what were the causes and consequences of the wall st crash Flashcards
causes
speculation- by 1929 there were an estimated 600,000- was very popular because it was the first time that ordinary Americans could become involved in the stock market
bank were willing to allow speculators to buy shares on the margin: a 10% payment was made and the rest of the money was lent to be payed back via interest.
consumers bought good with credit which lead to debt rising
USA was saturated with consumer goods which lead to overproduction- the consumer based economy couldn’t be sustained
tariffs meant that product couldn’t be sold overseas as many countries had introduced retaliatory tariffs making US goods too expensive to buy: US imports fell from $10B in 29 to $3B in 32
economy had been slowing down since 1927 yet share prices kept increasing: between 1924-29 the rose by 5x- this created a stock market bubble where the price of shares became devoid form their actual value
lack of regulation meant that insider trading was common place
the banking system itself to fuel speculation as they handed out easy credit
poverty- most of the population couldn’t support a consumer based economy. 50% of the population earned less that $2000 a year
workers in old industries had low wages and the smashing of trade unions meant that they had very little power to bargain for better wages
wall st crash
summer 1929- factory out put began to decline. overproduction and falling profits. some big investors began to sell their share.
autumn 1929: small investors followed suit. many were ruined as prices collapsed. Black Thursday stock market lost 11% of its value. Banks tried to restore confidence by buying up shares.
Black Tuesday 29 October: banks stopped supporting the stock market. In one day, 16 million shares were sold and the Market lost $14 billion
impacts of the crash
The rich were the big spenders. once they lost money and lost faith in the market the demand for consumer good fell even further
Churchill lost $500,000 after the crash
those who had borrowed money on the margin now owned worthless shares. the could not pay the banks back and so went bankrupt.
in 1929 659 banks failed+ banks stopped giving out loans to businesses and mortgages to home buyers
industry began to lay off workers, by 1933 there were 14 million unemployed
International trade suffered $10b to $3b
the depression
25% of the work force were unemployed
thousands lived in shanty towns called Hoovervilles
no social security and people relied on charity and queued in breadlines for food
2 million unemployment men traveled ed by train looking for work in 1932
farming was hit the hardest. prices dropped rapidly and income was so low they couldn’t afford to harvest crops. unable to pay loans, many went bankrupt.
some farmers formed armed bands to try to stop the authorities for seizing their farms and property
the dust bowl left 20million hectares of farmland like desert
many left their farms and headed to cities in hope of work
AA share croppers were often affected the worse off than their white neighbours. they lost their land and income fist and many moved north
Hoovers Response
was regarded as the do nothing president
he insisted for years that prosperity was just around the corner and that there would be a chicken in every pot.
he was a republican and so believed in self help and rugged individualism and self help which meant that he did not want to provide direct aid- this lead to him being seen as doing nothing
public works programs like the building of the hoover dam were seen as too little too late
he encouraged charities to help and asked businesses to not lay of people and maintain wages- this was impossible
he tarnished his reputation with the bonus marchers- put MacArthur in charge, who convinced himself that the peaceful veteran protestors were communist and gassed them and burned their tents
why did FDR win the election
he promised change and this fell on welcome ears as people had been wanting it for many years
he would use government money to help those worse affected by the depression
he lead a train campaign all around the US where he publicly criticised the republicans and hoover for doing nothing.
he promised a new deal
FDR was a DEMOCRAT
won the election by 7m votes
First new deal
banks= Emergency banking act- closed all banks for 4 days and only the well run ones were reopened. over $1b was redeposited by customers in 1933 as a result of restored confidence
FERA= federal emergency relief administration- $500 million spent on soup kitchens, clothing and employment schemes. provided work for 20 million people from 1933-35
CCC- 2.5 million low paid jobs for 18-25 year olds however they were not long lasting
CWA- civil works administration provided nearly 4 mill short term jobs 1933-34
PWA- used public money to build schools roads ect…
AAA- agricultural adjustment administration. quotas on food production- rose by 50% 1932-35. land taken out of production and livestock slaughtered helped to reduce over production- questions raised over whether it was right considering people were starving. AA’s and sharecroppers
FCA- farm credit administration loans to 20% of all farmers so they did not lose their land.
Prohibition was repelled allowing farmers to sell grain agin
NRA- national recovery administration- codes of fair competition introduced which helped improve wages and better working conditions- had no legislation so companies did not have to follow.
TVA- Tennessee valley authority built 33 dams improved farm land with new irrigation. New industries create thousands of jobs.
2nd New deal
critics claimed that the new deal did not do enough to help the poorest Americans
trade unions- Wagner act 1935, employers forced to legalise trade unions and workers could not be sacked for membership to them
welfare- social securities act 1935- state pensions fo the elderly and widows insurance for the sick and unemployed using gov money
Unemployment- WPA- works progress administration- created jobs for unemployed actors and artist and photographers. 8.5 mil jobs by 1943
Share croppers- resettlement administration- aimed to move half a million poorer faming families to new land- didn’t manage this- only around 1,500. + FSA- farm security administration provided loans for sharecroppers to by their own land. nearly $1b spent to help the poorest farmers
