What Caused The WSC? Flashcards
What event marked the dramatic end of the economic boom in October 1929?
The Wall Street Crash.
How much did the value of shares on the New York Stock Exchange fall by on the day of the Wall Street Crash?
Almost $4 billion.
What record number of shares changed hands on Tuesday, October 29, 1929?
16 million shares.
By the end of November 1929, how much had been wiped off share values?
$530 billion.
What was the unemployment rate in the USA between October and December 1929?
Rose from 500,000 to four million.
What economic phenomenon followed the Wall Street Crash?
A severe economic slump.
What was the percentage drop in average real wages from 1929 to 1931?
16 percent.
By what percentage did the Gross National Product (GNP) fall between 1929 and 1933?
29 percent.
What was the operating capacity of the US steel industry by 1932?
12 percent capacity.
What happened to national share values from their high in November 1929?
Fell from $87 billion to $56 billion.
By 1933, what was the value of shares that were once worth $87 billion?
$18 billion.
True or False: The Wall Street Crash was a direct cause of the economic slump that followed.
False.
The Wall Street Crash began the biggest economic ______ in US and world history.
depression.
What emotion was manipulated to create fear in the stock market according to the Philadelphia Evening Ledger?
Fear.
What did the propagandists of gloom and economic terror create in the stock market?
An artificial emotion of fright.
What did the lords of the nation’s credit find themselves trying to stop during the crash?
A fall of price.
What is the business cycle?
In western economies like the USA and Britain, economic activity traditionally goes through phases of boom and bust. Economic growth results in rising employment and inflation, while overproduction leads to recession and rising unemployment.
The lowest point of a business cycle is a depression, followed by economic recovery and a boom.
What happened in 1929 regarding the depression?
The depression in 1929 was so severe that governments worldwide were forced to intervene to stimulate recovery, typically through public spending on infrastructure projects.
This occurred in the USA, Britain, and Germany in the 1930s.
What are double-barrelled names for Congressional bills?
US Congressional legislation typically has two names: the first is that of the Senator who introduces the proposal in the Senate, and the second is that of the Congressman or woman who introduces it in the House of Representatives.
What was the impact of overproduction in the 1920s?
In the 1920s, the top five percent of the population benefited most from economic prosperity, leading to a lack of spending power among the majority. By 1929, this group owned 33 percent of the nation’s wealth, while the bottom 40 percent owned only 12.5 percent.
This disparity resulted in overproduction, as the economy lacked the spending power to purchase all produced goods.
What was the Fordney-McCumber Tariff of 1922?
The Fordney-McCumber Tariff of 1922 limited US trade with the rest of the world economy, leading to retaliatory tariffs from foreign countries and reduced US exports.
How did easy credit affect consumption in the US?
Consumption in the US was artificially inflated by easy credit through hire purchase schemes, allowing Americans to buy goods with only a small upfront payment. However, confidence waned after the Wall Street Crash, leading to a rapid drop in consumer spending.
What was the Florida Land Boom?
The Florida Land Boom occurred in the 1920s as many Americans sought to buy property in Florida, attracted by rising incomes and the accessibility provided by the growth of the motor car. Miami’s population grew significantly during this period.
Between 1920 and 1925, Miami’s population grew from 30,000 to 130,000.
What caused the collapse of the Florida Land Boom?
The Florida Land Boom collapsed due to lack of infrastructure, swindlers, taxation on property speculation, and a major hurricane in 1926 that devastated large parts of southern Florida, killing 400 people and leaving 50,000 homeless.
What is the business cycle?
The business cycle refers to the phases of boom and bust in economic activity, typically involving periods of economic growth followed by recession and recovery.
What happens during a recession?
During a recession, unemployment rises, prices drop (deflation), and economic activity decreases.
What is a depression?
A depression is the lowest point of a business cycle, characterized by severe economic downturn.
How did governments respond to the Great Depression of 1929?
Governments intervened to stimulate recovery through public spending on infrastructure projects.
What are double-barrelled names in US Congressional legislation?
Double-barrelled names consist of the Senator’s name who introduces a proposal in the Senate and the Congressman or woman’s name who introduces it in the House of Representatives.
What was the wealth distribution in the USA by 1929?
By 1929, the top five percent owned 33% of the nation’s wealth, while the bottom 40% owned only 12.5%.
What problem arose from overproduction in the 1920s?
Overproduction became a major problem as the economy lacked the spending power to purchase all the goods produced.
What was the Fordney-McCumber Tariff of 1922?
The Fordney-McCumber Tariff limited US trade with the rest of the world, leading to retaliatory tariffs from foreign countries.
What was the impact of easy credit on consumption?
Easy credit through hire purchase schemes artificially inflated consumption, but consumer spending dropped rapidly after the Wall Street Crash.
What was the Florida Land Boom?
The Florida Land Boom was a period of rapid real estate speculation in the 1920s, attracting many investors due to rising average incomes.
What factors contributed to the collapse of the Florida Land Boom?
The collapse was due to lack of infrastructure, unscrupulous speculators, taxation on property profits, and a devastating hurricane in 1926.
What was the population growth in Miami from 1920 to 1925?
Miami’s population grew from 30,000 to 130,000 between 1920 and 1925.
What was the effect of the hurricane in September 1926?
The hurricane killed 400 people and left 50,000 homeless, dissuading many from investing in Florida property.
What is the Florida Land Speculation Boom of 1925?
A period characterized by feverish speculation and fabulous wealth in Florida real estate, as described in Michael Parrish’s ‘The Anxious Decades’ (1994).
What was the share value increase on the New York Stock Exchange between 1925 and 1929?
Share values almost doubled from $34 billion to $64 billion.
What is a bull market?
A period when share prices go up.
What is a bear market?
A period when share prices fall.
What was President Hoover’s description of the market in 1928?
He called it a ‘mad orgy of speculation’.
What contributed to the weaknesses of the US banking system in the 1920s?
Low interest rates and high-risk lending contributed to the economic depression.
What role does the Federal Reserve Board play?
It acts as the central bank of the USA, helping to set interest rates and regulate the economy.
What are call loans?
Loans to individuals and companies to buy shares ‘on the margin’, profitable only as long as share prices rise.
What happened when share prices began to fall in 1929?
It exposed thousands of banks to bad debts, leading to bank closures.
How many US banks followed the Federal Reserve Board’s regulations in the 1920s?
Only one third of US banks followed the regulations.
What was the impact of having thousands of different banks in the US?
It led to limited stocks of money and increased bank closures when faced with bad debt.
What happened to banks between 1921 and 1928?
5,000 banks went out of business.
How many banks suspended operations in 1929?
659 banks suspended operations.
What role did banks play in the economy?
Banks provided money for industry through loans.
What was the impact of the weakness of the banking system?
It made a major economic depression inevitable.
What did the McFadden-Pepper Act of 1927 do?
It gave big city commercial banks extra powers to compete against smaller rural banks.
What was the significance of the Glass-Steagall Act of 1933?
It began the creation of a modern banking system to help the US economy recover from the depression.
Who wrote the article ‘What caused the panic of 1929?’
Henry Parker Wills.
What position did Henry Parker Wills hold?
He was the First Secretary to the Federal Reserve Board from 1914 to 1918.
Was the panic of 1929 inevitable?
No, it was the result of gross carelessness or wanton recklessness.
What has been expected of bankers in the past?
To restrain hasty investors and encourage saving over speculation.
