Causes of The Wall Street Crash (T1) Flashcards

Question

Stability of employment (as a cause of the WSC)

Answer 1

- Many families experienced periods of unemployment, particularly in 1929 - This was a time with very little welfare and benefits - Labour Unions had little influence + many workers were not allowed to join them. Union membership fell during the 1920s leaving workers without any legal protection and very little rights

Answer 2

- Easy credit was seen as a strength in the economy, but many Americans invested in speculative ventures and lost a lot of money - This desire to get rich quick led to confidence tricksters and crooks E.g. Charles Ponzi: a former vegetable seller who conned thousands of people out of their money by promising a 50% return on their investment in 90 days. He did not force people to invest, but took advantage of their greed.

Answer 3

- In the early 1900s Florida was relatively underdeveloped, but the climate made it appealing for middle classes… led to the land boom - 1920 population = 968,000. By 1925 population = 1.2 million people bought new developments on the coast - People began to invest in unseen + unbuilt developments based on glossy brochures (with the hope to then sell properties on at a profit). Often purchased on credit. - Success stories fueled the boom as wealthy northerners rushed to invest money - Demand began to trail off 1926 - there were scandals of made up property developments - Hurricane 1926 left 150,000 homeless - 100s were bankrupted leaving the land boom collapse and hundreds of unfinished properties

Answer 4

- Between 1926-1929 many Americans went Wall street Crazy; another get-rich-quick scheme opened up - Easy credit meant people could buy stocks and shares “on the margin” (only paying part of the price) - this demand to buy shares was the bull market - More people bought stocks + shares not to invest, but on speculation - stock prices rose + people would quickly sell making a quick profit - This worked for a while...

Answer 5

- It was outdated by 1920 - only set up in 1914 - Banks regulated themselves without government monitoring - Bankers could not be relied upon to act for the best interests of the nation, but for themselves - Most ordinary people’s money was invested in small local banks - these were unable to deal with financial problems

Answer 6

- America’s priority was for Europe to pay debt from WW1 - Most European countries could not afford to do so - Tariffs made it worse - European countries could not trade their goods to America - it was too expensive - Therefore they could not make the money to repay USA

Answer 7

- Boom depended on continued domestic consumption - Problems in small business - for every 4 successful businesses, 3 failed - The construction industry - lesser demand for construction - Falling domestic demand - people already had the domestic goods they needed therefore they did not need anymore --> there were warehouses full of products

Answer 8

- With growth in new industries slowing, full-time employment fell and the economy went into downward spiral. - Fall in income led to fall in demand (buying), which led to fall in production, adding to unemployment. - These problems were concealed by the superficial optimism and the frenzy of stock market speculation.