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History - USA > Causes of The Wall Street Crash (T1) > Flashcards

Causes of The Wall Street Crash (T1) Flashcards

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1
Q

What is the stock exchange?

A

The markets on which stocks and shares are bought and sold

Lots of this happens in a building called the stock exchange where brokers bid and trade large amounts of money

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2
Q

When did the wall street crash happen?

A

24th - 29th October 1929

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3
Q

What is the Bull market?

A

Stock market where there is lots of confidence and lots of buying and selling

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4
Q

What did 6 important bankers do in an attempt to keep the stock market afloat?

A

Each pump $40 million into it - they then withdrew that money once trading looked more stable

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5
Q

What happened on Monday 28th October?

A

The volume of trading was less than the previous Thursday

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6
Q

Within a few weeks of the WSC, how much money had been lost?

A

$30 billion

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7
Q

What does economy mean? (key words)

A

The circulation of money (buying, selling, inflation etc.) in an area/ country

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8
Q

What does stocks and shares mean? (key words)

A

Parts of a company’s assets and earnings that are sold. Owning a share in a company means you make money and have some ownership of that company.

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9
Q

What is wall street? (key words)

A

A street in New York’s financial district, where the New York Stock Exchange building is.

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10
Q

What is the stock exchange? (key words)

A

The market on which stocks and shares of companies are bought and sold. Lots of this happens in a building called the stock exchange where brokers bid and trade huge amounts of money.

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11
Q

What does investor mean? (key words)

A

A person or organization that puts money into financial schemes, property, etc. with the expectation of achieving a profit. In this case, they own stocks and shares

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12
Q

What is a broker? (key words)

A

A person who buys and sells stocks and shares on behalf of investors

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13
Q

What is the bull market? (key words)

A

Stock market where there is lots of confidence and lots of buying and selling

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14
Q

What is the bull pool? (key words)

A

Method by which dishonest brokers bought and sold stock to and from each other to keep prices high

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15
Q

What is a bankruptcy? (key words)

A

(of a person or organization) Declared in law as unable to pay their debts. Their assets are taken away from them.

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16
Q

What is ticker? (key words)

A

Ticker tape on which stocks and shares transactions were recorded

17
Q

What is the Dow Jones Index and New York Times Index

? (key words)

A

Two indicators of how well stocks and shares are doing, based on the top 25 leadings stocks (they show when the value of stocks are going up and down)

18
Q

What is a forecast? (key words)

A

Predict or estimate (a future event or trend).

19
Q

What were 3 of the signs that the economy was slowing down?

A
  1. Problems in small business
  2. The construction industry
  3. Falling domestic demand
20
Q

How did problems in small business show the economy was slowing down?

A

During the 1920s, for every four businesses that succeeded, three failed. It was a time for the big corporations to succeed

21
Q

How did the lacking construction industry show the slowing of the economy?

A

By 1926, the boom in demand for construction was tailing off. This led to unemployment and a series of knock effects to their suppliers eg brick manufacturers.

22
Q

How did falling domestic demand show the slowing of the economy?

A

The market was flooded with goods that could not be sold - people didn’t need or couldn’t afford any more goods. This then led to unemployment and low wages.

23
Q

What are 8 possible causes of the WSC?

A
  • Uneven distribution of wealth
  • Stability of employment
  • Instability of get-rich-quick
  • Land speculation, Florida land boom
  • Stock market speculation
  • Weaknesses of banking system
  • Cycle of international debt
  • Overproduction and slow down in economy
24
Q

Uneven distribution of wealth (as a cause of the WSC)

A
  • Income distribution across regions of America was vastly different: NE (1929 this was $921) and West ($881) SE ($412)
  • Industries such as agriculture did not experience prosperity
  • Social groups e.g. ethnic minorities + women did not experience opportunities + prosperity as much as big business
  • Patterns of employment could be unstable
25
Q

Stability of employment (as a cause of the WSC)

A
  • 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
26
Q

The instability of “get-rich-quick” schemes (as a cause of the WSC)

A
  • 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.
27
Q

Land speculation: The Florida Land Boom (as a cause of the WSC)

A
  • 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
28
Q

Stock-market speculation (as a cause of the WSC)

A
  • 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…
29
Q

Weaknesses of banking system (as a cause of the WSC)

A
  • 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
30
Q

The cycle of international debt (as a cause of the WSC)

A
  • 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
31
Q

Overproduction and slow down in the economy (as a cause of the WSC)

A
  • 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
32
Q

Downward spiral (as a cause of the WSC)

A
  • 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.

History - USA (37 decks)

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