Explain the Effects of the Wall Street Crash on the Usa

Topics: Wall Street Crash of 1929, Roaring Twenties, Bank Pages: 1 (303 words) Published: November 11, 2012
The Wall Street Crash caused a banking crisis, as the entire American banking system had reached the brink of collapse. Between 1929 and 1932, 5000 banks went out of business and the Bank of New York lost 400,000 people’s savings. This was primarily because the banks had invested their customers’ money in shares, and following the Wall Street Crash share prices crashed, and consequently people lost confidence in the banks and took their money out causing many banks to go bust, and the confidence that had caused the economic boom in the first place had been shattered. The banks also called in any outstanding loans in a bid to survive, which caused 20,000 businesses that had loans from the banks to go bankrupt, and between 1929 and 1932, 109,371 businesses failed. This caused 12,000 people a day to become unemployed, with a total of 13 million unemployed by 1932. Despite the closing of the business, however, the creditors remained unpaid, thus triggering a cycle of bankruptcies. These crises for businesses led to a significant decrease in industrial production, which dropped by 45% between 1929 and 1932. The trade restrictions previously implemented by the US government also had an adverse effect on the US economy, because with 13 million people unemployed, there was little money to spend on luxuries such as the Ford cars. Even necessities such as wheat and food were no longer selling at the rate they had been in the Roaring 20s, and the farmers found themselves with a surplus of food, which they could not sell to either an international market or indeed the Americans. Prices were consequently slashed on their food, and this meant that they had little money to spend on any luxury items either, which resulted in them reducing their spending also.
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