Causes of Wall Street Crash

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  • Created by: bea_damon
  • Created on: 11-05-17 14:36

The Wall Street Crash

What

- 12.8 million shares sold on New York Stock Exchange

- By end of day, value of shares on stock exchange had falled by almost $4 billion 

- Following week, record of 16 million shares changed hands at v. low prices

- End of November, $30 billion wiped off share values

- Began biggest economic depression in US + world history

Causes

1. Overproduction

- Low tax policies = by 1929, richest owned 33% of nation's welath while bottom 40% of population owned 12.5%. US economy lacked spending power to buy all goods produced.

- Belief that USA had entered new era of continued economic growth meant corporations built more factories to provide goods for seemingly ever-expanding market. By late 1920s, economy had reached full capacity in terms of what domestic market for goods could consume.

- Fordney-McCumber Tariff 1922 limited US trade with world economy - in retaliation foreign countries introduced own tariffs.

- Much of European market affected by aftermath of war e.g. Germany had to pay reparations to Allied powers. Potential markets lost by creation of communist state in Russia = resultig tensions between USSR + capitalist world limited trade.

- 1920-29, US manufacturing capacity rose 50% while US exports rose bby only 38%.

2. Land Speculation

- Prelude to crash had occurred in 1926 with land speculation centred on Florida. Many saw 1920s as period of unrivalled prosperity +

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