Unit 5.7 Classwork: Causes of the Great Depression

The Treaty of Versailles was signed in 1919, and officially ended World War I between Germany and the Allied Powers (Great Britain, France, and the ). The agreement included a controversial War Guilt clause that blamed for the Great War and imposed heavy debt payments on Germany known as . Many historians believed the Treaty of Versailles to the outbreak of the Second World War due to the impact of reparations.

For the United States, however, the effects of World War I were positive -- ushering in the Roaring 1920s as a decade of unprecedented , new patterns of , such as purchasing consumer goods like radios, cars, vacuums, beauty products or clothing

The expansion of in the 1920s allowed for the sale of more consumer goods and put within reach of average Americans. Now individuals who could not afford to purchase a car at full price could pay for that car over time -- with interest, of course!

With so many new products and so many Americans eager to purchase them, became a central institution in this new consumer economy.

The Great Depression was primarily caused by the , overextension of credit, and wealth of the Gilded Age and Roaring 20s. While European countries owed the U.S. money from World War I, those debts were never repaid. When the U.S. economy plummeted after the Stock Market Crash of , many Americans tried to withdraw their life savings during , which caused many banks to foreclose.

Nationwide defaults on loans and mortgages led to rampant unemployment, homelessness, and economic collapse.