• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Why did the American Economy collapse after the Wall Street Crash?

Extracts from this document...

Introduction

Sarah Thomas Why did the American Economy collapse after the Wall Street Crash? The economic boom of the 1920s came to an end in October 1929. The boom got totally out of control by 1929 with the average price of shares increasing by 300%. People would buy on the margin, and then waiting for the prices to go up before selling to make a profit. By the summer of 1929 there were 20 million shareholders in America and the prices continued to rise. Until October of that year when people realised that the prices had risen too much and were about to fall, so people began a drastic sell. This resulted in the Crash. The immediate consequences of the crash were the massive unemployment. By 1932 there were 13 million people unemployed. Banks lacked the right amount of cash as a reserve and were giving out loans much too easily. ...read more.

Middle

The fall in demand of the products was a result of the poor income distribution. Too much of the income from the 1920s boom was going into too few hands. By 1929, 5% of the American population was receiving 33% of the total income. By reducing the top rates of tax, the Republican government was helping the rich to become richer. Some of the wealth was spent or invested. But there was a limit to what this small percentage could consume. Higher wages would have resulted in greater consumption of goods and therefor a greater demand on goods, this would have stopped the mass unemployment and may have even stopped the depression happening at all. The Crash in 1929 revealed many weaknesses in the way in which businesses were carried out. During the 1920s, companies had been given as much freedom as they needed by the Republican government and tax breaks to big businesses, while the government provided no welfare. ...read more.

Conclusion

Farmers could not afford to pay debts and bills, which resulted in the banks taking over the farms to repay their debts. President Herbert Hoover was widely blamed for failing to lift the USA out of the depression. Like many Americans, Hoover thought that the depression would eventually cure itself. He was very reluctant to use the powers of the government to aid in the recovery of the economy. He reluctantly set up the Reconstruction Finance Corporation in hope to relief the pressure of money. It was aimed to lend money to banks, insurance companies and railways and he also passed the Federal Home Loan Act, which provided loans to Building Societies, and the Relief and Construction Act. Hoover believed in the 'trickle down' effect. He hoped that these loans would encourage investments and eventually provide jobs. But they did too little too late. The Wall Street Crash was the trigger event that started the great depression. The collapse was due to a combination of factors acting like a chain reaction. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our GCSE USA 1919-1941 section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related GCSE USA 1919-1941 essays

  1. The crash (causes and consequences of the Wall Street Crash)

    The Federal Reserve was anxious to protect overseas trade and was after all run by bankers. The Board offered little real leadership and would have found it hard to slow the market down due to the general mood and gov policy.

  2. What factors were responsible for the Wall Street crash?

    they didn't set borderlines for companies to follow, this meant that companies many banks lend as much money wired a little money as they liked.

  1. The Wall Street crash, the great depression and its how it affected the lives ...

    This was known as the Jazz age. A time when a barber or messenger boy who keep their eyes open for an opening in the stock market then buy on margin the share they had spotted, could become millionaires in a matter of months.

  2. Did the Wall Street Crash cause the depression?

    Another reason the government is blamed for overproduction is because of it's tariff policy, which led to the loss of it's export market. One way of selling surplus goods is to export to markets abroad. However, the government putting tariffs on goods abroad stopped them from doing so.

  1. After the Wall Street Crash in 1933 the American economy collapsed and fell into ...

    Roosevelt knew that this aid was only temporary so he introduced huge public work schemes to keep unemployment down. There were three main work schemes to provide jobs for the unemployed. The Civilian Conservation Corps (C.C.C.) set up work camps which would provide work for the young.

  2. In the 1920's America was the richest and most powerful country in the world ...

    These places were commonly known as 'breadlines'. Unfortunately in 1932 things were still not improving; 12 million people were now unemployed. In many places as many as four in ten people were out of work. Between 1928 and 1933 industrial and farm production decreased by a massive 40 per cent, and the average wage fell by over 60 per cent.

  1. Describe the effects of the Wall Street crash on the USA by 1932.

    Also, they could not afford to buy the products that were being overproduced and needed to be sold. Trade also helped the Wall Street to crash because the USA was unable to sell surplus goods to other countries, particularly Europe.

  2. The Wall street crash

    By 1929 those who could afford consumer goods had already bought them. The majority of Americans who were poor couldn't afford to buy them, even on generous hire purchase and credit schemes on offer. Hire purchase was something similar to '' buy now pay later''.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work