Sei sulla pagina 1di 3

The Wall Street Crash

Background:

Economic forecaster Roger Babson once predicted, “Sooner or later a crash is coming and it may be terrific.” This prediction was known as “the Babson Break”. Babson was referring to the Stock Exchange. Babson was right – a crash did occur and it caused the most widespread depression in human history.

it caused the most widespread depression in human history. After the Wall Street Crash The causes

After the Wall Street Crash

The causes of the Crash The traditional clothing and textile industries, the coalmining and shipbuilding industries, started becoming redundant due to the new and more successful rayon, electricity, oil and motorcar industries. The farming industry also took a huge downturn in the 1920s.

The American people were separated into three economic categories – the first 5% of the population who held over a third of the country’s wealth, the huge middle class which made up 53% of the American population who earned a bit over $48 per week, and finally the 42% of Americans who lived below the poverty line, made up of the unemployed, the immigrants, the blacks, the laid-off farm workers and the poorly paid factory workers.

The 1920s boom was based on people consuming goods such as radios, cars, fridges, rayon stockings and telephones. The problem with this was that it was that it was aimed at mainly the upper and middle class of income earners. By the time the late 1920s came, all the people who could afford the goods had already bought them, but the factories kept churning out the same number of items.

Normally, the USA would have just exported their surplus foodstuffs and products, but Europe could no longer afford America’s expensive items because of the cost of the First World War. They had also set up their own import tariffs to protect their home market from being destroyed by foreign goods.

Speculators would put down a 10% deposit of cash to buy shares, then borrow the rest of the money they needed from the bank. They would hang onto their shares until the selling price rose just enough for them to pay off their bank loan and get a nice little profit. In 1929, American banks lent over $9 billion to speculators. The demands for shares rose and prices climbed at unheard-of rates.

The Wall Street Crash – the actual event

The Wall Street Crash – the actual event The terror as news of the Crash reaches

The terror as news of the Crash reaches the people

shares were traded that day.

Monday, 21 st October 1929: After the slight decline in trading during September 1929, the Stock Market was once again experiencing busy trading. The trading was so busy in fact that the ticker machine fell behind by 1 and ½ hours due to the amount of trading.

Thursday, 24 th October 1929: Shares were changing hands at record rates. There were large falls, but banks intervened and bought $240 million’s worth of shares. After this confidence started to return and the prices stabilised. Over 13 million

Monday, 28 th October 1929: The next week the biggest falls yet occurred. The index of share prices dropped 23 points. It was clear that banks were no longer supporting the share prices. At least 9 million shares were traded that day.

Tuesday, 29 th October 1929: The following day was written down in history as “Black Tuesday”. The largest fall of all happened. People began selling for whatever they could possibly get. Millions of people were ruined. Without money or hope, dozens of people leapt to their deaths off skyscrapers. That day, 16 million shares changed hands.

Questions:

1. What was the Babson Break? [1]

2. How did redundant industries cause the Wall Street Crash? [1]

3. How did the uneven distribution of wealth cause the Wall Street Crash? [2]

4. What was one specific problem with the uneven distribution of wealth? [2]

5. How did WWI and import tariffs cause the Wall Street Crash? [2]

6. Who were the speculators? [1]

7. Why was speculation a big problem? [1]

8. What happened from Monday 21 st October 1929 to Monday 28 th October 1929? [2]

9. What was Black Tuesday? [1]

10. ‘Speculation was the only cause of the Wall Street Crash.’ Do you agree with this statement? Using what you have learnt, write an essay backing up your view. [7]

i

Total points: [20]

© All items and text Copyright by History Lesson Plans