The Wall Street Crash and The Great Depression Flashcards
What was the nature of Americans playing the stock market?
- Strong herd mentality
- Overconfidence: believing that share prices would continue rising
- Panic selling when influential investors started selling
- Impossible to stop
How did buying shares ‘on the margin’ contribute to the crash?
- Bought shares on credit (on the margin)
- Fuelled speculation (guessing without having sufficient information to be certain)
- When share prices fell and investors could not pay the balance, led to widespread panic
Why were so many Americans surprised by the crash?
- Over confidence due to rapid industrial growth and victory in post WW1 period
- Share ownership became democratised (shoeshine boys were participating alongside wealthy investors)
How did European investors impact the crash?
- Noticed a decline in industrial production
- Withdrew money from US markets
- Triggered a panic in American investors
How did stock market speculation distort the economy in the 1920s?
- Drove the US economy instead of industrial production
- Based solely on faith rather than economic health
When was Black Thursday?
24th of October 1929
What triggered the crash on ‘Black Thursday’?
- Panic selling began when 13 million shares were sold
- Efforts from wealthy bankers (e.g. J. P. Morgan) to stabilise prices, but news leaked that they were secretly selling because they lost confidence
Why did wealthy investors survive the crash better than others?
- Wealth was diversified (e.g. John D. Rockefeller)
- Could pay balance
What was the immediate impact on businesses and employment after the crash?
- Business confidence collapsed
- Spike in unemployment
What were ‘Hoovervilles’?
- Shanty towns where the homeless lived after being evicted from their homes or farms during the Great Depression
- Often overcrowded
Describe two features of Hoovervilles
- Name and origin: shanty towns named sarcastically after President Herbert Hoover, who was blamed for economic conditions during the Great Depression (e.g. bedding = newspaper = ‘Hoover blankets’, shoes lined with cardboard = ‘Hoover leather’
- Living conditions: makeshift shelters, built with scraps like cardboard, wood, scrap metal, outskirts of cities, poor sanitation, limited access to water, those who lost jobs or faced foreclosure struggled to survive
How did the crash affect dependence on charities and relief?
- Increased public dependence
- Relied on breadlines, soup kitchens
- Crucial food assistance
- Run by charities, churches, private citizens (e.g. Al Capone)
- State relief funds
How did public unrest become apparent after the crash?
- Organised political protest
- Clashes with police
What did the crash expose about the banking system?
- Too many ‘casino banks’, which meant that they had been playing the stock market with the depositor’s money
- Small banks could not handle mass withdrawals
- Public lost confidence in banks
- Very vulnerable, prone to failure
How did income inequality contribute to the Great Depression?
- Wealth was an illusion
- Unequal distribution of income
- Most Americans were living in poverty, had low purchasing power
- Demand for goods fell further after the crash
- Mass unemployment
