History GCSE -Boom to Bust 1920's USA

Mindmap showing all the causes of the Wall Street Crash

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  • From BOOM to BUST
    • Underlying problems of the US economy included:-
      • FALSE ECONOMY
    • Effects of the Tariff Policy
      • US industry could not sell abroad because other countries had put up tariffs in retaliation to he USA
      • Surplus goods could not be sold overseas due to the Fordney-McCumber Tariffs preventing imports
        • Over-production
          • meant prices of products fell and therefore profits fell too
          • Most goods had already been bought - the industry was running out of customers
            • More was being made than could be consumed
              • demand for consumer items fell (people already had them)
                • meant prices of products fell and therefore profits fell too
          • More was being made than could be consumed
            • demand for consumer items fell (people already had them)
        • A lot of countries owed America large amounts of money from war loads - and so american goods not sold easily overseas
      • People took to buying shares on credit hoping to sell for profit - but this money isn't real!!
        • Speculators caused rise in share prices. Some people borrowed money to buy shares;
          • Other bought 'on the margin' (only paying 10% of the value, hoping to pay the rest off later)
            • These small investors would not be able to pay back loans to the bank if the prices fell
              • In 1928, small investors panicked as they saw s fall in share prices and rushed to sell their own shares
                • This led to complete collapse of stock market and thousands of investors lost millions of dollars!
                  • This then led to the Wall Street Crash - October 1929 - selling shares frantically - banks ran out of money. Businesses collapsed, people ruined
        • Over-confidence in companies meant buying more shares
      • Over-production
        • Most goods had already been bought - the industry was running out of customers
        • Republican policies
          • Laissez-faire: no intervening with businesses, therefore there were no government credit controls
            • Banks lent out money without checking people's incomes, mortgages - (would they be able to pay it back?)
        • Unequal Distribution of Wealth
          • 60% of families lived below the poverty lines
            • Weren't enough people to afford these consumer goods
        • Hire purchase convinced people they had the money to buy goods

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