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Transcript of 1615
Over 600 banks went bankrupt
Unemployment reached upwards of 13 million people (25%), but it hit oer 50% in some cities such as Cleveland. Many people living in primitive conditions and close to famine. One New York family moved into a cave in central park and in St Louis more than 1000 people lived in shacks made of metal and cardboard, there was 'Hoovervilles' all over America. Between 1-2 million men traveled across America looking for work while many employers didn't offer jobs, John Steinbecks book 'Of Mice And Men' tells the story of two men working on a ranch during The Great Depression.
The Great Depression in 1930 was set off by the Wall Street Crash (1929) after almost everyone in America was effected by the crash and lost money in some way. Banks lost peoples savings while people who played the stock market lost all money they had invested previously. Many businesses also collapsed under the economic pressure.
Industrial production fell 40% which led to economic crisis in other countries, such as Germany and Britain.
In the 1920s, after WW1, huge numbers of rural Americans migrated into the cities with a sense of post-war optimism that they would find a more prosperous life as the country’s industrial sector grew. This meant that the agricultural industry shrunk causing financial crisis for many farmers.
This industrial boom led to overproduction of consumer goods, meaning supply was greater than demand, leading to price reductions. Taxes were imposed on goods being sold between America and Europe leading to very low levels of trade.
House prices increased dramatically in the early 1920s, but after 1926, house prices fell leaving a number of Americans owning houses that were worth less money than what they had paid for them.
The poorer people in America often bought goods on credit, which led to a great deal of them owing money to shops and large companies. Many of these companies subsequently went into financial difficulties as the poor failed to pay their debts.
As the financial sector was not very tightly regulated, there was an abundance of small banks, which did not have the financial resources to cope with the rush for money when the Wall Street Crash happened. A number of banks had to close leaving thousands of customers with no money at all.
Throughout the decade, many saw the stock market as 'the new gold rush' and so the prices of shares had increased to unrealistic levels; people continued to buy shares as they were making huge profits from them. By 1929 over 20 million people had invested in shares.
In order to buy the shares, on which they were making huge profits, people took out loans, resulting in $8.5 billion in loans.
In 1928 the new Republican president Herbert Hoover confidently stated, 'We in America today are nearer to the final triumph over poverty than ever before in the history of any land.' Within a year, all the confidence had ended and America was plunged into the Depression.
This graph shows how the Dow Jones Industrial Average, which is a stock market index created by Wall Street Journal editor Charles Dow, changed over 1929-30. It shows how 30 large publicly owned companies based in the United States have traded during a standard trading session in the stock market. The highlighted section of the graph shows the extremely steep decline of the index during the Wall Street Crash.
By Freya Watrasiewicz & Lydia Tew
The Wall Street Crash of 1929
1720 South Sea Bubble
The South Sea Company was founded in 1711 as a joint public-private partnership that was aimed at countering a debt of £30million.
In 1720, the government sold a monopoly to markets in South and Central America to the Company for £7million pounds in an attempt to further service its debt.
The trade monopoly for the SSC was based around exporting wool and slaves to the Spanish Americas. An assiento granted by Spain to Great Britain as part of the Treaty of Utrecht, which ended the Spanish War of Succession, gave Britain exclusive rights to sell to the Americas.
At this time the Americas were still thought to be a land heaving with precious metals, and where wool and slaves would be ingreat demand amongst the Spanish colonists.
Shares increased in value from around £100 to just under £1000 in under a year.
This caused an rush of investment across Britain, and many new emergences into the market were made. Such was the selling of shares that their value crashed. Soon they were worth less than £100 each again.
Anyone who had bought shares on credit was hit hard, and declarations of bankruptcy became commonplace.
Meanwhile, the company had failed to make much in the way of earnings, as demand for British goods in the Americas was low, and management had been poor, with goods often being shipped to the wrong ports.
A sub-prime loan was when money was lent to people
with a bad credit history. An extreme form of this was known a NINJA loan (No Income, No Job, No Assets) this was extremely risky and meant that people would be unable to repay the mortgage in the event of a crisis.
This was eventually one of the reasons for the worldwide economic crisis in the late 2000's