Causes of the Depression

Question 1

WSC is…

Answer 1

symptomatic of the problems of the 1920s

the trigger rather than the cause of the Great Depression

Question 2

What did the WSC directly lead to

Answer 2

the Banking Crisis

Question 3

Who did the Banking Crisis cause harm to that it can be seen as the cause of the Great Depression

Answer 3

ordinary investors

Question 4

What did NYC buying stocks give ordinary people

Answer 4

confidence to invest on the stock market

Question 5

What was happening to stocks in 1929 even prior to October

Answer 5

value of some stocks was declining, or growth rate slowing

e.g construction contracting

Question 6

What % of people did not own shares?

Answer 6

97.5%

Question 7

What statistic can be given for how the WSC did not affect the vast majority of people?

Answer 7

only 2.5% of people owned shares

Question 8

X2 monetarist historians

Answer 8

Friedman and Schwartz

Question 9

How many independent small scale banks in 1929

Answer 9

25,000

Question 10

Examples of their being a lack of regulation pre 1933

Answer 10

no federal deposit insurance system

limited capital to protect all the individual banks

Question 11

‘Ripple effect’ caused what after the banking and wall street crashes

Answer 11

people to lose confidence

= caused a run on the banks

Question 12

How did the banks try to raise capital after the run on the banks?

Answer 12

liquidating assets

Question 13

What did banks liquidating assets result in?

Answer 13

asset prices declining e.g property prices down

Question 14

When did Bank of United States Crash? What did it lose?

Answer 14

11th December 1930

lost $286million

Question 15

How many banks failed annually throughout the 1920s?

Answer 15

500

Question 16

What organisation was responsible for determining interest rates?

Answer 16

Federal Reserve

Question 17

Who suggested that the Federal Reserve was too timid to curb speculation through high interest rates?

Answer 17

Friedman and Schwartz

Question 18

What did Friedman and Schwartz suggest the Federal Reserve was too timid to do to curb speculation?

Answer 18

Curb speculation via high interest rates

Question 19

What did Friedman and Schwartz see the failure of the Federal Reserve as in relation to the Depression?

Answer 19

was too late to prevent the downturn 1930-31 via lowering interest rates (which would have stimulated demand)

Question 20

How saw the forces of Depression as lying outside of the United States?

Answer 20

Hoover

Question 21

Hoover’s quote on Europe’s role in the Depression

Answer 21

“the major forces of the Depression now lie outside of the United States”

Question 22

When did the German economy collapse in early 1920?

Answer 22

1923

Question 23

What did the Dawes plan do, when was it enforced?

Answer 23

1924

gave loans to Germany to pay reparations

Question 24

Why was the Dawes plan enforced in 1924?

Answer 24

attempt to stimulate German economy to create demand for American goods

= would address the US’s problem of saturated markets

Question 25

When did Kreditanstalt collapse

Answer 25

1930

Question 26

What Austrian / German bank collapsed in 1930, leading to a run on the banks?

Answer 26

Kreditanstalt

Question 27

What was Hoover’s perspective of reparations?

Answer 27

tried to scrap them

Question 28

What did Hoover securing the §yr moratorium mean for Britain?

Answer 28

stopped receiving reparations

so couldn’t afford to keep repaying loans back to US

Question 29

When did Britain come off the gold standard

Answer 29

September 1931

Question 30

What did Britain coming off the gold standard mean in terms of trade?

Answer 30

Britain closed its doors to try maintain the pound’s value

Question 31

What were American banks reliant upon in relation to Europe?

Answer 31

loans coming back to them from Britain from WWI

Question 32

How many banks went bust in 1931?

Answer 32

2,294

Question 33

What type of explanation does Galbraith propose for the Great Depression?

Answer 33

Keynesian

Question 34

What factors are included in a Keynesian explanation of the Depression?

Answer 34

Underlying problems;

• uneven distribution of wealth
• over-speculation
• 1920s facade prosperity
• declining of traditional industries

Question 35

What turned the WSC into the Depression?

Answer 35

the banking crisis

Question 36

What theory suggests that the problem that caused the Depression lies at the top with the banks in crisis?

Answer 36

Monetarist

Question 37

What should be remembered about the factors culminating in the Depression… (could be used as conc.)

Answer 37

It is easy to blame one party in hindsight

Yet it was a unique combination of factors which came together at one particular time to create such a Great Depression

All factors were synergistic and interconnected

Question 38

Dawes plan provided Germany with what amount in loans? When?

Answer 38

$200million

1924

Question 39

What did the Young Plan in 1929 do to reparations for Germany?

Answer 39

decreased reparations from $33billion to $8billion

Question 40

Why was demand from abroad so important?

Answer 40

only because there was huge domestic underconsumption

which was due to the unequal distribution

Question 41

How many states;

• banks declared bank holiday
• closed completely
• limited withdrawals

What did this cause?

Answer 41

• 32 states = bank holiday
• 6 states banks close completely
• 10 states limit withdrawals

Liquidity crisis

Question 42

By 1933 what % of banks had closed?

Answer 42

40%

Question 43

What was the peak year for bank closures?

How many banks closed?

Answer 43

1931

2,300

Question 44

What did the Federal Reserve do to the rediscount rate in october 1931?

What effect did this have?

Why was this a problem?

Answer 44

Raise it from 1.5% to 3%

Made credit less freely available
people couldn’t access sufficient purchasing power

only a problem since so many failed to have their own sufficient purchasing power
(DUE TO UNEQUAL DISTRIBUTION OF WEALTH)

Question 45

What did banks do in response to the WSC? What did Mellon and the Federal reserve do?

What impact did this have on the public?

Answer 45

• X6 banks invested in bluechip stocks (but not on the scale required)
• Fed + Mellon dithered

Eroded confidence further

Question 46

What is an argument for the causes of the great depression lying in 1920s Republican mistakes?

Answer 46

• had the economy of the 1920s been sound, then the impacts of the WSC would have been minor