The Wall Street Crash and the Great Depression Flashcards
1
Q
Long Term reasons for the Great Depression/ problems with US economy
- How was falling demand for consumer goods a key reason for GD?
A
- Construction boom ended 1928 thus slowed down spending and investment
- By 1929: most Americans who could afford a car had one
- Industrial production fell 2 months before WSC
- fall in demand due to over saturated market
- 50% of American families had income of less than $2000 a year (minimum needed to survive)
- overproduction of goods
- US could not sell surplus to other countries
- other European countries owed US money + struggling to repay
- US put high tarrifs on foreign goods - they did the same
- businessmen found dif to sell goods abroad
2
Q
Long Term reasons for the Great Depression
How was the instability of “get rich quick” schemes reason for GD?
A
- aim of Americans
- invested in speculative ventures and many lost money
- provided op for tricksters and crooks
- E.g Charles Ponzi conned thousands into investing in his ventures
- promised 50% profit in 90days
- more large-scale speculation was notably during the Florida land boom + stock exchange in latter part of decade
3
Q
Long Term reasons for the Great Depression/ problems with US economy
How was the Florida land boom an example of speculation or “get-rich-quick” scheme?
A
- Parcels of land began to be sold to wealthy Northerners
- People began to invest their money in unseen developments (hoping to sell and make profit)
- land boom sustained only if there were more buyers than sellers
- demand tailed off in 1926
- Scandals of land advertised as within easy access of sea that was really many miles inland or in middle of swamps
- nature played its part with hurricanes in 1926 killing 400 and left 50,000 homeless
- With thousands of people bankrupted, Florida land boom collapsed leaving coastline strewn and storm-battered developments
4
Q
Long Term reasons for the Great Depression/ problems with US economy
- How were problems with agriculture a reason for TGD?
A
- falling demand led to falling prices: wheat dropping $2.5 to $1 a bushel
- Farmers overproduced
- growth of synthetic fibres lessened market for natural ones e.g cotton
- Prohibition cut demand for grain used in manufacture of alcohol
- Greater use of tractors meant fewer horses necessary - less demand for food
- after war - European farmers able to grow enough to meet own demands
- competition from Canadian, Australian and Argentinian farmers
5
Q
Long Term reasons for the Great Depression/ problems with US economy
In terms of the problems with agriculture how did this differ between the North and the South?
A
- by 1928 half all US farmers living in poverty
- Distinct division between town and countryside
- Towns and cities in North experienced economic growth + prosperity
- not case in rural areas esp South and West due to problems with agriculture
- led to lower living standards and poverty
- wages low
6
Q
Long Term reasons for the Great Depression/ problems with US economy
What were problems with the old industries as a cause of the depression?
A
- faced long term difficulties
- Coal mining and textile industry were in decline
- demand for coal fell in 1920s as gas and electricity more widely used
- More foreign comp e.g cheap coal from Poland
- Led to closure of a N. of mines and many miners made redundant
- lowering of tariffs on wool and cotton in 1913 meant US textile industry faced stiff competition from abroad
- Man made fibre rayon cheaper to produce than wool, cotton or silk
- Textile mills in North e.g Massachusetts closed down
7
Q
Reasons for the Wall Street Crash
How did the US banking system work and briefly what was the issue?
A
- out of date in 1920s
- 12 regulatory reserve banks headed by Federal Reserve Board, appointed by president
- System allowed banks to regulate themselves without gov interference
- but there were problems …
8
Q
Reasons for the Wall Street Crash
What were the problems with the US banking system?
A
- Reserve Banks acted in interest of bankers rather than nation as a whole
- Local banks no part of the centralised system:
- 1920s: over 30,000 banks in USA: most small and unable to cope with financial problemos - Federal Reserve Board favoured low interest rates
- encouraged easy credit - cause of crash
- 1927: lowered interest rates from 4 to 3.5% - encouraged “bull market”
9
Q
Reasons for the Wall Street Crash
What was the bull market?
A
- During 1920s more and more Americans bought shares on stock exchange + prices kept rising, thus creating a bull market
10
Q
Reasons for the Wall Street Crash
How was Over-speculation on the stock market a reason for the WSC?
A
- In 1928, shares did not rise as much as previous years
- fewer people willing to buy shares and there was a drop in confidence in the market
- warning but when share prices began rising again speculation reoccurred
- The complete lack of stock market regulation by the government or any other agency encouraged more and more speculation
- R gov’s stuck to “laissez faire” beleifs
- 1925: stock market value $27 bill –> 1929: $87 bill
- 1929: 20 mill shareholders + prices risin
11
Q
Reasons for the Wall Street Crash
How did the Availability of easy credit cause the Wall Street Crash?
A
- credit made it much easier for people to buy goods even though they didn’t have the cash to pay for them on spot
- customers could pay on hire purchase
- this included practice of buying shares on credit “on the margin”
- further encouraged by easy credit policies from FRB
- worked well as long as prices rising - when they fell - problemos
- 75% of purchase price of shares was borrowed
- created artificially high prices
12
Q
Reasons for the Wall Street Crash
How was loss of confidence a reason for the wall street crash?
A
- market structure maintained largely by confidence
- 1929: some experts started to sell shares heavily before value fell further
- small investors panicked
- saw fall in price and rushed to sell their shares
- led to a complete collapse of prices and thousands of investors lost millions of dollars
- rumours e.g that FRB about to tighten credit facilities
13
Q
What were the events leading up to the Wall Street Crash?
A
- Sep 1929: sharp fall in prices, no panic
- 19 Oct: panic begins ~3.5 mil shares bought and sold - prices fall
- 22 Oct: stock market recovering
- 24 Oct: “Black Thursday” Prices fell so quickly that people rushed to sell their shares. Nearly 13 mill sold.
- 25 Oct: Bankers support stock market. worked
- 26 Oct: hoover assured A that panic over
- 29 Oct: “Black Tuesday”: worst: ~ 16.5 mil shares traded. Shares lost value many shareholders lost everything. Suicides reported.
14
Q
What do historians see crash as in relation to depression?
A
- thought depression well on its way already - signs show that
- crash important trigger
15
Q
What were the effects of the crash?
A
- collapse of many businesses with individuals losing billions
- Thousands bankrupt + N of suicides
- President Union Cigar plunged to his death from New York hotel when stock company fell from $113.50 to $4 in a single day
- Thus, people unable to consume or invest.
- As workforces laid off even less money in eco for spending
- Crash -> collapse of credit with loans called in and new ones refused
- crash destroyed confidence in US economy
16
Q
What did Hoover believe that effected his dealing of the Depression?
A
- People should be responsible for own welfare + gov should not have to intervene
- “rugged individualism”
- placed great emphasis on role of the individual, hard work and initiative
- this fed into ideas of voluntarism and self-help
- spoiler alert these were never gonna be enough to deal with problems of depression
- thought economy would sort itself out
17
Q
What were Hoover’s policies that made the situation worse?
A
- criticised for doing too little too late
- some policies, e.g increasing tariffs made situation worse
- 1932: widely ridiculed in USA
- new shanty towns set up on edge of cities nicknames “Hoovervilles”
- newspapers that homeless people cover up with called “hoover blankets”
18
Q
What did Hoover do to help the depression in terms of agriculture?
2 sort of acts/ organisations
A
- Agricultural Marketing Act 1930
- enabled gov to lend money to farmers through special marketing groups which stabilised prices and ensured produce sold at profit
- The Grain Stabilisation Corporation: 1930
- tried to guarantee fair prices by buying wheat so that it could be stored until price went up
- however, price con to plunge
19
Q
How successful were Hoover’s agricultural policies?
A
- failed because he was paying farmers artificially high prices
- also: farming badly affected by introduction of tarrifs through the Hawley-Smoot Tariff Act of 1930
- countries refused to trade with US in retaliation
20
Q
What was Hoover’s tactic to dealing with the effects of the deppresion?
A
- tried to balance the budget by reducing federal spending and opposing relief schemes suggested by congress
- relied on voluntary action
21
Q
How did Hoover encourage voluntarism to deal with the depression?
A
- met businessmen and implored them not to cut workforce and wages
- Encouraged state govs to begin new public works programmed
- 1932: gave additional $500 mil to help various agencies provide relief
- The Reconstruction Finance Corporation (RFC): 1932: lent up to $2 billion to rescue banks, insurance companies, railroads and construction companies
- The Emergency Relief Act 1932: gave $300 mil to state govs to help unemployed
- The Home Loan Bank Act 1932: to stimulate house building and home ownership
- 12 regional banks set up with fund of $12 mill
22
Q
Who were the bonus marchers?
A
- Veterans of WW1 who had been promised a bonus for serving in war, payable in 1945
- felt couldn’t wait that long
23
Q
What was the Bonus March?
A
- 1932: a Bonus Expeditionary Force: made up of 12,000 unemployed and homeless veterans, marched to Washington DC to voice support for bill that would allow early payment of bonuses
- built hooverville outside capital
- bonus would have cost $2.3 mil - H felt too much
- 5000 refused to leave and Hoover called army to control situation
- Armed forced by Douglas MacArthur: razed Hooverville to ground: more than 100 injured and baby tied of tear gas poisoning
- credibility of president destroyed + left bitter taste in mouth of many
24
Q
What were the economic effects of The Great Depression in unemployment?
A
- 1933: 24.9% of nations workforce 12,830,000 out of work
- Labour Research Associated insisted figures nearer 17 million
- Unevenly distributed:
- New York State had 1 mill unemployed. Toledo, 80% unemployed
- 4 to 6 times greater among African Americans
- Employment opps in Northern cities which had opened to them in 1920s: now generally closed
- much higher unemployment among working-class women. Those in unskilled jobs likely to be laid off before men.
25
Q
What was the growth rate of the US economy?
A
- went into decline
- from 6.7% in 1929 to minus 14.7% in 1932
- in coal industry, production in 1932 lowest since 1904 with 300,000 made unemployed
- Iron and steel production fell by 59%
26
Q
Social Effects of Depression
- What was the effect of the Depression in the cities?
A
- factories began to close down
- people stopped spending - trend con, production slowed down or stopped
- industrial cities ^ in unemployment by 1933: almost 1/3
- those who lost their homes moved to edges of towns and cities
- built homes of tin, wood and cardboard: “Hoovervilles”
- Many slept in doorways or cardboard boxes
- estimated 1932: 2 million homeless
27
Q
What was the effect of the Depression in the countryside?
A
- farmers faced problems
- Bankruptcy grew –> unable to sell produce
- Drought of 1931 compounded problems
- crops damaged by dry weather, high temp, high wind + insects
- states worst effected by drought: Oklahoma, Colorado, New Mexico and Kansas
- Poor farming methods + drought turned soil into dust thus dust storms
- 20 mill hectares affected: “dust bowl”
- these issues forced 1 mill people out of home + seek work in fruit-growing areas
28
Q
In 1933 how many out of work?
A
almost 13 million
12,830,000
