Causes of the Wall Street Crash Flashcards
How was income distribution across America different? Give specific examples.
- In 1929 average wages in NE was $921, SE was $365, for farmers in South Carolina it was $129
- 60% of Americans earned an annual income of less than $2000
How did minority groups and women not benefit from employment opportunities?
Between 1920-26 nearly 2% of farms were foreclosed. 66% of farmers operated at a loss
85% of black Americans still lived in the South - the poorest areas of the USA
Women - less then 2% of judges and lawyers, on 2 women in the house of rep, out of 145
Both groups received less wages and limited opportunities to high paid and more skilled jobs
What was stability of employment like in 1929?
Fluctuating employment - 4 million unemployed during this period
For every 4 successful business, 3 failed
Why were there “get-rich-quick” schemes? And what were they?
Motivated by making quick profit from speculative ventures. The ability to buy these investments on credit made them more accessible.
Give examples of two ‘get rich quick’ schemes.
- Stock market speculation
- Florida land boom
What were the problems with the banking system?
Federal Reserve board did not regulate small banks - there were over 3,000 in the USA. Because banks were small they did not have the reserves or strength to survive recession in 1926, or the crash in 1929 - losing people’s savings. Some banks would also make risky speculative investments, which would also fail
The banking system was old fashioned and could not cope with the rapid economic growth
Many people borrowed money which they could not pay back
Why did get-rich-quick schemes lead to problems in the economy? Explain this with the example of stock market speculation
The Stock market speculation led to the stock market crash because more and more people were buying shares and then selling them very quickly, and dishonest brokers would artificially put the value of shares up, and then withdraw investment all at once - leaving companies without investors
Why did get-rich-quick schemes lead to problems in the economy? Explain this with the example of Florida land boom
Florida land boom - land speculation. People began to buy land in Florida as it became more popular. This was in the hope of making profit on this land as it was developed and properties were sold., However, in 1926 interest in buying properties fell due to the hurricane and stories of swindle, leading to people losing money
