The Wall Street Crash, The Great Depression and The Election Flashcards
Who was the US president in 1929?
Herbert Hoover, a republican president
What are the four main reasons for the WSC in 1929?
✧ Over production (no longer demand for goods)
✧ Uneven distribution of wealth (33% of nations wealth belonged to 5% of pop)
✧ Lack of export market (other countries couldn’t afford US goods and foreign countries put up tariffs against US goods, preventing US exports
✧ Speculation/over confidence (investors took risks and borrowed money from banks, meaning banks were loaning people a lot of money)
What evidence is there for over-production in the late 1920s?
Farmers suffered badly due to overproduction of goods, as when the USA was booming they kept on producing. There were also improvements likes combine harvesters and fertilisers, which led to too much food being produced and no one wanting it
How did over-production contribute to the crash?
✧ There was no longer any demand for goods like cars
✧ Too many goods being produced in the 1920s
✧ People could not simply carry on buying forever
What evidence is there of uneven distribution of wealth in the 1920s and how did it contribute to the crash?
✧ There was an uneven distribution of wealth in the USA as 33% of the nations wealth belonged to just 5% of the pop, meaning millions could not afford goods (cars/radios)
✧ Over 60% of the pop lived below the poverty line
✧ US banks were small and vulnerable (between 1923 and 1930 5000 banks collapsed)
What is speculation and what evidence is there of it in the 1920s?
✧ The economy was doing so well in the 1920s people though it was worth it to risk it
✧ Investors taking risks by thinking they could make money
✧ Many borrowed money to buy shares and so there were lots of debts
✧Banks had loaned people a lot of money which would have to be paid back
How did so many people become investors in the stock market?
✧ Many believed it was an easy and quick way to to get rich, as anyone could buy shares watch their value rise and then sell their shares later at a higher price
What happened on Tuesday 29th October 1929?
It became clear to speculators that banks were not going to intervene to support the price of shares, and so Wall Street had its busiest and worst day in history as speculators tried to dump 13 million shares at a fraction of the price they had paid for them
How did speculation contribute to the crash?
✧ In 1920 there had been only 4 million share owners in the USA. By 1929 there were 20 million, out of a pop of 120 million
✧ If people are confident that prices will keep rising there will be more buyers and sellers, however, if there is less confidence, there will be less buyers and seller, which is what caused the crash suddenly
✧Also, they only had to put up 10% of the shares, and the banks lent the other 90%. This was known as buying on the margin
Why was there a lack of export market for the USA and how did it contribute to the crash?
Over production would have been solved if the US could have exported its surplus goods; however US tariffs in the 1920s had caused other countries to set up tariffs, therefore, the US found it hard to export goods
What were the key economic effects of the crash?
✧The crash helped to push USA into a depression - businesses found it very hard to borrow money from banks who had been severely affected by the crash (over 5000 had closed
✧Companies also found they were selling far less (car sales fell from 4.5 million to only 1 million in 1932)
✧By 1932 25% of the population was unemployed and production was just over 20% of its level in 1929
What were the key social effects of the crash?
The number of unemployed rose to 13 million and homelessness began to rise. Breadlines formed for free food and shanty towns were set up
How did the American people associate Hoover with the depression?
✧They thought of him as a ‘Do nothing’ and weak president as he told many poor people to rely on charity for food and clothing, and not the government
✧Because he did little to help the homeless and unemployed, Hoovervilles were created
What was Hoovers initial reaction to the WSC?
He believed that the government should stay out of business matters (laissez faire) and believed that the economy would soon return to normal.
What did Hoover do once he realized the scale of the problem?
- He pleaded with businesses not to sack works or cut pay; he set up the RFC(Reconstruction Finance Corporation) to make loans to businesses in trouble; he encourages states and cities to launch public works programs to make jobs for the unemployed.
- He also cut taxes by $160m and asked Congress for $423 for public works scheme.
