WHAT CAUSED THE DEPRESSION?

Question 1

BANKING CRISIS

Answer 1

1. over 600 banks failed
2. buying on the margin left banks with no money
3. gave unreliable loans
4. lost client money due to BOTM
5. consumer confidence and therefore business confidence crashed- spending stopped, as did output, so employment reduced
6. state laws stopped banks helping each other
7. FR sold bonds- took even more money out the economy

Question 2

GLOBAL ISSUES

Answer 2

1. devaluation of european currency made american exports more expensive
2. war loans to the US meant Europe were in large debt too
3. Austrian bank collapsed
4. lost investment to the US following the boom

Question 3

GOVERNMENT

Answer 3

1. interest rates pre crash were low, creating a false bubble. they then put them up following the crash- didn’t help at all
2. people had been spending like crazy, and then suddenly stopped
3. government had loans too large to pay- had moratorium on war debts to stop european exports completely
4. laissez fair policy meant wall street was unregulated
5. during the boom, the government had bought back all bonds to get out of debt so had little money

Question 4

WALL STREET CRASH

Answer 4

1. crash caused people to claim money from their banks, which the banks didn’t have, 2 day bank holiday was claimed
2. the stock market collapse caused panic, people lost confidence and stopped spending- this led to the banking crisis
3. jobs were lost, exports worsened, the government had little money to help