The cause of the great depression and the 1929 crash Flashcards
What economic conditions in Europe contributed to the 1929 financial crisis?
European countries had massive debts to reimburse to the USA, lacked money to rebuild, and Germany faced massive inflation.
How did the agricultural sector contribute to the 1929 financial crisis?
After World War I, American farmers faced difficulty paying debts due to reduced government prices and increased competition from Europe and new countries like Argentina.
What was the impact of the consumer goods revolution on the economy leading up to the 1929 crash?
The consumer goods revolution led to overproduction and under-consumption, as the productive capacity of industries outpaced demand, contributing to the economic downturn.
How did unequal distribution of wealth contribute to the 1929 crash?
The economic system failed to distribute wealth broadly, leaving millions of Americans unable to afford goods, exacerbating the issue of overproduction.
What role did speculation play in causing the 1929 financial crisis?
Speculation grew as people, banks, and companies invested heavily in the stock market hoping for quick profits. This led to inflated stock prices and created a bubble that eventually burst.
What happened on October 24, 1929, and why is it significant?
October 24, 1929, known as Black Thursday, saw a massive sell-off of stocks as investors panicked, leading to a sharp drop in stock prices and the first financial crash of the Wall Street stock market.
How did the Federal Reserve’s actions in 1927 contribute to the financial crisis?
In an attempt to combat a mild recession, the Federal Reserve lowered the discount rate, which led to increased speculation as people borrowed money not to invest in businesses but to buy stocks.
What triggered the second major stock market drop on October 29, 1929?
On October 29, 1929, known as Black Tuesday, fear that the entire financial system would collapse led to a second huge drop in the stock market as people withdrew their money from banks, causing massive bank bankruptcies.
How did the overuse of credit contribute to the severity of the 1929 crash?
A significant portion of stocks was bought on credit, meaning when stock prices plummeted, many investors were left with substantial debts they couldn’t repay, leading to widespread financial instability.
What were some short-term causes of the 1929 crash?
Short-term causes included fear and rumors leading to panic selling, foreign countries withdrawing funds from the U.S., and initial price drops that triggered widespread sell-offs.
Why did the agricultural sector experience a decline after 1919, and what were the consequences for American farmers?
After the war, the government reduced the prices it paid for crops, and American farmers faced increased competition from Europe and countries like Argentina. This made it difficult for farmers to pay back the loans they had taken to expand their farms during the war.
What was the impact of the saturation of the durable goods market on the U.S. economy?
As more Americans owned durable goods like cars and refrigerators, the market became saturated. This slowdown in sales contributed to the economic downturn as production outpaced demand.
How did the economic challenges in Europe influence the financial situation in the United States?
Economic instability in Europe, including massive debts to the USA and inflation in Germany, weakened the global economy, contributing to the financial strain in the United States.
What was the relationship between overproduction in the American economy and the global market’s ability to consume these goods?
American firms overproduced goods in anticipation of mass consumption, but the global market was not prepared for the American style of consumption, leading to under-consumption and economic instability.
How did the speculation in the stock market differ from traditional investments, and why was it problematic?
Speculation involved buying stocks on margin, hoping to make quick profits without investing in the actual production. This led to inflated stock prices disconnected from the real economy, creating a bubble that eventually burst.
