Aim: What were the causes of the Great Depression? Objectives



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AIM: What were the causes of the Great Depression?

Objectives: stock market crash due to failures of the businessman

Motivation: Martha Stewart fraud trial
From boom to bust

What was Wall Street like up until the crash?

1920’s – boom in effect

Dow Jones set an all time high at 381

Steady increase for 18 months till October 1929

Led to millions investing in the market



Black Thursday

Unprecedented volume of selling on Wall Street led to a plunge in stock prices

To stabilize the market, a group of bankers bought large shares on Friday

But on Monday, massive selling resumed

Tuesday, the “bottom fell out” – sell orders far exceeded any buyers

Decreased to a low of 198 by November, and 41 3 years later


Why did the Crash occur?

Uneven distribution of income

Increase in productivity and corporate profits increased despite limited increase in real wages

Top 5% controlled 33% of the wealth



Over speculation

“playing the market” approach to investing

not for the long term investment into a company, but rather as a get rich approach – buy now, sell quickly for a profit

Buying on margin – allowed people to borrow most of the initial costs of stock purchase (down-payment as little as 10%)


Credit

Installment buying – stimulated consumer demand which led to overproduction

Overproduction

Business growth along with credit produced a large amount of goods that workers could not purchase due to lack of wage increase

Weak farm economy

Suffered severe weather as well as not receiving any increase in wages

Governmental policy


Faith in business, no effort to regulate it during the 1920’s

High tariffs hurt farmers and stunted international trade



Post WWI problems

Besides Dawes Plan, not much else to help hurting global market

How did President Hoover try to remedy the situation?

Thought nothing of the Depression – an economic cycle that would soon turn over and pass

Voluntary action and restraint – a true rugged individual

Hesitated to ask Congress for economic action – would destroy self reliance



Hawley-Smoot Tariff (1930)

Belief that the Depression was foreign in origin

Also to help business from foreign competition

31%-49% tariff rates

sank national and international trade into a further slump



Debt moratorium (1931)

Proposed a halt on all debts owed

France opposed, saying that depression was caused by those who defaulted on payments



Too little, too late

Federal Farm Board and the Reconstruction Finance Corporation

FFB (1929) – given more power after the Crash to help stabilize farm prices by keeping surplus in granaries

RFC – trickle down method to help businesses recover



BUT- unrest on the farms and the Bonus Army (2 killed, tanks and tear gassed afterwards)

Hoover seemed heartless and uncaring


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