pages 24 - 25 of USA A5 booklet (Causes of the Wall Street Crash and What was life like during the depression) Flashcards
What were the 3 long term problems which caused the Depression?
Underlying problems/ problems in farming
Failure of Republican policies/ overproduction
Poor income distribution
Why did farm incomes drop?
Too many crops were grown (overproduction) so prices fell and farm incomes dropped.
What was happening to all the unemployed farmers?
It was difficult for unemployed farmers to get jobs so a huge number of people couldn’t buy consumer goods which meant demand in factories began to fall.
When did the building industry start failing?
The building industry started failing in 1926.
Other than the building industry, what else was failing during the 1920s?
Farming, coal, textiles and iron industries were also in trouble during the 1920s. This meant that workers didn’t have enough money to spend on consumer goods, so demand dropped.
During the Depression, why couldn’t the USA sell any of their products to Europe?
In response to America putting up their tariffs, Europe put up their tariffs, this meant that at a time when American sales were falling they couldn’t sell abroad because Europeans couldn’t pay for expensive American imports.
What did Laissez Faire mean for the workers?
Laissez Faire meant that the wages remained low so workers couldn’t afford goods.
How much did most Americans earn per year?
Most Americans still earned less than $2000 per year.
What % of the population had such low wages that they couldn’t afford to buy consumer goods on a large scale?
60%
Which groups had the lowest wages?
Workers, blacks, immigrants.and natives.
How much wealth did the top 5% of the country own?
The top 5% of the country owned 33% of the overall wealth.
What are the 2 short term problems which caused the Depression?
Over confidence and speculation.
What did people think would happen to the value of shares?
People thought that the value of shares would carry on rising.
In what year did shares cost more than they were worth?
In 1929, shares cost more than they were worth.
Why did the price of shares fall?
Their prices fell because everybody started to sell - causing the prices to fall. Then the people who wanted to sell their shares couldn’t find a buyer, only people who could pay small amounts. Meaning that they lost lots of money.
How did banks contribute to cause the Depression?
They speculated too much of peoples money
How much money did the banks speculate in 1929 alone?
In 1929 alone, banks speculated $9 billion.
In 1929, how many people were gambling on shares?
20 million people were gambling on shares in 1929.
Because of Buying on Margin, how much did investors pay? How did they pay this back to the bank?
Investors only had to pay 10% while banks would lend 90%, which would be repaid from share profits.
How did people afford to buy shares?
They borrowed money from the banks.
What % of shares in the Pennsylvania Railroad were owned by women? What nickname did they get from this?
Over 50% of shares in the Pennsylvania Railroad were owned by women earning it the nickname the “Petticoat Line”.
What was the Babson Break on 5th September?
On the 5th of September “The Babson Break”: Roger Babson, economic forecaster says “ Sooner or later a crash is coming and it may be terrific.”
What happened on Monday 21st of October?
Busy trading day. There was so much trading that the “ticker” which tells people of changes in price falls behind by 1.5 hours. Some people don’t know they are ruined until after the exchange closes. By then it is too late to do anything about it.
What happens on Thursday 24th of October?
Busiest trading day yet. Big falls. Banks intervene to buy stock. Confidence returns. Prices stabilise.
