What were the causes and the consequences of the Wall Street Crash
In 1928 Herbert Hoover President of the United States 1928-1932 said, “we shall soon, with the help of God be in sight of the day when poverty will be banished from the nation - What were the causes and the consequences of the Wall Street Crash introduction. ” This statement was far from the truth as the Wall Street crash which would result in years of depression was just around the corner. This was not predicted as the “Roaring Twenties” had given the US a booming economy. The truth was that there were cracks beginning to form in the foundations of the economy. Then the Wall Street crash occurred and the whole economy collapsed. The Wall Street crash was the catalyst for depression.
People lost all their money Possessions lost all value. There were many causes of the Wall Street crash and the main reasons were the flaws during the economic advance in the 1920`s. A massive 60% of American families were earning less than $2000 a year. The upper and middle class people that had benefited from the boom in the 1920`s had bought all the goods available. They had all the cars and refrigerators that they needed and the poor could not afford these products so the market became saturated there were more goods being produced than were being sold.
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They could not export the excess to other countries as the tariffs the Americans had come up with were now being placed on their items as well. This meant that they could not export the excess goods. Overproduction caused companies to stop making money and as a result many business men began to speculate that the share prices of companies would begin to fall. This caused everybody who had shares to begin to sell them rapidly. Although the autumn of 1929 had seen the largest amount of share buying the attitude swiftly changed from “buy buy buy” to “sell sell sell”.
On Saturday the 19th October 1929 share prises began to fall and 3,488,100 shares exchanged hands then on Monday 21 th October 1929 the market continued to fall as 6,091,879 shares were traded as people began to franticly sell shares. On Tuesday the 22 shares began to raise slightly as Richard Whitney (a broker from J. P Morgan) bought shares to try and boost the peoples confidence in the market and it began to work but its effects were short lived. On Thursday 24 th October 1929 (black Thursday) 12,894,650 shares were traded as people franticly sold.
On Tuesday 29 the market crashed. Most of America was now bankrupt, banks had lost everybody’s savings on the market and depression was setting in. People now changed from selling stocks to selling possessions that they had brought in the golden age (1920`s) . New cars and other products were selling for a fraction of the price they were brought for a car was sold for just $100 on the day of the crash. Depression began to settle in as people could no longer buy products companies lost money and had to cut jobs. Sales of all items plummeted, in 1929 car sales were 4. million but in 1932 they were just one million. This reduction in sales caused the companies to cut jobs. This unemployment meant that sales plummeted further and so more jobs were cut. The road and building construction was cut by 92%. Manufacturing wages fell from 59 cent in 1926 to 44 cent in 1933. So many jobs were lost that thousands of men would apply for a single job. In 1929 just 1. 6 million people were unemployed but by 1933 14 million were unemployed. As the unemployment levels rose so did the amount of homeless people.
Because people no longer had a source of income they could not pay their mortgages and were forced to sell their properties over to the banks. Around the edge of almost every city large shanty towns known as Hoovervilles emerged and became home to the millions of people who had be come homeless. In America at the time there was no social security system in place to help the poor. The only help they received was from private charities and some wealthy people. They provided soup kitchens and cheap food for them. The poor also set up help for each other they sold unmarketable fruit and exchanged it for services like medical help.
Some unemployed men in Pennsylvania dug coal on companies property and sold it cheaply for money. The situation was not only bad in the city’s it also affected rural areas of America as well. The wealth from the boom had not been divided equally and many people living in rural areas had been left poor. Now that people could not afford food and clothes farmers were unable to sell their produce. Crops were left in fields and not harvested as this was cheaper. It would cost more money to harvest and ship the produce than the money it would sell for.
The farmer’s income fell further and further and more become bankrupt every day. Many were evicted by the banks as they could no longer pay the rent or loans back. In 1932 Oscar Ameringer said when giving evidence to the House of Representatives that “thousands of bushels of wheat left in the fields uncut on the account of its low price that hardly paid for the harvesting”. The then went on to say that apples were left to rot in orchards yet millions of children will not be able to each an apple this winter because of their parents actions.
When he went to Oregon 3000 sheep had been killed because it cost $1. 10 to ship them and they would only sell for $1. 00 yet in the cities of New York and Chicago men picked scraps of meat out of garbage cans. He concluded that this was the result of overproduction and under consumption occurring at the same time. The irony of the situation was that people were starving to death in the cities, yet in the country side the food was being destroyed as it was too expensive to ship. Then, to make the whole situation even worse the dust bowl occurred, it lasted from 1930-1936.
It took place because during World War I, farmers had pressure on them to switch from animal farming to crop farming as crops could be sold abroad, but this continued on past the war and the soil lost its fertility. This was followed up by years of hot summers and little rain, This caused the top layer of soil to turn to dust. Then when strong winds blew the dust in to the air. There were massive dust storms which covered everything in dust. By 1936 over 20 million hectors of land in Kansas, Oklahoma ,Texas, new Mexico and Colorado were covered in dust and turned to desert.
As the land had become infertile the farmers from Oklahoma and Arkansas which had been hit the worst by the dust bowl migrated to California the land of plentiful were they hoped to get new jobs. the problem was that they were not welcome and people put signs on the border saying “okies go home no relief available in California”. They’d travelled over 1500km in search of jobs and all they got was hatred. President Hoover stayed out of the whole situation and like a business man he did not interfere and thought that time would fix the problem.
He provided no relief for the poor and homeless and did not supply food to them. Eventually he could no longer ignore what was happening and he begged employers not to sack workers or reduce pay as this would make the situation worse. He lent government money $423 for building programmes such as the Hoover Dam which provided jobs. Hoover introduced the Hawley-Smoot act 1930 where he raised tariffs on imported products to make Americans buy only American goods. However this backfired as it did before because Americans could not afford any products.
Other countries increased their tariffs on American goods. This made the situation worse than before. In 1930 after the Wall Street crash 1st World War veterans arrived in Washington DC demanding that the bonus they were promised for 1945 was paid now. They were known as the “bonus marchers” and after the 1st World War they were promised a bonus of about $500 each for their services to the country. It wasn’t due until 1945 but after the Wall Street Crash they had little money so they wanted their bonus early.
About 25,000 bonus marchers set up camp in Washington and would not move until they got there bonus president Hoover refused to pay saying most of them were communists and criminals and over half of them had never been in the armed forces. They stayed there until the summer putting pressure on the government. Eventually Hoover called in the army to evict the marchers and their families from the area. They attacked them and set their tents on fire, two babies died from the tear gas used and many people including children were injured.
This was the last straw for Hoover and actions the army made him very unpopular with the people of America. These mistakes resulted in Hoover getting voted out of office in 1932. He was replaced by Roosevelt who managed the situation much better than Hoover. The length and the effects of the depression could have been much better if Hoover had taken a role in the state of affairs much sooner and the effects would not have been too dreadful. It would have been better still if Hoover had worked on preventing the event as soon as the first signs occurred.