JOHN KENNETH GALBRAITH--THE CAUSES OF THE GREAT CRASH
In this article the main economic factors that contributed to the collapse of the economy are examined.
*1921-29 The US was prosperous. We had cars, roads, radios, flight, and modern construction had begun.
*The income was unequally distributed
*Worker output rose while prices and wages remained static thus, mainly businesses profited.
*Secretary of treasury Andrew Mellon reduced income taxes to benefit the rich
*Those who received the highest incomes had increased throughout this time of prosperity. Also, it owned a quarter of the US wealth. Hence. The US was extremely dependent on the spending of the rich.
*The unions were made weak due to the red scare. The steel industry was still working a 12 hour day. This was ended by President Harding after he pressured Judge Gary, head of the US Steel Co.
*We became the worlds greatest creditor after WWI.
We had to import more than export otherwise, we had to forgive the debts. The balance maintained through new foreign loans. This led to the weakening of the buying power of those who depended on exports and bond owners would suffer.
*These corporate companies relied on the ultimate holding company. If anything happened to it every1 was screwed.
*The stock market was booming and could buy on margin which means that one could extend his holdings by borrowing funds. Loans increased at the rate of 400,000,000 a month and the interest on them was about 7-12%.
*Catch: the boom was self-liquidating. It could last only as new $$ flowed into the market. Once the supply of $ began to falter, the market would cease to rise, and many would cash in. It crashed in October of 1929 (Black Tuesday).
*It could have been forseen because it had happened repetively with...