Causes of the Depression Flashcards

1
Q

WSC is…

A

symptomatic of the problems of the 1920s

the trigger rather than the cause of the Great Depression

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2
Q

What did the WSC directly lead to

A

the Banking Crisis

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3
Q

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

A

ordinary investors

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4
Q

What did NYC buying stocks give ordinary people

A

confidence to invest on the stock market

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5
Q

What was happening to stocks in 1929 even prior to October

A

value of some stocks was declining, or growth rate slowing

e.g construction contracting

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6
Q

What % of people did not own shares?

A

97.5%

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7
Q

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

A

only 2.5% of people owned shares

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8
Q

X2 monetarist historians

A

Friedman and Schwartz

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9
Q

How many independent small scale banks in 1929

A

25,000

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10
Q

Examples of their being a lack of regulation pre 1933

A

no federal deposit insurance system

limited capital to protect all the individual banks

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11
Q

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

A

people to lose confidence

= caused a run on the banks

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12
Q

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

A

liquidating assets

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13
Q

What did banks liquidating assets result in?

A

asset prices declining e.g property prices down

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14
Q

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

A

11th December 1930

lost $286million

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15
Q

How many banks failed annually throughout the 1920s?

A

500

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16
Q

What organisation was responsible for determining interest rates?

A

Federal Reserve

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17
Q

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

A

Friedman and Schwartz

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18
Q

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

A

Curb speculation via high interest rates

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19
Q

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

A

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

20
Q

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

21
Q

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

A

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

22
Q

When did the German economy collapse in early 1920?

23
Q

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

A

1924

gave loans to Germany to pay reparations

24
Q

Why was the Dawes plan enforced in 1924?

A

attempt to stimulate German economy to create demand for American goods

= would address the US’s problem of saturated markets

25
When did Kreditanstalt collapse
1930
26
What Austrian / German bank collapsed in 1930, leading to a run on the banks?
Kreditanstalt
27
What was Hoover's perspective of reparations?
tried to scrap them
28
What did Hoover securing the §yr moratorium mean for Britain?
stopped receiving reparations so couldn't afford to keep repaying loans back to US
29
When did Britain come off the gold standard
September 1931
30
What did Britain coming off the gold standard mean in terms of trade?
Britain closed its doors to try maintain the pound's value
31
What were American banks reliant upon in relation to Europe?
loans coming back to them from Britain from WWI
32
How many banks went bust in 1931?
2,294
33
What type of explanation does Galbraith propose for the Great Depression?
Keynesian
34
What factors are included in a Keynesian explanation of the Depression?
Underlying problems; - uneven distribution of wealth - over-speculation - 1920s facade prosperity - declining of traditional industries
35
What turned the WSC into the Depression?
the banking crisis
36
What theory suggests that the problem that caused the Depression lies at the top with the banks in crisis?
Monetarist
37
What should be remembered about the factors culminating in the Depression... (could be used as conc.)
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
38
Dawes plan provided Germany with what amount in loans? When?
$200million 1924
39
What did the Young Plan in 1929 do to reparations for Germany?
decreased reparations from $33billion to $8billion
40
Why was demand from abroad so important?
only because there was huge domestic underconsumption which was due to the unequal distribution
41
How many states; - banks declared bank holiday - closed completely - limited withdrawals What did this cause?
- 32 states = bank holiday - 6 states banks close completely - 10 states limit withdrawals Liquidity crisis
42
By 1933 what % of banks had closed?
40%
43
What was the peak year for bank closures? How many banks closed?
1931 2,300
44
What did the Federal Reserve do to the rediscount rate in october 1931? What effect did this have? Why was this a problem?
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)
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?
- X6 banks invested in bluechip stocks (but not on the scale required) - Fed + Mellon dithered Eroded confidence further
46
What is an argument for the causes of the great depression lying in 1920s Republican mistakes?
- had the economy of the 1920s been sound, then the impacts of the WSC would have been minor