The Great Depression - "From Boom To Bust" - How America went from massive growth to crippling depression

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UNITED STATES 1919 - 1941

HISTORY COURSEWORK ASSIGNMENT 2.

 THE GREAT DEPRESSION.

The 1920’s were the boom years for the American economy. America experienced prosperity in all parts of it’s economy, industry and entertainment were all doing well and people had more money to spend. America was portrayed as a country which was doing well and had recovered from the war well. People were doing well. As the Republican Presidential candidate Herbert Hoover said :

        “ We are nearer today to the ideal of ending poverty and fear then ever before in any land “

But this was not true. Declining industries like coal, steel and textiles did not experience the boom. These people did not have the money to buy the luxuries produced by affluent industries. 78% of the profits of the boom went to a small proportion of the population - 0.3%. This caused companies to overproduce soon they were making large numbers of goods which could not be consumed. Instead of making profits these companies started losing money. In 1927 the spending power of American people per head began to fall. In an attempt to protect it’s economy America imposed tariffs on foreign goods coming into the country. This made the foreign goods more expensive so people would buy American produced goods which were cheaper. The Fordney and McCumber act was passed in 1922. Other countries retaliated and put tariffs on American goods. This was called Protectionism.

The most immediate cause of the collapse of the Wall street Crash was the millions of people speculating on the stock exchange. People had more money to spend and therefore they also had more time to spare. So they invested there time and money in the stockmarket. Many of the people speculating on the stockmarket did often have no experience. Many of these investors bought shares ‘on the margin’ where they were using borrowed money to buy shares. Between 1927 and 1929 American stockbrokers increased the amounts they had borrowed from $3.5 million to $8.5 million. As more and more people bought shares the more the prices for shares rose. People bought shares to make profits which they did because industry was doing well. But as predicted share prices could not continue rising forever. Professional share dealers realised this and started selling their shares and stopped buying shares. Share prices began to fall and in a panic more and more people tried to sell their shares for whatever price they could.  October 24th became known as ‘ black Thursday’ with over 12.9 million shares sold. On Monday things were getting worse. Nine million shares were traded and prices sank by $ 14, 000,000,00. Soon shares became worthless. No-one was buying. The next day the Wall Street Crash occurred  where the New York stockmarket completely collapsed.

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THE DEFLATIONARY CYCLE.

                        Share holders lose confidence and

                                        sell shares.

Companies cannot sell all of                                        Companies have less

        their goods.                                                        money.

        Workers have less money                         Workers laid off to

                to buy goods.                                      save money.

The Wall Street Crash had many long and short term effects. The crash sent many firms bankrupt because they could no longer sell products because most people who speculated on the stockmarket had invested their life savings ...

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