1920s Economy

1
The Great Depression
1920s Economy
The Business of America... is Business -
Calvin Coolidge 1923
2
After World War I

• Industries made consumer goods
• Consumer person who buys or uses a good
• People wanted luxury items
• Examples Radios, cars, phones, fridges

3
1920s Economy

• Average income increased more
• More more people bought luxuries
• Businesses made more expanded
• Businesses expanded made more products
• More production more jobs created
• More jobs more more spending
• (Formula) High production high spending
  growing economy
• Bull Market rapidly growing economy
• Bear Market falling economy

4
Buy Now Pay Later!!!

• Installment buying pay for item on a monthly
  fee
• Get product now, pay for it with monthly bills
• Dont need entire price upfront
• less-rich people can buy luxuries
• I.B. Creates higher demand for more goods
• Also put people in debt
• Still have to pay entire price over time
• (Credit Cards works the same way interest)

5
Get Rich Quick!!!

• People invested in the Stock Market
• Stock share of ownership in a companys profits
• When people buy shares of stock businesses use
  that to expand
• Business grows value of stock increases
• People buy more stock
• People buy more stock value of stock increases
• People make money over night
• But only once you sell
• EX. buy 100
• value rises to 500
• worth 400 more

6
On-margin

• Many businesses sold stock on-margin (easier to
  buy)
• On margin 10 down payment 90 bank loan
• People only paid 10 of stock price
• Loaned the other 90 from the bank (thru the
  stockbroker)
• Loan money borrowed that must be paid back
• Hold stock until value increases
• Sell stock, repay bank, keep whats left
• Only works if value increases
• Value decreases lose money pay the bank (loan)

7
Presidents of the 1920s

• Mostly left the economy alone
• Laissez Faire hands off (govt)
• Warren G. Harding (1921-1923)
  A return to normalcy - after WWI
• Calvin Coolidge (1923-1929)
  The business of America is business
• Herbert Hoover (1929-1933)
  The end of poverty

8
Trouble on the Horizon

• All was not well the economy (2 reasons)
• Farm prices were falling (high supply from WWI)
• Farmers were going bankrupt
• Bankrupt lacking the to run a business
• Banks loaned depositors money to stockbrokers
  (people who sell stock)
• If the stock market falls...
• Millions of people would lose their