Causes of The Depression and The years of the Depression 1929-33 (Hoover)

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A government policy which restricts trade from abroad in order to limit competition
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Emergency Tariff Act- 1921
Put duty on the importation of agricultural products
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Fordney-McCumber Tariff - 1922
Put duty on industrial products and food imports up by 38%
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Duties on imported goods, which raise revenue for the government, but also make foreign good dearer, therefore encouraging the purchase of locally produced goods. Other countries then did the same, which in effect stopped trade
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To "leave alone" - A Minimalist approach adopted by successive Republican governments whereby they intervene as little as possible
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Historical opinion where the root of depression is believed to be due to a lack of sufficient demand and overproduction
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Dear Money
1929 onwards,stagnates investment by keeping interest rates artificially high to make it more difficult for people to get a loan or credit
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A historical view whereby the root of the depression is caused by a shortage of money and credit caused by the dear money policy pursued by the government
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Insider Dealing
The buying or selling of shares by those who know crucial information on the company that is not available to the general public.
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Michael J Meeham
Used insider dealing to manipulate stock investments. He drove the price of Radio Corporation of America up which attracted investors and then quickly sold his shares, he gained massively whilst other investors lost out
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Stock Speculation
The buying and selling of stock without regard for its actual value or the strength of the individual company. Banks were warned that they were making to many loans for stock speculation
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Buying on the margin
Buying shares through a stockbroker without putting up the money for their purchase. As long as share prices were rising, everyone was a winner
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Rugged Individualism
Believed by President Hoover (R) - People should be able to solve their own problems and succeed on their own without government intervention
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Panic selling
People feel that the share prices will fall, so quickly sell all their stocks and shares in order to minimise losses, quickening the fall in share prices. Between Sept and Nov 1929 fell by 50%
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How did the state of the US economy appear in 1927?
In a bubble.Seemed to be a religious belief in the market. Investment increasingly widespread although not to the extend people made out. Only a small percentage actually owned shares
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Reality of US society in the late 20s
Millions lived below the poverty line, and investment by ordinary people was usually "on the margin". when the crash occurred the vulnerability was exposed
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The Wall Street Crash
October 1929 Panic selling caused the price of stock and shares to plummet very rapidly resulting in a crash
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1929 unemployment rate
3.2% Unemployed
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June 1930 - Hawley-Smoot Tariff
Raised duties on a number of farming products and manufactured goods to an average level of 42% and prompted many other countries to retaliate and adopt tariffs
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1930 unemployment rate
8.7% unemployed
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October 1931
522 US banks collapse
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October 1931 unemployment rate
15.9% employment
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January 1932
Reconstruction finance corporation established
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November 1932
Roosevelt defeat Hoover in the Presidential election
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What did the Federal Reserve do in an attempt to stop speculation in the Autumn of 1929?
The Federal Reserve raised interest rates
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Factors that led to the Depression - Insignificant demand
Depressed agriculture, Declining old industries, Wages in new industries not rising fast enough to encourage greater consumption, international trade discourages due to tariffs, government failed to increase demand by sufficiently increasing spending
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Factors that led to the Depression - shortage of money and credit
Banking crisis - too many small banks, which collapse and then pull down others (20% collapse). Dear money policy from 1929 - artificially high interest rates - adds to crisis and discourages consumption
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Average income of a farmer in 1929
$273 a year
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National Average income in 1929
$750 a year
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Farmers debt level in 1920 + interest
$8.4 billion with annual interest payments alone totalling at $574 million
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Decrease in the price of a bushel of wheat 1919-1922
$2.19 - 90c
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Decrease in net farm income 1929- 1932
$6.1 billion - $2 billion
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Oklahoma wheat harvest fall in yield
Average yield of $1 million - $7,000 in 1933
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Farming problems in Mississippi
Flood in 1927, Income fell fomr $239 (1928) - $117 in 1933, over 1/3 of banks failed, 3,500/5,280 farm foreclosures
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Who lost out the most from the agricultural depression
Farm labourers, sharecroppers, and smaller farmers
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How much did the value of farmland drop between 1920-29
dropped by 30%
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Reasons for a decline in the coal-mining industry
Overproduction and falling demand.Restoration of European production and exports after WWI. Competition from new fuels like oil. End of the great rail-road boom
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Reasons for decline in the textiles industry
Overproduction and falling demand.New technologies has a considerable impact - Introduction of fibres like rayon hit traditional cotton producers
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By the end of the 1920s how many people were living below the poverty line
16 million families, approx 60% of the population
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Unemployment in urban areas went up and those still employed's income went down
Unemployment 15.9% (1931) - 25% (1933). income decreased by 25% in terms of what they could buy.
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Extent of the decline in the auto-mobile and the manufacturing industries
Combined sales declined by over 2/3 between 1929- 1932
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Ford employed significantly less workers by 1931 due to a decline in the motor industry
(1929) 120,000 workers - (1931) 37,000 workers
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No market for new buyers in the electrical industry and consumers had no money for replacements
Two electrical giants - General Electric and Westinghouse. General Electric's income fell from $60.5 million (1930) - $14.17 million in 1932. Its workforce fell from 88,000 to 41,000
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Decline in construction industry
Contracts awarded dropped from $6.6 billion (1929) - $1.3 billion (1932). This led to jobs losses in the timber industry, civil engineering and architecture. By 1931 3/4 of iron and steel workers were on short time.
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People attempted to escape rural poverty by moving to cities, often were forced to live in ill-constructed shanty towns while they searched for work
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Bull Market
A market in which share prices are rising, encouraging consumption
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What happened in the first two weeks of October in 1929?
Stocks dipped by 20%
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Wednesday 23rd of October
Significant slippage in the stock market, causing an avalanche
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Black Thursday
Panic hit the markets and the index fell by 20% in one day's trading. Freak weather conditions added to the uncertainty as people couldn't communicate decisions to sell with brokers
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How did banks try and steady people's nerves?
Richard Whitney of J.P Morgan purchased 10,000 shares in US steel and repeated buying other stocks. Six banks spent up to $30 million.
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Monday 28th October - Second decisive crisis
The Great Crash - 9 million shares changed hands, 14% drop in the market, 14 billion dollars wiped off share values, by the end of Tuesday 29th the market had shrunk by 50% in just six weeks
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The Federal Reserve Board
A body established in 1913 to regulate the national banking system. It established the Federal Reserve Bank
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The Federal Reserve Bank
Could vary interest rates to control the amounts of money in circulation and therefore curb speculation- or by lowering them, increase liquidity in the system
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Weaknesses of the Federal Reserve Bank
The banks was based in NYC whereas the board that controlled the bank met in Washington. The two didn't always work effectively together, and the bank in NYC was more detached from the political decisions in Washington
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Weaknesses of the Federal Reserve Board
Made up of private bankers who believed that the system created prosperity. They were slow to react to the speculative mania of 1928 and 29 by curbing the money supply and from 1930 onwards, increasing it
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Refers to the availability of money. Interest rates reflect the dearness or cheapness of money. High interest rates mean dear money- it costs more to borrow and this can lead to a liquidity crisis (a shortage of cash)
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Gold Standard
Currencies are given a fixed value in terms of gold for which they can be exchanged. This gives stability and confidence in international trade. The Gold Standard Act 1900 had fixed the dollar at $20.67 per ounce of gold
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In November 1930 after a period of feeling that the worst was over, the banking crisis deepened
The bank of Kentucky failed (which triggered more collapses across the mid west). The Bank of the United States in NYC collapsed. It had 400,000 depositors and $268 million on deposit.
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International issues of an economic crisis
GB and France paying war debts to the USA. This weakened both the French and British currency and the capacity of these countries to purchase US goods. German economy damaged due to paying reparations
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How much did international trade worth decrease by 1929-32?
$36 billion (1929) to $12 billion (1932)
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Andrew Mellon
Secretary of State for the successive republican governments
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Great Britain leaves the Gold Standard for sterling, effectively devaluing the pound
September 1931
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By the end of 1931 how many banks had closesd
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The use of - or dependence on - voluntary contributions rather than government funds
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1929 Agricultural Marketing Act
up to half a billion dollars to be used to establish farmer owned cooperatives
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1931 - National Credit Corporation
Capital fund of 500 million dollars which was supposed to help bail out struggling banks
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1932 - Reconstruction Finance Corporation
Two billion dollars made available to rescue banks, trusts credit unions and other financial institutions, however most aid went to the larger banks and companies
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Hoover supported proposals for $1.5 billion to be given to states to finance local public works
e.g. Boulder Dam provided HEP, better flood control and irrigation to the Imperial Valley in California
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Programme of economic expansion
Leading businessmen sustain wages + maintain levels of employment. Union leaders foster industrial harmony + encourage spending. Developing spending programmes on roads, schools
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Tax increases
Hoover believed in a balanced budget and not deficit spending. Increased federal expenditure by increasing taxes. June 1932 largest peace-time tax rise in US history was introduces
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Criticism of Hoover - War Veterans
Ordered General McArthur to clear the camp (with restraint) of 15,000 war veterans who were demanding the payment of promised bonu, scheduled for 1945. McArthur burns camp and brutally and thoroughly routed helpless unemployed veterans+families
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Card 2


Put duty on the importation of agricultural products


Emergency Tariff Act- 1921

Card 3


Put duty on industrial products and food imports up by 38%


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Card 4


Duties on imported goods, which raise revenue for the government, but also make foreign good dearer, therefore encouraging the purchase of locally produced goods. Other countries then did the same, which in effect stopped trade


Preview of the back of card 4

Card 5


To "leave alone" - A Minimalist approach adopted by successive Republican governments whereby they intervene as little as possible


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