The Great Depression Flashcards
What was the income disparity
One percent of the population controlled 1/3 of the assets
*** had an upper class which controlled a large portion
*** many poor
What was there a record of in the 1920s?
Record profits
The Great Depression led to far reaching ramifications where?
Around the world and the US
The causes of the Great Depression were similar to the causes we see where?
In other
depressions
Recessions
Economic crashes
Because of the record profits in the 1920s, people were very inclined to do what?
Invest in companies that were doing well
- not interested in helping to regulate the companies
What were some characteristics of the Great Depression?
- A lot of poor people
- People didnt have money to spend
** in turn, ppl could not help the economy grow by purchasing products
What did Bubble growth entail?
- Diminishing returns
2. Decrease in wages
Fast production caused?
A decrease in demand and lack of profitability for the producers
** things were made so quickly, there was much less of a demand for products
What was the lack of profitability for the producers?
Less demand for continued products
Explain the Large Debt increases of the Great Depression
- Based on profits and growth
- Individuals and companies were over-leveraging the companies
** trying to borrow too much money
Explain the decline of agriculture in the Great Depression
- Dry conditions in a lot of the states that were big agricultural producers
“Dust Bowl”
- were unable to grow crops b/c of the lack of water
What states were effected by the dry conditions during the Great Depression?
Kansas
Oklahoma
Arkansas
Places that had a lot of farming
What was the stock market worth in 1925?
27 billion
What was the stock market worth in 1929?
87 billion
- more than tripled since 1925
What were the reasons for the large increase in worth of the stock market from 1925 (27 billion) to 1929 (87 billion) ?
- investment craze
- margin purchased (borrowing against stock to purchase more stocks)
Explain the investment craze during 1925 - 1929
- Because the market was growing so quickly
- Ppl saw the stock market as a way to get rich quickly
- Pouring a lot of money into a lot of stocks that did not have the value that they were being sold at
*** ppl were buying off of perceived value, not true value of the company, thus paying more than they should
Explain the margin purchases of the Great Depression
Ppl were buying stocks with money that they really did not have
** stocks that they were using to buy other stocks could lose value
When was the stock market crash during the Great Depression?
October 24th, 1929
“Black Thursday”
People realized what during the stock market crash?
That the market had become over-inflated
In turn
Panic-selling: everybody was selling their stocks b.c. They thought the market was gonna lose it value
** their stocks didnt have much value
What happened to the value of the stocks during the Great Depression?
The value of the stocks went way down
What did JP Morgan (and others) do in order to try to stop the stock market crash?
Buy stocks - artificially bolster the value of the stocks
** didnt prevent the stock market crash
With the value of currency going down, what happened to the banks?
The banks started to fail
- they were based on assets which had lost huge amount of value
** unable to lend
With the banks failing, what happened to credit?
It crashed as well
- unable to lend money to businesses and individuals
With credit failing how did this hurt the economy?
People and businesses were unable to borrow and therefore could not purchase things to grow, expand, and boost the economy
