Causes of Wall Street Crash

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  • Created by: Jasmin
  • Created on: 04-05-13 15:52
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  • Causes of Wall Street Crash
    • SPECULATION
      • 1921 onwards Stock Market did well as American businesses were sucessful
      • Speculation began increasing
      • People no longer investing in company as thought it was strong
      • Investing with hope that price of shares would rise
      • People who could not really afford it became involved
        • Began buying stocks and shares with borrowed money (on the margin)
          • Frantic buying helped to push up share prices
            • Small investors not able to pay back loans to bank if prices fell
              • Banks were largely unregulated - unstable
                • Brokers provided expensive loans to enable investors to buy shares
        • 1929  experts started to sell shares heavily as worried about weaknesses in economy and high share prices, small investors panicked
          • Saw fall in prices - rushed to sell own shares
            • Led to complete collapse
              • Investors lost millions of dollars
    • WEAKNESSES IN US ECONOMY
      • Poverty
        • Farmers
        • New immigrants (given lowest - paid jobs)
        • Blacks (discriminated against. Many lived in poverty in rural areas)
        • Workers (wages very low)
      • Overproduction
        • New mass production - more made than consumed - those who can afford goods brought them
        • Umemployment increased
        • Other countries couldnt afford to buy US goods
          • Trade
            • European countries couldnt affors US goods as owed US money in war loans - struggling to pay back, US gov put high tariff on imported goods - isolationism
      • Trade
        • European countries couldnt affors US goods as owed US money in war loans - struggling to pay back, US gov put high tariff on imported goods - isolationism
    • Consequences of Wall Street Crash
      • Banks bankrupt
      • People lost money
      • Hoover cut taxes to encourage people to buy goods
      • Farming decreased

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