Depth Study - Wall Street Crash Flashcards
1
Q
What was happening to the prices of the shares during the 1920s?
A
They went steadily upwards, with increasing fluctuations, until 1929
2
Q
Why did share prices rise?
A
Beause of he virtuous cycle of prosperity, shares seemed like easy money,and more buyers appeared on the market. There were more buyers than sellers, so the share prices rose
3
Q
Wy was buying shares so popular?
A
Is was seen by the speculators (people who had no idea how the market worked, and wanted to make quick money) as a way of earning easy money.
4
Q
How many shareholders were there in 1920 compared to 1929 in the US?
A
1920 - Only 4 million share holders
1929 - 20 million shareholders (out of a population of 120,000, 1.5 million big investors)
5
Q
How many investors were speculators in 1929?
A
600,000
6
Q
What were speculators?
A
People who wanted to make quick and easy money, and act like gamblers, speculating about which stocks will shoot up in price so they can be sold immediately to make a profit. They usually bought the stock on margin to maximise this profit.
7
Q
What was buying on margin and what were the impacts?
A
Banks would accept that stock buyers put down only 10% of the total price.
This allowed people to make larger profits on stocks, but it also meant that if the stock devaluated, they still had to pay back 90% of the stocks original price
8
Q
What was women role in the stock market?
Give a fact
A
They also became heavily involved in speculation
They owned 50% of the Pennysylvania Road, which became known as the ‘petticoat line’
9
Q
Explain the impact of banks funding speculation
Give a fact
A
- American banks lent 9 billion dollars for speculating in 1929
- This meant that when the stock market crashed,this money was not paid back, causing banks to go bankrupt
10
Q
Describe the extent of the speculation in 1928 and onwards using statistical evidence
A
- Demand for shares was at its highest
- Prices rose at extremely high rates, convincing even more people to speculate
- In March, Union Carbide shares stood at 145 dollars,while in september 1928, they had risen to 413 dollars
- Share value doubled and tripled, but the fluctuation also caused the market to fluctuate increasingly
11
Q
What was the one factor that kept share prices rising?
A
Confidence in the stock market, economy, and prosperity
As long as people were confident that prices would keep rising, there would be more buyers than sellers, which would increase the price of the stocks. However, if confidence falls, there would be more sellers and this would make the prces crash in a vicious loop.
12
Q
What were the weaknesses in the US economy
A
- The construction industry had begun to decline since 1926
- The farming and traditional industries were struggling since 1920
- American industries producing consumer goods such as cars and eletrical appliances were overproducing, as by 1929, all those who could afford these goods already had them and had no need to buy more
- This was because the majority of Americans were to poor to buy them, even with the credit systems
- 500 small banks which were overlending failed each year
13
Q
How did companies selling consumer goods adress the lack of demand, and what was the outcome?
A
- The tried high pressure advertising
- In 1929, the american industry spent 3 billion dollars on advertising
- However, as the workers wages did not rise, and prices did not fall, demand still decreased
14
Q
Why did Americans have trouble with exporting surplus goods?
A
- People in Europe were still recovering from the first world war
- People in Europe did not have the same level of prosperity as the americans and could not afford these goods
- After nine years of american tariffs, Europe had introduced their own tariffs to protect their indstries, so nobody would buy american goods in Europe
15
Q
Describe the chain of events that led to the Wall Street Crash
A
- June - Factory output starts declining, as well as steel production
- 3 Sept - The last day of rising stock prices
- 5 Sept - ‘The Babson Break’ - Roger Babson predicts a crash in the stock market, cusing a decrease in share prices
- 6 Sept - The market recovers
- Mon 21 Oct - Extremely busy trading - the ticker, which tells people the stock prices, fell behind by 1.5 hours, and some people were ruined without even knowing it until the next day
- Thu 24 Oct - A peak in trading, busiest trading yet. Large falls in stock prices occur, but Banks intervene to buy stock, causing prices to return and stabilise
- Mon 28 Oct - There is a massive fall in the stock market, and banks have stopped supporting share prices
- Tue 29 Oct - There is another massive fall, and people sell stocks for whatever scraps of money they can get
16
Q
What were the signs leading to the stock market crash?
A
- Car sales were slowing
- Steel production starts declining
- Industrial output showed a fall for the first time in four years
- Speculators became nervous and began to sell
17
Q
Describe Tuesday 29 1929
A
- It became clear that banks would not intervene again and speculators panicked
- Wall street had its busiest and worst day, during which speculators tried to sell a total of 13 billion shares
18
Q
What were the economic consequences of the Wall Street Crash for the rich?
A
- The rich had lost the most as they invested the most
- The Vanderbilt family lost 40 million dollars
- Rockerfeller lost 80% of his wealth, but had 40 million dollars left
- Winston Churchill and the singer Fanny Brice noth lost 500,000 dollars
- Groucho and Harpo Marx, two of a comedy team, lost 240,000 dllars each
- The rich had been the main buyers of american goods, so ther was an immediate decrease in spenidng
- The shares some of them had bought were worthless, meaning they were unable to pay back their loans to banks so they too went bankrupt.
19
Q
What were the causes of the Wall Street Crash?
A
- Poor distribution of income between the rich and the poor
- Overproduction of american industries
- The action of speculators
- No exports for US goods
- Decision by banks not to support share prices
- The econom had already started to slow in 1929, but Wall Street Was in its own little bubble, disengaged from reality, where prices kept rising, and shares became ‘empty money’
20
Q
What were the consequences of the wall street crash?
A
- The rich lost the most money, as they invested the most
- Small shareholders were the worst hit, as they bough stocks on margin, and could not pay back their loans and went bankrupt
- This caused people to withdraw their loans, causing banks to go bankrupt
- The US enters the Great Depression
- Citizens cannot afford food, impacting farmers
21
Q
Describe the downward spiral caused by the Wall Street Crash
A
- Wall Street Crash
- The Banking Crisis, as people draw all their money from banks
- Business Failures, as banks demanded theym to repay loans
- Wage Cuts & Unemployment, as buisinesses failed or contracted
- Reduced Spending on the behalf of American citizesns as poverty increases
- Reduced confidence in the system, grounding the US economy
22
Q
What was President Hoover’s approach to the crash?
A
- The loss of fortunes were regarded as tragic but isolated incidents
- Hoover assured the peoples of the USA that ‘prosperity was just around the corner’
- He cut taxes to encourage people to buy more goods, in hope tht the situation would improve, and prices rose slightly by mid-1931
23
Q
Describe the banking crisis afetr the crash
A
- In 1929, 659 banks failed
- This caused people to to mistrust banks and remove their savings from them, which caused more banks to go bankrupt
- In 1930, another 1352 went bankrupt
- The biggest of these was the Bank of the United States in New York, which had 400,000 depositors, including many recent immigrants. Almost a third of the New Yorkers saved with this bank
- In 1931, European banks suffered as a knock on effct of the USA, and another 2294 banks failed
- One billion dollars were withrawn from banks in the US, and putin safe deposit boxes, as people felt that hard currency was their onlu security
- By 1933, over 5000 banks had gone bankrupt
24
Q
What were the impacts of the depression on industrial and farming producton from 1928 to 1933?
A
Their average production fell by 40%, and wages by 60%
25
Why was the reduced consumption that followed after the crash devastating to the US economy?
- The American economy was shaped for mass consumption
- It relied on high spending, so fewer goods sold meant fewer people employed
- By 1932, the USA was suffering from the worst economic depression in history
- By 1933, there were 14 million unemployed, and 5000 banks had gone bankrupt
26
Describe how the problems in urban areas impacted the country side
- Farm prices were already low and the farmin industry was struggling even before the crash
- People in towns could not afford to buy as much food as before, so frices fell even more
- They became so low that the cost of transporting animals was higher than the price of the animals themselves
- Total farm income fell to 5 billion
27
What happened as a consequence of the great depression to international trade?
- Other countries also suffered from the depression as they had to pay back loans to american banks
- They bought even less american goods
- To protect american businesses, the government put even more tariffs on imorts so other countries sold less too American, impacting these countries badly
- The USA internatiooal trade was reduced from 10 billion in 1929 to 3 billion in 1932
28
Describe the great depression in the countryside
- As farm income fell even more than before, farmers were unable to pay their mortgages
- Farmers organised themselves to resist banks attempting to seize their homes, using pitchforks and barricading highways
- Most farmers were forced to pack their belongings in their trucks and live on the road, finding whatever jobs hey could
- Children died from starvation and malnutrition, but wheat, fuit and animals were left to rot because farmers could not afford the cost of transportation of the goods to the market
29
How were black farmers and labourers faring during the great depression?
They lost their land and farms before whites
30
Describe the dustbowl
- In the Southern and Midwest states, overfarming and overcultivation caused topsoil to turn to dust, and soil to lose it's fertility
- This dust was whiped up by the wind and created huge duststorms, causing this area to be named the dustbowl
- Farmers left this uncultivatable land as migrants, searching for fertile land or employment
31
Describe unemployment in the towns after the Great Depression
- Unemployment rose rapidly,rising up to nearly 25% in 1933
- In 1932, in a steelworks city Cleveland, 50% of the workers were unemployed, while this figure was 80% in Toledo
- City workers were forced to sell their homes or kicked out due to their inability to pay debt, and added to the sea of unemployed workers
- Thousands were taken in by relatives, but most ended up on the streets.
- The workers who had contributed towards prosperity in the 1920s now were unemployed
- An estimated 2 million people travelled in railway freight wagosn to seek work in 1932
- Every town had a 'Hooverville', slums where migrants lived while they searched for work
- NY - Through 1931, 238 people were admitted into hospital suffering from malnutrition or starvation, and 45 of them died
32
What actions were taken by Hoover to rekindle the American economy?
- He tried to restart the economy in 1930-31 with tax cuts
- He set up the Reconstruction Finance Company, which heped banks to stp them from going bankrupt
- He put money into public work programs such as the Hoover Dam
33
What factors damaged Hoover's reputation?
- He was regarded as a do-nothing president, which was the republican policy at the time
- He was reluctant to change basic Republican Policies which were now stopping the economy from restarting, as he believe buisiness should be left alone to bring back prosperity
- In 1932, he blocked the Garner-Wagner Relief Bill which allowed Congress to provide 2.1 billion dollars to create jobs
- He believed that social security was not the resonsibility of the government, but should be provide dby charitie and local governments, so nobody liked him
- He rejected and attacked the Bonus Marchers in 1932
34
Describe the Bonus Marchers Incident
- Thousands of servicemen who had fought in the first world war marched on Washington, asking for their war bonuses (sort of like a pension) to be paid early
- They camped peacefully outside the White House and sug patriotic songs
- Hoover refused to meet them
- He appointed MacArthur to handle the situation, who convinced himself that the marchers were communist agitators
- He ignored Hovvers instructions to treat the marchers with respect, and used tear gas, troops, and police to burn the marhcers camps and make them flee
35
What were Franklin D. Roosevelts main characteristics?
- He was a Democrat, and Hoover's opponent in election 1932
- He was not radical, and believed in 'active government' to improve the lives of ordinary people
- He had plans to spend public money on getting people back to work, as he had already started to do as Governor of New York
- He was not afraid to ask advice from experts, such as factory owners, union leaders and economists
36
Describe the campaign between Hoover and Roosevelt
- Roosevelt was confident in his victory as nobody liked Hoover after the depression and the crash occured
- However, roosevelt went on a train tour around the USA in the weeks before the election
- He attacked the attitude of the Republicans
- Roosevelts plans were vague, while people wanted action, so he proposed the American people the 'New Deal'
- He did this on a 20,800km campaignduring which he made 16 major speeches
- His personality attracted support almost as much as his policies, which inspired confidence
- He made a contact with the American people and offered them a hope, a way out, of the depression and the errible situations they were in
37
Describe the result of the US election in 1932
Roosevelt got a landslide victory, winning by 7 million votes, while the democrats won the majority of seats in congress
| This was the worst defeat Republicans have ever suffered
