Shocking History: Why Canada's Great Depression Was The Worst Financial Crisis

Summary

The video explores the economic challenges faced by Canada and the US during the early 20th century, focusing on the 1907 crisis, the Great Depression, and subsequent recovery. It highlights Canada's reliance on commodity exports, the impact of the Smoot-Hawley Tariff, and the banking systems in both countries. While the US struggled with massive unemployment and bank failures, Canada’s banking system remained more stable. Roosevelt’s New Deal policies contrasted with Canada's more conservative approach. The economic prosperity that followed World War II saw the US banks thrive, while Canadian banks grew steadily in a more stable environment.

Takeaways

• 😀 The 1907 financial crisis was averted in Canada, but Europe plunged into war seven years later, driving Canada to introduce income tax.
• 😀 The Great Depression had a devastating impact on Canada, with per capita income dropping by 50% and 75% in Saskatchewan, mainly due to declining commodity prices like wheat.
• 😀 The Smoot-Hawley Tariff in the United States exacerbated the global depression by imposing high tariffs on Canadian agricultural products, causing retaliatory tariffs worldwide.
• 😀 The banking system in the US faced widespread failures during the Great Depression, while Canada's banks remained relatively stable due to their larger geographical reach and better management practices.
• 😀 Prime Minister Bennett of Canada, a former banker, emphasized the importance of maintaining sound banking principles, which helped Canadian banks survive the Great Depression.
• 😀 In the United States, the Great Depression saw unemployment rates soar to 25-33%, and the government initially offered no direct relief to struggling citizens.
• 😀 Franklin Delano Roosevelt's New Deal introduced policies like the Glass-Steagall Act, which separated commercial and investment banking to restore trust in the financial system.
• 😀 While the US focused on sweeping economic reforms, Canada created a central bank to help stabilize its economy during the Depression, though it didn't see the same level of innovation as the US.
• 😀 The outbreak of World War II effectively ended the Great Depression, as the war effort stimulated economic growth and employment in both Canada and the US.
• 😀 Post-war prosperity followed the Great Depression, with the US banking system continuing to innovate and compete, while Canadian banks expanded as the economy grew.

Q & A

What event averted the crisis of 1907, and what followed shortly after?

The crisis of 1907 was averted, but just seven years later, World War I erupted in Europe, which led to the introduction of the income tax in Canada. The United States followed suit with a similar move shortly afterward.

How did the Great Depression affect per capita income in Canada?

During the Great Depression, per capita income in Canada declined by 50%, and in the province of Saskatchewan, it declined by 75%, making it a particularly devastating economic period.

What was the impact of the Smoot-Hawley Tariff on Canada?

The Smoot-Hawley Tariff in the United States imposed prohibitive tariffs on Canadian agricultural products, which led to retaliatory tariffs from other countries, further exacerbating unemployment and economic struggles worldwide.

What was the role of Canadian banks during the Great Depression compared to U.S. banks?

Canadian banks performed better during the Great Depression due to their larger size and wider geographical reach. This allowed them to weather economic downturns without high failure rates, unlike the thousands of bank failures seen in the U.S.

How did Roosevelt's policies in the U.S. address the economic crisis?

Roosevelt introduced workfare programs, shortened the workweek, and tried to stimulate the economy to generate inflation. He also demonetized gold and introduced significant financial reforms like the Glass-Steagall Act.

What was the unemployment rate in the U.S. during the Great Depression, and what measures did Roosevelt take?

Unemployment in the U.S. during the Great Depression was between 25% and 33%. Roosevelt’s measures included work programs and an attempt to inflate the economy through various reforms, such as the Glass-Steagall Act.

What was the Glass-Steagall Act, and how did it affect banking in the U.S.?

The Glass-Steagall Act, introduced by Roosevelt, separated commercial banking from investment banking, aiming to reduce the risks associated with banks speculating on financial markets and protect depositors.

Did Canada introduce a similar reform to the Glass-Steagall Act during the Depression?

No, Canada did not introduce a reform similar to the Glass-Steagall Act. However, the Canadian government created a central bank to help mitigate the effects of the economic crisis.

How did World War II impact the Great Depression?

The outbreak of World War II and the subsequent war effort helped end the Great Depression, as the need for war materials and production led to economic recovery.

What happened to the banking sector in Canada and the U.S. after the Great Depression?

After the Great Depression, U.S. banks continued to thrive and innovate, while Canadian banks grew alongside the broader economic expansion in Canada, benefiting from a more stable financial system.