1b: Causes of the Crash Flashcards
When was the Wall Street Crash?
October 1929
What percentage of the USA’s stocks and shares did it handle?
61% - would have a knock on effect.
Was the Crash unexpected?
NO!!!!!
Economic experts had been warning about it but the govt ignored them.
What demonstrates the widespread effect of the Crash?
It affected MILLIONS, including those who didn’t even own stocks.
Was the Crash the cause of the Depression?
No.
Rather, it demonstrated that the economy was in serious trouble.
What showed that the boom was slowing down and that prosperity was coming to an end?
1 - Uneven distribution of wealth.
2 - Get rich quick schemes.
3 - Debt from use of credit.
4 - Undeveloped banking systems.
Why was the banking system unable to cope with the crisis?
It was purely self-regulated and put its own self-interests over that of the nation’s.
Why had the economy “overheated”?
Supply exceeded demand and the inability to export abroad due to tariffs and debts in Europe.
Wall St Crash:
What led to the immediate crash?
There had been mass selling on the stock exchange on the 24th October. This led to more selling as brokers felt they would be left with worthless stock.
Wall St Crash:
How many shares were sold?
16.4 million.
$30 billion of $100 billion was lost.
Wall St Crash:
How does the fall in the radio share price show the extent of the crash’s damage?
September 1929: Share price = 101 points.
November 1929: Share price = 28 points.
Economic problems in the 1920s:
What were some warning signs that the economy was struggling?
1 - Uneven distribution of wealth. 2 - Instability of get rich quick schemes. 3 - Stability of employment. 4 - Banking weaknesses. 5 - International debt. 6 - Overproduction.
Economic problems in the 1920s: Uneven Distribution.
What was the difference in Northern and Southeastern per capita incomes?
1929:
North = $921
Southeast = $365
Economic problems in the 1920s: Uneven Distribution.
Had everyone benefited from prosperity?
No.
Social groups, such as women and black Americans, did not benefit.
Economic problems in the 1920s: Uneven Distribution.
How much worse was it for farmers?
South Carolina per capita income:
Non-agricultural sectors: $412
Farmers: $129
Economic problems in the 1920s: Uneven Distribution.
Was this unequal distribution actually as wide as we think?
Yes.
The Brookings Institute found that wealth inequality was increasing as, by 1929, 60% of families had incomes of less than $2k a year.
Economic problems in the 1920s: Stability of employment.
Why was employment often unstable?
Because of the fluctuating demand for goods.
Economic problems in the 1920s: Stability of employment.
What was unemployment looking like in 1929?
Of the 165 families surveyed, 72% had been unemployed at some point, with 43% had been jobless for over a month.
Economic problems in the 1920s: Stability of employment.
Why couldn’t workers look to the unions?
Because the Supreme Court and businesses would undermine them:
The Court had blocked attempts to ban child labour.
Employers had “yellow dog clauses”, not allowing workers to join unions.
Economic problems in the 1920s: Stability of employment.
What was union membership looking like?
It had declined by 1 million from 4 million.
Economic problems in the 1920s: Get rich quick.
Why was credit a drawback?
Many would invest hugely in speculative ventures, and then lose it all, riddled with debt.
Economic problems in the 1920s: Get rich quick.
Who was Charles Ponzi?
A scammer.
He conned thousands into investing in his ventures, promising 50% profit within 90 days.
The judge criticised people for greed.
Economic problems in the 1920s: Land speculation.
What was the Florida land boom?
Florida became an attractive place for people to retire and visit on vacation due to its sunshine.
The growth of the motor car enabled people to go there.
Economic problems in the 1920s: Land speculation.
How did Florida’s population change between 1920-1925?
968k —–> 1.2 million.
This was because land was being sold to wealthy northerners.
