Question

1. Prior to the stock market crash in October 1929, what were the major weaknesses in the economy of the late 1920s?

Answer 1

Prior to the Stick market crash in October 1929, there were several weaknesses of the economy of late 1920s. Major weaknesses during that time were low prices for agricultural products, protective tariffs, inequality or unequal distribution of wealth, banks failure unregulated stock speculation etc. The major weaknesses of the economy was that there was severe inequality or unequal distribution of wealth. Large portion of the wealth was in the hand of top margin people. At the same time a large part of the American society people do not have purchasing power. A large chunk of the purchasing power was in the hands of top class . Another weaknesses of the economy of 1920s was related to the international trade. As already mentioned that the trade was subjected to the protective tariffs and thus it has badly affected the US trade.

At the same tume time European nations defaulted on debts and withdrew investments in the United States.At the same time the situation become more serious as the sources of income of America also declined due to the inability of the countries like Britain and France who failed or were unable to pay their debts to United States .They were also not in position to purchase US goods due to weakening of their currency and thus the problem of overproduction was also there. Another weaknesses was related with agriculture . The natural disasters ,inability of farmers to earn more and the overproduction were the main factors leaded to problems in farm sector thus pushing the economy towards a grave danger. There was overproduction in the old  industries of textile and coal and they were not able to face the competition by oil industries. Thus decline of old industries was also a common weakness. Overproduction and underconsumption at that time were affecting most sectors of the economy and at the same time  Old industries were declining.Farm debts were rising and the farm income was declining.

The crashing of the banks was very common at that time. The uncimtrolled banking sector was also one of the main weaknesses that were present in the economy of 1920s. All these weakness lead the Great Depression nof 1930s which changed the outlook of economy.