economic problems of the 20s Flashcards
trade and tariff
o 1922 Fordney McCumber Tariff Act
o 30% tax on goods imported
o This was done as a response to the small recession after WW1
o However this caused more problems than it solved
high tariffs
they were a problem because foreign countries found it hard to sell their goods in the US, which meant they had no money to buy US goods. Therefore, the US found it difficult to sell goods overseas.
agriculture
o Farmers producing much more food therefore prices of food fell
o The 2 tariff acts made it hard for farmers to sell produce overseas
o Farmers began borrowing money in hope prices would soon recover and be able to pay back loans
the banking system
o Over lending and over borrowing
o Interest rates during 1920s were low (below 5%)
o Banks encouraged people to borrow to buy houses, car etc
o Banks were lending out more money than they could afford
o They did this because they believed the boom was never ending
unequal distribution of wealth
o 1920s many poor people and few rich people
o 50% of Americans only earnt enough to buy bare necessities therefore had to borrow
o In 1928 1% of the population owned almost 25% of US wealth
= problems – only small number of people were driving a large part of US consumption
o This group had a big effect on price of shares because they could buy/sell shares in large quantities
