Causes of the Wall Street Crash

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  • Created by: Heather
  • Created on: 23-03-14 15:34
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  • Causes of the Wall Street Crash
    • Laissez-Faire
      • Republican party policy was to 'leave it to the market',
      • This means the federal government wont get involved with the market as it would sort everything out itself,
      • It was known as non-intervention,
    • Loss of Confidence
      • Many felt that the stock market = profit and bought as many shares as they could, often by Hire Purchase,
      • By Autumn 1929, some investors realised he crisis was looming so sold their shares,
      • This led to a loss of confidence which was the main thing that kept it rising so it fell,
    • Economic Weaknesses
      • 60% of families couldn't afford consumer goods and were under the poverty line,
      • Many who did buy bought on Hire Purchase so you can a loan and paid in instalments,
      • The richest owned all the consumer goods,
      • Tariffs restricted trade with other countries,
    • Speculation
      • As the US industry boomed, company shares went up,
      • Millions of people were encouraged to buy shares based on the confidence that share prices would rise,
      • Many speculators bought shares on the margin (only paying 10% and paying the full price with profits)
    • Overproduction
      • By 1929, industry was running out of customers,
      • Everyone who wanted a fridge or freezer had one now so the market was saturated,
      • Due to overproduction, there was a less profits as there were less customers so more people were unemployed which means they gained less money so couldn't afford consumer goods and the cycle of depression continues,
    • 29th October, 1929,
      • Confidence dipped and no-one wanted to buy shares,
      • Investors began panic-selling shares which lead to a tumbling of prices
      • On the 24th October, 13 million chares were sold and on the 19th October, 16 million,
      • Banks sold their shares to cover losses made by bankrupt speculators,

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