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Reasons for the Wall Street Crash

Terms in this set (26)

Background
American Gross National Product rose from $72 to $104 billion during 20's thanks to post war optimism

Depression ruined global economy and left 15 million Americans unemployed in 1933
Republican: Lowered the ____ which encouraged people to ______
Capital Gains tax
make riskier investments as profits were taxed much less
Republican: A
Bankrupted people, companies, banks when risky stocks all failed at once
Republican: Another policy compounded the problem - __________ left many unstable and over ____ of __________ were small ones
Deregulation of the Banks
90% of failed banks
Republican: A+
Small, new, and risky banks encouraged by Republicans excarabated the crisis - Republicans responsible for banking failures
Republican: Eval
Cut top tax rate from 77% to 24% by 1929
Wages never rose to match company profits, profits went into overproduction
Repubs caused all factors
Banks: System was ___________ and unable to handle such a booming economy, as there were ______ small banks by the end of the boom.
Tiny _______ since much was invested into ____
decentralised
30,000 small banks

Tiny capital reserves
invested into risky stocks
Banks: A
Almost every bank was at great risk during economic hardship. Describe snowball effect of bank runs
Banks: Average of ______ banks had been failing every year of the 1920's and bank closures peaked __ years after the depression began, in ____
580
4 years
1933
Banks: A+
not bad enough to halt the boom on its own, - as banking failures peaked toward the end of the crisis, it was not the primary instigator of the depression
Banks: Eval
75% of depositors in the Bank of the United States had less than $400 in their account - most people had no safety net. The economy would shrink even more as people defaulted on debt and stopped any purchases, - greater economic chaos. Republicans were the ones that allowed the stock banks to rely on risky investments
Debt: America gave out __________ of dollars in loans - despite this, the USA then imposed _____ of ______% through the 1922 __________
tens of billions
tariffs of 40%
Fordney-McCumber Tariff Act
Debt: A
European economies grew at a much slower rate, made both economies weaker to depression
Debt: US banks gave out a majority of these loans and all repayments from Europe were ____________ constantly throughout the decade
renegotiated and delayed
Debt: A+
Banking only collapsed after 1930, so European debt was not nearly enough to harm an already weak part of the American economy
Debt: Eval
Germany experienced the "Golden Twenties" of economic growth and culture from 24-29 - after tariffs had been introduced. If the weakest country in Europe could prosper despite tariffs, then the largest economy on Earth would not succumb to these same tariffs alone.
OP/UC: Top ___% of American families had as much wealth as the ________ and the market failed to realise that most buyers of luxury goods were in a small segment of the population
5%
bottom third
OP/UC: A
Demand for certain goods would fall once small part of the population had them - companies cut costs to prevent a loss, increasing unemployment only weakened the lack of demand and spread it to other industries
OP/UC: __% of people owned a _____ and ___% owned a _____ by ____, so spending on luxuries was therefore fairly common, and was only stopped in a time of extreme economic anxiety
40% of people owned a radio 20% owned a car
by 1929
OP/UC: A+
Underconsumption was therefore a result of the Crash, not the start of it. Repub lack of response created this anxiety
OP/UC: Eval
160,000,000 electrical goods sold in 1929 alone - this only stopped when Republican Laissez Faire policies prevented the public gaining confidence after the crash
Crash: _________ and the following day alone, the stock market fell around ___% and ______ dollars was wiped out - even usually reliable _______ stocks plummeted
Black Tuesday
23%
14 Billion
blue chip
Crash: A
Shock made all investments seem unreliable and dangerous, ensuring that the economy could not be revived in any way for years
Crash: ___% of Americans lived near the _____________during the entire boom of the 20's, and the soaring profits of companies and the stock market were therefore ___________ compared to the rest of the economy.
60%
poverty line
massively inflated
Crash: A+
the crash was merely profits and stocks coming back to reality
Caused by Republican trickle-down policies and made inevitable
Crash: Eval
Rich incomes up 40%
Poor incomes up 1.4%
Much larger factors were responsible for the crisis that was made inevitable throughout the decade - the Repub trickle-down policy being primarily responsible
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