WSC And Depression New Flashcards
Causes of Wall Street crash
-high demand for shares was due to confidence not actual value of the company, and confidence was lost
-Experienced investors began to sell shares because:
->Car manufacturing and construction(important industries) were in decline
->Federal reserve made it more difficult to borrow money for shares
->investors though stock market was not aligned with realities of the US economy
-after this, more followed their example and there was no more confidence, leading to people selling shares and prices dropping.
-manufacturers overproduced goods, then lowered prices, leading to wage cuts and job losses, leading to less demand. This cycle continued.
Why was the a growth in share value in Wall Street in 1929
- Many were buying and selling shares, increasing demand and driving up prices
- Americans had great confidence in their economy and thought prices would keep rising, so they kept buying
- A bull pool encouraged inexperienced investors to speculate, artificially increasing prices
Consequences of WSC
-decrease in share prices ($26bn lost)
-price of radio corp went from $5 to 30 cents
-savings lost
-reduction in consumer spending
-companies can’t get loans and grow
-fewer and lower wages
Other causes of Wall Street crash
-Underconsumption
-over-production in industry
-falling income of farms
-problems in Europe
-Failing Banks
How did underconsumption contribute to depression
-people who could afford items like cars and radios already bought them
-71% of Americans were on low incomes and could not buy luxury consumer goods or houses
-the market became saturated, so well paid workers that produced these goods lost their jobs, losing their purchasing power too
How does over production in industry contribute to the depression
-car and construction industries were in decline before crash (car sales fell by 30%, $2bn reduction in spending on construction)
-fewer people bought goods but these industries still produced goods, so prices fell
How did the falling income of farmers contribute to the depression
-over production and falling demand = lower income and high unemployment
-severe droughts across the Great Plains made soil condition worse from dust storms
(Did not cause depression, made depression impact greater)
How did problems in Europe contribute to the Depression
-USA lent money go allies during way, but they could not repay these
-USA kept giving money to for them to pay off WW1 debt, but stopped after depression
-they could not buy goods anymore from USA, exports dropped
-high tariffs on USA good prevented much buying
-Germany and Britain became self sufficient (Britain set up trading agreement within its empire)
-bank failures in Europe weakened trade more
How did failing banks contribute to the Depression
-only a third of banks were part of Federal reserve system, making it difficult for the government to help banks in a crisis
-many banks had limited reserves of money
-failing banks made customers retrieve savings, making them fail
-took away spending power from consumers and stopped loams to businesses
Impacts of WSC on Industry
-USA exports decreased 40% in 3 years
-3.5 fewer cars sold in 3 years
-10bn profit became 3rd loss in 3 years
-40% drop in steel mills production after 1 year
-Ford fired 60% of his workforce
-70,000 factories closed down
(Wages cut, fall in demand, less exports, workforce laid off, closing down if no profits)
Impacts of WSC on banks
-9,000 banks bankrupt in 3 years
-savings of 9 million Americans lost
-$2bn in savings lost
Impact of WSC on agriculture
-protests after farms were taken from owners and put on auction. Local communities forced auctioneers to sell it at a low price, where it was returned to its owner(rare)
-migration: 2m moved rural to urban into unpleasant areas
-droughts affecting 17 million Americans caused infertile land and drop in income. there were 38 black blizzards
Effects on WSC on unemployment
-3% -> 25% unemployment in 3 hears
-50% unemployment in some areas
-20k children not enough food in 1932
-average couple married 2 years later
-birth rate went below replacement rate
-suicide rate increased 14% in 2 years
-100k applied for jobs in USSR
-soup kitchens by government and charities helped
Impact of WSC on Homelessness
-2m homeless
-NYC gov had to find accommodation for 20k children in 1931
-Many lost their homes from mortgages or rent
-71m people travelled around to find work
-put strain on popular destinations like California: 100k in 1931 searched for work
Effects of WSC on black people
-more likely to lose jobs; 50% black women lost jobs
-racist threats: 40k joined “Black Shirts” to campaign against black workers
Effect of WSC on immigrant workers
-lost jobs
-deported or left: 5000k workers returned to Mexico in early 1930s
Effects of WSC on women
-lost jobs; 25% of women lost jobs in domestic service
-benefits: due to lower family income; 25% more women could find work at the end of the depression
Effects of WSC on Elderly
-could not retire
-only 11 states had pension schemes and 15% of industrial workers had a private plan
-most relied of family help
Hoovervilles
-homeless joined together near their hoe town to create a shanty town on empty land
-made of scrap materials
-population in the 100s
-no running water, basic facilities or permanent shelter
-called Hoovervilles as they blamed their problems on President Hoover
Charities
Bonus Marchers features
-congress passed a law in 1924 to give WW1 veterans a bonus of up to $625 for the wages they lost while in war
-supposed to receive it in 1945
-this was not an issue during the 1920s boom, but in the Depression, veterans felt they needed the money right away
-As a result, 20k people marched to the Washington DC to the Capitol to get the government to listen.
-They camped across the river while waiting for US congress to decide if they would get their bonus
-Hoover was against it, he was trying to gather funds for other methods to tackle the depression
-Bonus bill was rejected, but $100,000 was made available to pay for the bonus marchers to return home
-5k stayed on to maintain pressure
-Hoover set a deadline for when Veterans should leave. Police tried to empty buildings with bonus marchers after deadline passed, and they were attacked with rubbish and rubble.
-when they tried again, police shot and killed 2 veterans
-Hoover sent in army, under command of general Douglas MacArthur. Infantry, Calvary, machine guns and tanks were used to clear the camp
-troops chased fleeing veterans, troops burnt tents and tear-gassed marchers.
-100 injured, 1 child killed, and Hoover’s reputation destroyed
What were Hoover’s beliefs
-Volunteerism: believed government did not have the right to force people to do things
-Believed government should brig together state and local government and businesses to help the economy. Encouraged business leaders to cut jobs or wages, but did not demand this
-Self-reliance: Believed individuals should look after themselves and not rely on governments or charities. Lapses afire helped USA to become rich, if left alone would store wealth, but Hoover knew some actions were needed in such a crisis
Actions of Hoover during the depression to help with banks
- National credit corporation 1931: $500m raised by businesses to help failing banks
- Reconstruction Finance Corporation 1932: $2bn provided by the government to rescue banks and other key organisations
Limitations of Hoover’s actions during the Depression when helping banks
- National Credit Corporation: Its investors were afraid to lose money and spent little on it.
- Reconstruction Finance Corporation: criticised for using government money to help banks rather than people
Hoover’s actions during the depression to help farms
- Agricultural Marketing Act 1929: set up the Federal Farm Board to buy up crops from farmers
- Hawley-Smooth Tariff 1930: raised import duties on foreign good by 40% to force Americans to buy their own goods
- Federal Farm Loan Act 1932: $125 million given to Federal Land Banks to provide farm mortgages
