Summarize the causes of the globe economic instability that emerged in the 1920s
1. Treaty of Versailles: The harsh reparations imposed on Germany after World War I led to economic hardship and political instability.
2. Stock market speculation: The stock market boom of the 1920s was driven by speculation and excessive leverage, leading to an unsustainable bubble that eventually burst in 1929.
3. Overproduction and underconsumption: Industrial production increased rapidly during the 1920s, but wages did not keep pace, leading to a mismatch between supply and demand.
4. Global debt: Many countries, including Germany and the United States, were heavily indebted following World War I, leading to financial instability and economic challenges.
5. Protectionist policies: The imposition of high tariffs and trade barriers, such as the Smoot-Hawley Tariff Act in the United States, exacerbated economic instability and hindered international trade.
6. Bank failures: The interconnectedness of the global financial system led to a domino effect of bank failures, further destabilizing the economy.
7. Deflation: Falling prices and declining consumer demand contributed to a deflationary spiral, making it difficult for businesses to generate profits and causing further economic hardship.