Depression questions Flashcards
What do historians say about the causes of the Depression?
The stock market crash of 1929 didn’t lead to the depression. It was the underlying economic conditions in the US before the stock market crash.
What was completely unsustainable in the 1920s?
Large scale domestic consumption through credit and instalment buying.
What had happened to farms during WW1?
American farms had expanded during WW1 to provide food for soldiers.
What did the expansion of farms during WW1 lead to?
The expansion led many farmers to mechanise their operations. This mechanisation was expensive and many farmers went into debt to finance their expansion.
What caused many farms to close?
A combination of low production and low prices meant that often their farms were foreclosed upon.
What are the two examples of industries that slowed down by 1925?
Car manufacturing and residential construction.
What did Hoover call the situation happening on the stock market?
‘An orgy of mad speculation in the stock markets that began in 1927.’
What was the % of Americans who owned stock
Only 3%
What was one of the most significant reasons for the depression?
America’s weak banking system
What happened to banks from 1930?
A wave of bank failures began to spread in Indiana, Illinois, etc.
What happened as depositors lined up to take money out the banks?
Banks called in loans and sold assets. Ultimately, this meant that credit froze up which was what really destroyed the economy.
What did Hoover blame for the Depression?
He claimed that its primary cause was WW1, which did set the stage for a global economic disaster because of the web of debt and reparations it created.
How did world trade come to a halt after the Crash?
With the largest non-US industrial economies in turmoil, fewer people abroad could buy American products or French wine or Brazilian coffee.
How did the US respond to this collapse in world trade?
America raised tariffs to their highest ever level with the Hawley-Smoot Tariff.
What was the idea of the high tariff? Did it work?
The idea of the high tariff was to protect American industry but since Europe responded with their own high tariffs that meant that there were fewer buyers for American goods, less trade, fewer sales and ultimately fewer jobs.
