(1b) Causes of the crash Flashcards
When was the Wall street crash?
What happened?
29th October 1929
the New York Stock Exchange crashed.
How much was lost in the wall street crash?
$30 billion had been lost by mid november
How did overproduction cause problems in the economy?
Manufacturing increased despite drop in consumer demand; workers laid off as businesses failed to sell products.
in 1929 how many americans were living close to subsistence?
80%
How did Land speculation cause problems in the economy?
Florida Land Boom crashed in 1926; investors lost $ millions.
How did The bull market cause problems in the economy?
- peculation and get-rich-quick schemes on the stock exchange
- limited regulation of stock market led to insider dealing
- shares could be bought on credit.
How did the weakness of the banking system cause problems in the economy?
- Outdated and unregulated; Federal Reserve system;
- 12 Federal Reserve banks and 30,000 small local banks.
How many small banks where there?
30,000
What was the health of the construction industry like?
The health of the construction industry is often an indicator of the health of the economy as a whole. By the late 1920s this was in recession.
How many points did the Dow Jones Industrial index fall by?
drop of 38 points down to 260
fell another 30 posits to 230
11.73% fall
What were the economic problems in the 1920?
=Uneven distribution of wealth
=Stability of employment
=The instability of ‘Get rich quick’ schemes’
=Weakness of the banking system
=the cycle of international debt
=Overproduction and the slowdown in the economy.
What was the income of people in the northeast and far west?
What was this compared to the south east?
$921 and $881 income per capita
$365
What was the income for people in south Carolina ?
Compare this to farmers in the region
$412
$129
How many Americans had annual incomes of less than $2000?
60%
What was the ‘yellow dog clause’ ?
workers not allow to join unions.
How many workers belonged to a union?
During 1920’s stood at 4 million this declined over all by 1 million
7.1% of workforce by 1930
Give an example of someone who benefited from the get rich quick schemes?
Charles Ponzi a former vegetable seller conned 1000s of gullible people into investing in his ventures. He promised 50% profit within 90 days.
How did the population of Florida change from 1920-1925?
968,000 to 1.2 million
How was land in Florida often bought?
Oftern they paid on credit, with a 10% deposit know as a binder
What was a happened to cause the land boom to tail off?
Hurricanes in 1925 killing 400 people and leaving 50,000 homeless.
What happened during 1927-1929?
people went Wall Street crazy and many people began to get shares and stocks
What could stocks be bought on?
they could be bought on the margin
This was on credit with loans from their broker.
What was the demand to buy shares know as?
Bull market
What was the banks by 1920?
outdated
What did the federal reserve board allow banks to do?
Why was this a problem?
regulate themselves
The reserve banks represented the interests of the bankers and so could not be completely relied on to act in the best interests of the nation if there was a conflict of interest.
What was at the heart of economic problems?
The cycle of international debt
What was Americans priority?
Why was this hard to do?
For European countries to repay the loans they had taken out to finance WW1.
most European countries were still suffering from depressed economic conditions arising from the war and couldn’t afford to pay them back.
What tariff affected the cycle of international debt?
The Fordney-McCumber Act raised tariffs on imported goods.
This meant that European countries could not export their manufactures goods to the USA in great quantise so found it impossible to earn the money to repay the loans.
In the 1920’s how many business succeeded too failed?
For every 4 businesses that succeeded, 3 failed
What happened to the construction industry after 1926?
It began to tail off
How many banks failed by 1932?
5000
What happened as a result of falling consumer demand?
Stores were full of unsold goods
Firms cut back production which led to unemployment
how many people were living close to subsistence in 1929?
80%
