Even so, unemployment is still double the normal level. In the end, it takes the burst of wartime spending at the beginning of World War II to finally end the Depression. | |||||||||
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Here We Go Again Back in 1914, the First World War is such a monstrous waste of people and resources that many people are confident it will never be repeated. Sadly, Hitler has different ideas when he sets out to restore the glory of the German Empire, just 20 years later. For the first two years of World War II, no one is able to resist Hitler's heavily-armored war machine. By 1942, almost all of Europe is under his control, plus large parts of Russia (dashed line at left on map). The Japanese, meanwhile, take advantage of the situation to conquer most of East Asia (dashed line at right). The tide slowly turns during the next three years, as America pushes Japan back in the Pacific, and the Soviets drive Hitler all the way back to Germany, destroying the heart of his army. | |||||||||
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Happy Ending When it's finally all over, and Hitler is gone, Americans come home to a country untouched by war. Europeans share in the celebration, but for them, the evidence of war was still fresh. It will take a decade to recover. | |||||||||