DEPTH: 3 What were the causes and consequences of the Wall Street Crash? Flashcards
What did President Hoover say about poverty after his landslide election win in 1928?
‘We in America today are nearer to the final triumph over poverty than ever before… The poor man is vanishing from among us.’
What are shares?
Units of ownership of a company that can be bought and sold on the stock market
How can a shareholder make money?
By receiving a dividend (a proportion of company profit) or by selling their shares
Where was the main American stock market located?
Wall Street, New York
Who are speculators?
People who buy and sell shares simply in order to make quick profits
What was buying shares ‘on the margin’?
A form of gambling on the stock market. Speculators borrowed money from banks (up to 90% of the share price!) to buy shares, sold them when the price had risen, repaid the loans and made a quick profit.
How much did American banks lend for speculating in 1929?
$9 billion ($6 in every $10 loaned by banks)
When was the Wall Street Crash?
September and October 1929. The worst days were 24th October ‘Black Thursday’ and 29th October ‘Black Monday’.
What weaknesses in the US economy were the 5 main causes of the Wall Street Crash?
1) The action of speculators
2) Overproduction
3) Limited Exports
4) Signs of an economic slow-down
5) Uneven income distribution
What signs were there of an economic slow-down in the late 1920s?
- Struggling traditional industries: farming, coal, textile
- Fall in construction from 1926
- Workers wages stopped increasing
- Warehouses were filled up with stock
How far did the Dow Jones Index (stock performance of 30 large companies) fall between September 1929 and July 1932?
339.95 (a 89.19 % loss)
What was the problem with overproduction?
Industry was producing more consumer goods than there were customers to buy them. Many Americans who could afford the new consumer good now had them. Increasing stocks in warehouses made investors nervous.
Why did the US economy struggle with exports?
- European customers were poor and still recovering from WWI
- Reciprocal tariffs were set up on US goods entering other countries which made it difficult for American exporters
Why did the uneven distribution of income in the US economy help cause the Wall Street Crash?
- 60% of Americans were too poor to take part in the consumer boom of the 1920s
- Low wages and unemployment at 5% reduced the market
- The richest 5% had 33% of total income in 1929 which limited mass consumption
What impact did the Crash and falling demand for American goods have on the economy?
Businesses and banks failed; businesses cut production and expansion, sacked workers and reduced wages; further fall in demand for goods; confidence collapsed and spread around the world.
What are welfare benefits?
Payments made by the government to assist the old, sick, and unemployed (There were non to help struggling Americans)
What were ‘Hoovervilles’?
Shanty towns made of makeshift huts and tents constructed on the edges of towns and cities
Who were the ‘Bonus Army’?
25,000 army veterans who marched on Washington DC in the summer of 1932. They wanted their war service bonus due in 1945 brought forward to 1932. Congress refused to pass a Bonus Bill and President Hoover appointed General Douglas MacArthur who used the army to destroy the protest camp with tanks, machine guns and tear gas killing 2 and injuring 1000.
How many were unemployed by 1933?
13 million (25% of the workforce)
How much did industrial and farm production fall between 1928 and 1933?
40%
How much did average wages fall between 1928 and 1933?
60%
Why did farmers suffer during the depression?
- The 1920s had already been tough for farmers
- Farm income fell further during the depression
- Unable to pay their mortgages many were evicted
- Over farming and drought in central southern states turned millions of acres into a dust bowl
How many banks and businesses closed between 1929 and 1933?
10,000 banks and 100,000 businesses
Which singer-songwriter fled the dust bowl to California with thousands of other ‘Okies’ and wrote hundreds of folk songs.
Woodie Guthrie
Who won the November 1932 presidential election?
Franklin D. Roosevelt by 7 million votes (42/48 States)
Plus the Democrats won a majority of seats in Congress to pass new laws
Who said ‘prosperity is just around the corner’?
President Hoover who considered the depression as a downturn in the normal business cycle of boom and bust
What was ‘rugged individualism’?
The idea promoted by President Hoover and the republicans that people should be self-reliant and independent from government support (welfare)
How did President Hoover try to combat the Great Depression?
- Cut taxes by $130 million in 1930
- Increased tariffs Hawley-Smoot act in 1930
- Financed building projects like the Hoover Dam
- Voluntary wage and production agreements with businesses
- $1,500 million in loans through the Reconstruction Finance Corporation in 1932
- Buy surplus farm produce with the Federal Farm Board
What was the Hawley-Smoot Act (1930)?
US tariffs were increased to protect american-produced food and goods
What was the Reconstruction Finance Corporation (1932)?
A federal response by Hoover to provide loans amounting to to $1,500 million to US businesses
What were Roosevelt’s strengths in the 1932 presidential election?
- He was a candidate for the Democratic party who had been out of power since Wilson 1921.
- He had built a broad coalition of Democrat supporters and believed in ‘active government’ to improve lives where self-help and charity had failed.
- As governor of New York he had spent government money to help the elderly and unemployed.
- He asked advice from a wide range of experts, such as factory owners, Union leaders and economists.
- His personality was warm, charming and optimistic promising a ‘New Deal for the American people’
How far did Roosevelt travel in his campaign train tour of the USA?
20,800 km making 16 major speeches and another 60 from the back of his train
