Causes of the Wall Street Crash
- 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,
- Laissez-Faire
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