USA Wall Street Crash

Question 1

What is the stock exchange?

Answer 1

The market on which stocks and shares of companies are bought and sold. Lots of this happens in a building called the stock exchange where brokers bid and trade huge amounts of money.

Question 2

When did the Wall Street Crash happen?

Answer 2

24th - 29th October 1929

Question 3

What is the Bull market?

Answer 3

Stock market where there is lots of confidence and lots of buying and selling

Question 4

What did 6 important bankers do in an attempt to keep the stock market afloat?

Answer 4

Each pump $40 million into it - they then withdrew that money once trading looked more stable

Question 5

What happened on Monday 28th October?

Answer 5

The volume of trading was less than the previous Thursday

Question 6

Within a few weeks of the WSC, how much money had been lost?

Answer 6

$30 billion

Question 7

Economy

Answer 7

The circulation of money (buying, selling, inflation etc.) in an area/ country

Question 8

Stocks and shares

Answer 8

Parts of a company’s assets and earnings that are sold. Owning a share in a company means you make money and have some ownership of that company.

Question 9

Wall Street

Answer 9

A street in New York’s financial district, where the New York Stock Exchange building is.

Question 10

Stock Exchange

Answer 10

The market on which stocks and shares of companies are bought and sold. Lots of this happens in a building called the stock exchange where brokers bid and trade huge amounts of money.

Question 11

Investor

Answer 11

A person or organization that puts money into financial schemes, property, etc. with the expectation of achieving a profit. In this case, they own stocks and shares

Question 12

Broker

Answer 12

A person who buys and sells stocks and shares on behalf of investors

Question 13

Bull Market

Answer 13

Stock market where there is lots of confidence and lots of buying and selling

Question 14

Bull Pool

Answer 14

Method by which dishonest brokers bought and sold stock to and from each other to keep prices high

Question 15

Forecast

Answer 15

Predict or estimate (a future event or trend).

Question 16

Bankrupt

Answer 16

(of a person or organization) declared in law as unable to pay their debts. Their assets are taken away from them.

Question 17

Ticker

Answer 17

Ticker tape on which stocks and shares transactions were recorded

Question 18

Dow Jones Index and New York Times Index

Answer 18

Two indicators of how well stocks and shares are doing, based on the top 25 leadings stocks (they show when the value of stocks are going up and down)

Question 19

Uneven distribution of wealth

Answer 19

Income distribution across regions of America was vastly different: Northeast (1929 this was $921) and Far West ($881) enjoyed the highest per capita incomes, but the Southeast was far lower ($412)

Industries such as agriculture did not experience prosperity

Social groups such as ethnic minorities and women did not experience opportunities and prosperity as much as big business

Patterns of employment could be unstable - sometimes under and unemployment

Question 20

Stability of employment

Answer 20

Many families experienced periods of unemployment, particularly in 1929

This was a time with very little welfare and benefits

Labour Unions had very little influence, and many workers were not allowed to join them anyway. Union membership fell during the 1920s leaving workers without any legal protection and very little rights

Question 21

The instability of “get-rich-quick” schemes

Answer 21

Easy credit was seen as a strength in the economy, but many Americans invested in speculative ventures and lost a lot of their money

This desire to get rich quick led to confidence tricksters and crooks
E.g. Charles Ponzi: a former vegetable seller who conned thousands of people out of their money by promising a 50% return on their investment in 90 days. He did not force people to invest, but took advantage of their greed.

Question 22

Land speculation: The Florida Land Boom

Answer 22

In the early 190s Florida was relatively underdeveloped, but the climate made it appealing for middle classes… led to the land boom
1920 population of the state was 968,000. By 1925 it was 1.2 million as people purchased new developments on the coast
People began to invest in unseen and unbuilt developments based on glossy brochures (with the hope to then sell properties on at a profit). Often purchased on credit.
Success stories fueled the boom as wealthy northerners rushed to invest money
Demand began to trail off 1926 - there were scandals of made up property developments
Hurricane 1926 left 150,000 homeless
Hundreds were bankrupted leaving the land boom collapse and hundreds of unfinished properties

Question 23

Stock-market speculation

Answer 23

Between 1926-1929 many Americans went Wall street Crazy as another get-rich-quick scheme opened up

Easy credit meant people could buy stocks and shares “on the margin” (only paying part of the price) - this demand to buy shares was the bull market

Increasingly people bought stocks and shares not to invest in a company but on speculation - when stock prices rose people would quickly sell making a quick profit

This worked for a while…

Question 24

Weaknesses of banking system

Answer 24

It was outdated by 1920

Banks regulated themselves without government monitoring

Bankers could not be relied upon to act for the best interests of the nation, but for themselves

Most ordinary people’s money was invested in small local banks - these were unable to deal with financial problems

Question 25

The cycle of international debt

Answer 25

America’s priority was for Europe to pay debt from WW1

Most European countries could not afford to do so

Tariffs made it worse - European countries could not trade their goods to America - it was too expensive

Therefore they could not make the money to repay USA

Question 26

Overproduction and slow down in the economy

Answer 26

The boom depended on continued domestic consumption

Three signs the economy was slowing down:
Problems in small business: During the 1920s, for every four businesses that succeeded, three failed. It was a time for the big corporations to succeed

The construction industry: By 1926, the boom in demand for construction was tailing off. This led to unemployment and a series of knock effects to their suppliers eg brick manufacturers.

Falling domestic demand: The market was flooded with goods that could not be sold - people didn’t need or couldn’t afford any more goods. This then led to unemployment and low wages.

Question 27

Downward spiral

Answer 27

With growth in new industries slowing, full-time employment fell and the economy went into downward spiral.

Fall in income led to fall in demand (buying), which led to fall in production, adding to unemployment.

These problems were concealed by the superficial optimism and the frenzy of stock market speculation.

Question 28

How was income distribution across America different? Give specific examples.

Answer 28

In 1929 average wages in NE was $921, SE was $365, for farmers in South Carolina it was $129

60% of Americans earned an annual income of less than $2000

Question 29

How did minority groups and women not benefit from employment opportunities?

Answer 29

Between 1920-26 nearly 2% of farms were foreclosed. 66% of farmers operated at a loss
85% of black AMericans still lived in the SOuth - the poorest areas of the USA
Women - less then 2% of judges and lawyers, on 2 women in the house of rep, out of 145
Both groups received less wages and limited opportunities to high paid and more skilled jobs.

Question 30

What was stability of employment like in 1929?

Answer 30

Fluctuating employment - 4 million unemployed during this period
For every 4 successful business, 3 failed

Question 31

Why were there “get-rich-quick” schemes? And what were they?

Answer 31

Motivated by making quick profit from speculative ventures. The ability to buy these investments on credit made them more accessible.
The Stock market speculation led to the stock market crash because more and more people were buying shares and then selling them very quickly, and dishonest brokers would artificially put the value of shares up, and then withdraw investment all at once - leaving companies without investors

Question 32

Why did get-rich-quick schemes lead to problems in the economy? Give examples of two schemes.

Answer 32

Florida land boom - land speculation. People began to buy land in Florida as it became more popular. This was in the hope of making profit on this land as it was developed and properties were sold., However, in 1926 interest in buying properties fell due to the hurricane and stories of swindle, leading to people losing money

Question 33

What were the problems with the banking system?

Answer 33

Federal Reserve board did not regulate small banks - there were over 3,000 in the USA. Because banks were small they did not have the reserves or strength to survive recession in 1926, or the crash in 1929 - losing people’s savings. Some banks would also make risky speculative investments, which would also fail
The banking system was old fashioned and could not cope with the rapid economic growth
Many people borrowed money which they could not pay back

Question 34

What caused the cycle of international debt to cause economic problems for the USA?

Answer 34

Dawes Plan 1924, and Young Plan 1929, lent European countries lots of money. Those countries began to struggle economically largely due to lack of trade because countries had all raised their tariffs

Question 35

How did tariffs exacerbate issues with the drop in consumer demand?

Answer 35

Fordney-McCumber tariff raised US tariffs by 50%. This then meant other countries raised their tariffs, so during the 1920s there was less and less trade

Question 36

What signs were there that the economy was slowing down?

Answer 36

After 1926 demand in consumer goods dropped due to the domestic market for goods being saturated. Companies struggled to sell goods abroad due to high tariffs. This meant that industries began to let workers go. This led to unemployment rising. These problems were concealed by the stock market frenzy which made it look like the value of industries and companies was still growing.

Question 37

How did the population grow?

Answer 37

106.5 million up to 123 million in 1920s

Question 38

How did the population migrate?

Answer 38

By the end of the 1920s more people lived in urban areas than rural, black Americans migrated to North Eastern cities and lived in ghettos like Harlem (85% still lived in south)

Question 39

What immigration laws were put in place? Explain the limits these placed on immigration

Answer 39

1921 Emergency immigration - cap at 3% of population rate in 1911
Johnson Reed - cap reduced to 150,000, ban on Japanese and other Asian immigrants

Question 40

What was the Red Scare and what caused this?

Answer 40

Bolshevik revolution and rise in communism, particularly amongst workers

Question 41

What happened as a result of the Red Scare?

Answer 41

Palmer Raids, arrest of 6,000 suspected communists, many had little evidence to incriminate them. Some were deported

Question 42

What was the Sacco and Vanzetti trial?

Answer 42

Two Italian immigrants, admitted to carrying fire arms and being anarchists, but not to murder. They were executed for armed robbery and murder despite little evidence

Question 43

What happened to the membership of the KKK during the 1920s? What might have been some reasons for this?

Answer 43

4 million

Belief in the moral decline of the country and growing immigrant population