Podcast
Questions and Answers
What action did banks take to address panic selling on the market?
What action did banks take to address panic selling on the market?
Which event is referred to as 'Black Tuesday'?
Which event is referred to as 'Black Tuesday'?
On what date did President Hoover make a speech declaring that the market was okay?
On what date did President Hoover make a speech declaring that the market was okay?
What was the primary reason for the stock prices to continue falling leading up to Black Thursday?
What was the primary reason for the stock prices to continue falling leading up to Black Thursday?
Signup and view all the answers
How many shares were traded on October 24th, known as Black Thursday?
How many shares were traded on October 24th, known as Black Thursday?
Signup and view all the answers
How did the wealth gap in the US contribute to the Wall Street Crash?
How did the wealth gap in the US contribute to the Wall Street Crash?
Signup and view all the answers
What was a result of overproduction by US industries in the late 1920s?
What was a result of overproduction by US industries in the late 1920s?
Signup and view all the answers
How did tariffs imposed by the Republican government affect American farmers?
How did tariffs imposed by the Republican government affect American farmers?
Signup and view all the answers
What was one of the consequences of the saturation of the market by the late 1920s?
What was one of the consequences of the saturation of the market by the late 1920s?
Signup and view all the answers
What impact did increased unemployment have on the economy during this period?
What impact did increased unemployment have on the economy during this period?
Signup and view all the answers
What caused many farmers to go bankrupt by 1929?
What caused many farmers to go bankrupt by 1929?
Signup and view all the answers
Which management technique contributed to overproduction in industries?
Which management technique contributed to overproduction in industries?
Signup and view all the answers
Why were American farmers unable to compete effectively in the global market during the late 1920s?
Why were American farmers unable to compete effectively in the global market during the late 1920s?
Signup and view all the answers
What was a primary reason US companies struggled to sell their products internationally in the 1920s?
What was a primary reason US companies struggled to sell their products internationally in the 1920s?
Signup and view all the answers
What does 'Buying on Margin' refer to?
What does 'Buying on Margin' refer to?
Signup and view all the answers
Why did speculators become nervous in the late 1920s?
Why did speculators become nervous in the late 1920s?
Signup and view all the answers
What event triggered the panic selling of shares in October 1929?
What event triggered the panic selling of shares in October 1929?
Signup and view all the answers
What was the consequence of the decision made by the top 6 banks on October 25?
What was the consequence of the decision made by the top 6 banks on October 25?
Signup and view all the answers
How did the public's reaction during the stock market crash affect banks?
How did the public's reaction during the stock market crash affect banks?
Signup and view all the answers
What impact did the decline in the construction and car industries have on the economy?
What impact did the decline in the construction and car industries have on the economy?
Signup and view all the answers
What was the outcome for many speculators when share prices fell?
What was the outcome for many speculators when share prices fell?
Signup and view all the answers
What major economic indicator showed a downturn in the late 1920s?
What major economic indicator showed a downturn in the late 1920s?
Signup and view all the answers
Which factor contributed to the panic in the stock market in October 1929?
Which factor contributed to the panic in the stock market in October 1929?
Signup and view all the answers
What percentage of their own money did speculators typically use when buying shares on margin?
What percentage of their own money did speculators typically use when buying shares on margin?
Signup and view all the answers
What was a common misconception among speculators during the 1920s regarding share prices?
What was a common misconception among speculators during the 1920s regarding share prices?
Signup and view all the answers
By what year had the number of share owners in the U.S. reached 20 million?
By what year had the number of share owners in the U.S. reached 20 million?
Signup and view all the answers
What effect did the banks' lending practices have on speculation?
What effect did the banks' lending practices have on speculation?
Signup and view all the answers
What realization led to the rapid selling of shares in the market during the crisis?
What realization led to the rapid selling of shares in the market during the crisis?
Signup and view all the answers
How did the increase in share price speculation contribute to the eventual market crash?
How did the increase in share price speculation contribute to the eventual market crash?
Signup and view all the answers
What was one significant issue faced by small rural banks in the USA during the 1920s?
What was one significant issue faced by small rural banks in the USA during the 1920s?
Signup and view all the answers
What economic policy did the Republican Party endorse during the 1920s?
What economic policy did the Republican Party endorse during the 1920s?
Signup and view all the answers
What event marked the beginning of panic selling on Wall Street in October 1929?
What event marked the beginning of panic selling on Wall Street in October 1929?
Signup and view all the answers
What was a key factor that encouraged speculation in the stock market from 1928 onward?
What was a key factor that encouraged speculation in the stock market from 1928 onward?
Signup and view all the answers
What occurred on October 26, 1929, that illustrated the government's reaction to the stock market turmoil?
What occurred on October 26, 1929, that illustrated the government's reaction to the stock market turmoil?
Signup and view all the answers
Which of the following conditions was evident in the US economy prior to the Wall Street Crash?
Which of the following conditions was evident in the US economy prior to the Wall Street Crash?
Signup and view all the answers
During the 1920s, approximately how many banks were operating in the USA?
During the 1920s, approximately how many banks were operating in the USA?
Signup and view all the answers
What triggered the Babson Break in September 1929?
What triggered the Babson Break in September 1929?
Signup and view all the answers
Study Notes
Underlying Economic Weaknesses of the 1920s
- Wealth gap: In 1925, 42% of the population had incomes below the poverty line, lacking sufficient funds to purchase necessities.
- Unsaturated market: Consumer goods became readily available, creating an oversupply, leading to reduced company sales, profits, and stock prices.
- Overproduction in industry: Mass production and new management techniques increased output dramatically, exceeding consumer demand in the late 1920s.
- Agricultural overproduction: Farmers used new technologies, resulting in surplus crops. They faced reduced ability to sell their produce due to international tariffs, causing significant economic hardship.
- Reduced export markets: Tariffs imposed by other countries limited US exports, resulting in a decrease in sales and profit for US companies.
Speculation in the Stock Market
- Speculators: Individuals buying shares with borrowed money (margin), hoping for price increases and quick profits.
- Buying on margin: Investors borrowing 90% of a share's cost.
- Economic downturn: As the economy slowed in the late 1920s, speculators became nervous and began to sell their shares.
- Panic selling: The prospect of lower share prices triggered widespread panic selling, causing a rapid and drastic drop in share prices.
- Bank failures: Many speculators were unable to repay their loans, pushing banks to failure. This resulted in insufficient liquidity to cover depositors' needs.
- 6 Major Banks: On October 25th , 6 major banks met to attempt to prevent further declines in the market. Unfortunately, this action proved unsuccessful and further exacerbated the problems.
Role of the Banking System
- Outdated system: Pre-1913 banking system lacked sufficient regulation and uniformity.
- Local banks: Many smaller state banks lacked the resources to withstand economic downturns.
- Lack of government regulation: The Republican government policy of minimal intervention meant inadequate safeguards for banks to maintain financial stability.
- Bankruptcies: Widespread bank failures left depositors without their savings.
Events of 1929 October
- 500 banks went bankrupt each year from 1920–1929.
- Economic indicators, such as construction, car sales, and industrial output, showed a downturn in the economy.
- October 19th-29th: A series of events marked the descent into the Wall Street Crash, with escalating declines in share prices:
- Rising panic selling pushed share prices down further
- Ultimately, no buyers were available, resulting in massive losses for those invested in the market due to panicked selling efforts.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Related Documents
Description
Explore the underlying economic weaknesses that plagued the 1920s, leading up to the Great Depression. This quiz highlights issues such as the wealth gap, overproduction in industries, and the impact of international tariffs. Assess your understanding of how these factors contributed to significant economic hardships during this period.
