Investors mortgaged their homes, and foolishly invested their life savings in hot stocks, such as Ford and RCA. To the average investor, stocks were a sure thing. Few people actually studied the companies they invested in. Most investors never even thought a crash was possible. To them, the stock market always went up. This was only until the companies which they had brought shares in started to over produce goods. A reason for this was the unequal distribution of wealth. This was a long term cause which contributed to the Wall Street Crash. The over production of goods was a short term cause which contributed to the Wall Street Crash.
By 1929 at least one-third of all income generated by the American economy went to only 5% of the American people. 200 companies controlled 49% of industry. In 1929 43% of families earned less than
$1,500 a year and 78% had incomes of less than $3,000. Many Americans therefore could not afford to buy any consumer goods or transport vehicles. The US economy had been built on the principle of mass production but the market for consumer goods was limited. People not being able to afford to buy the goods caused the companies share price to decrease. This worried the share holders therefore they decided to sell the share as fast as possible, otherwise they would become worthless.
Question 3:
On Tuesday 29th October 1929, the American Stock Market, Wall Street, crashed. As a result, 659 banks crashed in America in 1929, 1352 in 1930 and 2294 in 1931. America recalled loans from Germany that had been negotiated under the Dawes Plan (1924). Germany now had to pay back these loans and had to pay reparations. For these reasons, the worldwide economic depression that followed the crash affected Germany particularly badly.
The most important consequence of the Wall Street Crash was the rise of Germany’s Adolf Hitler. After the Wall Street Crash of 1929, German economy collapsed. The Number of unemployed grew, people starved on the streets. In the crisis, people wanted someone to blame, and looked to extreme solutions, Hitler offered them both, and Nazi success in the elections grew. Germans turned to Nazism because they were desperate. The number of Nazi seats in the Reichstag rose from 12 in 1928 to 230 in July 1932
In 1930 there were 3.5 million unemployed people in Germany. This rose to 5 million in 1931 and 6 million in 1932. People were desperate for work, and would have done almost anything to get it. A German worker describes in 1985 why he joined the Nazis in the 1930s. 'I was unemployed for many years. I'd have made a pact with the devil to get work. Hitler came along and got me work, so I followed him'. The unemployed were given food and shelter in Nazi hostels and then became part of the SA.
It was a crisis in Germany. People had lost faith in the Weimar republic and many people wanted to see a change. It was realised that in such a crisis, the Weimar government needed one strong man to deal with Germany's problems. The Great Depression reignited people's anger for the Treaty of Versailles. People now started listening to Hitler. The Nazi’s offered strength and discipline, which is what people were looking for. Before the Great Depression, people were happy to go along with Stresemann's policy. Support for Hitler grew as unemployment grew. In 1928, the Nazis had 12 seats in the Reichstag. In 1930 this rose to 107 and in 1932 to almost 200. The Nazi party was now the biggest party. In the 1932 presidency election, Hitler got 13 million votes to Hindenburg's 19 million. Von Papen and Hindenburg realised that a strong man who was backed with popularity in the Reichstag was needed in such a crisis, which is why they eventually appointed Hitler chancellor.
Without the Great Depression, it is unlikely that Hitler would have risen into power. This unexpected event which Hitler had no control over was one of the most important reasons why he became chancellor.