The Crash Occurs and the Great Depression Begins

1. What industrial weakness signaled a declining economy in the 1920s?       



Industrial weaknesses that signaled the declining economy were that industries such as railroads, textiles, and steel were barely making a profit. No one wanted mining or lumbering anymore and coal mining was hit hard because no one needed that either because of all the new energy sources such as hydroelectric energy. Even the booming industries like automobiles were weakening. The thing that was hit the hardest, though, was housing starts. Once that started falling, so did jobs that were related to it. Although, Agriculture suffered the most.

   

2. What did the experience of farmers and consumers at this time suggest about the health of the economy?      

Farmers over estimated everything and bought more land and more tools and made more crops but there wasn't enough buyers for them to sell it all. Consumers were spending less which made the farmers have more crops to sell but they couldn't sell them because the consumers weren't buying. Everyone was buying things on credit, though, before they stopped spending so much; both consumers and farmers. It then led to the Great Depression because no one had the money to pay off their debts.

3. How did speculation and margin buying cause stock prices to rise?     

Speculation and margin buying caused stock prices to rise because easy money was available to investors and the unrestrained buying and selling made the stock prices skyrocket. The investors got the easy money from margin buying because people would make a down payment on a bond and then borrow the rest. Speculation was when people bought bonds and stocks to try and make an easy profit but ignored the risks and by buying bonds and stocks, that gave money to investors.

4. What happened to ordinary workers during the Great Depression?     

Many ordinary workers lost their jobs. Banks closed and lots of people lost all their savings and the people that tried to withdraw all their savings, couldn't because the bank had no money because they invested it all. Unemployment rates skyrocketed from 3 percent to 25 percent. The people that were able to keep their jobs faced budget cuts and less hours. One out of every four workers was out of a job.

5. How did the Great Depression affect the world economy? 

The Hawley-Smoot Tariff Act was passed and it was supposed to help farmers and manufactures from foreign competition but it did the opposite. The tariff made unemployment worse in industries. Many countries then raised their own tariffs because of ours which would cause world trade to fall more than 40 percent. During the 1920's, no country was really doing that well.