5.3 USA: What were the causes and consequences of the Wall Street Crash? Flashcards
How did Speculation lead to the Wall Street Crash?
by 1929 there were 20 million shareholders.
Speculators intend to buy a share and sell it after the price has risen.
They could buy ‘on the margin’ - where they only had to put 10% of the money and they could borrow the rest.
Women speculators owned 50% of the Pennsylvanian railway, the ‘petticoat line’.
American banks lent $9 billion for speculating in 1929.
Speculation wasn’t controlled and therefore, when they thought prices would stop rising, more people wanted to sell the shares than to buy them so prices fell.
How did Weaknesses in the US economy lead to the Wall Street Crash?
Construction industry started downfall at 1926.
Farming industry didn’t boom.
Coal+Textile industries were damaged.
500 banks who lent too much failed per year.
Europe had risen tariffs in order to protect their industries.
People that could afford them, had already bought the goods.
Workers wages and prices stagnated and so demand fell.
1929: figures for industrial output decrease.
Speculators start selling their shares.
How did the downward spiral work?
Wall Street Crash: people loose confidence, take away the money from banks.
Banking Crisis: People loose their money and businessesn can’t get loans.
Business failure
Wage cuts+unemployment: people can buy less.
Reduced spending: Business sell less goods.
so Business failure…
Who were the ones that lost most in the Crash?
The rich, because they had invested the most.
Rockefeller lost 80% of his wealth, but he still had $40 million left.
By 1933, how many unemployed and bankrupt banks were there?
14 million unemployed.
5,000 banks bankrupt.
What happened with the Bank of the United States in New York, 1930?
Went bankrupt in December 1930.
1/3 of New Yorkers had their savings there.
What actions did President Hoover initially take?
He said that prosperity was ‘just around the corner’.
He cut taxes to encourage people to buy more goods.
By 1931, production rose slightly and there was some hope.
How did the Great Depression affect the countryside?
Farmers organised themselves to resist banks seizing their homes.
Most packed their belongings into a truck and lived on the road.
There was hunger while crops and animals were being killed because they weren’t sold.
Overfarming and drought caused the topsoil t turn into dust. This was whipped by the wind to create the dustbowl.
How did the Great Depression affect the city?
Unemployment (1932, Toledo city: 80% of workers were unemployed)
Kicked out of homes because couldn’t pay the rent;
Homelessness;
Hoovervilles - shanty towns where people lived while searching for work.
People queued for food given by charities. The Hoover stew was a cheap recipe that people ate.
What did Hoover do during the Depression?
He tried to cut taxes to restart the economy.
Persuaded business leaders not to cut wages.
Reconstruction Finance Company helped banks.
Public works programs: Hoover Dam, Colorado River.
Introduced Tariffs.
Why did Hoover take little action?
He refused to accept there was a major problem.
Argued that the economy went in cycles of boom and bust, so prosperity would soon return.
Republicans thought that if the government helped individuals, they would become less willing to work.
What was the Garner-Wagner relief bill, 1932?
Bill which would’ve allowed Congress to provide $2.1 billion to create jobs. Hoover blocked it in 1932.
What was the Bonus Army, June 1932?
Soldiers which had fought in WWI demanded their bonus.
They camped peacefully outside the White House.
Hoover appointed general Douglas McArthur, who convinced himself that this was a communist riot.
Troops and police used tear gas and burned the camp.
How did Franklin Delano Roosevelt campaign for the 1932 election?
He had already start to help citizens of New York as governor of New York.
He went on a train tour across the USA making speeches:
‘New Deal’
‘Action and Action Now’
‘Save the Forgotten Man’
‘Happy days are here again’ presidential campaign song.
He inspired confidence.
What was the result of the 1932 presidential election?
Landslide victory for Roosevelt and the Democrats.
