The 1920s Economy Causes of the Stock Market Crash of 1929 and the Great Depression

Post World War I Economy… The end of World War I brought an end to wartime production in the United States. The end of World War I brought an end to wartime production in the United States. Only wealthy business owners profited from the return to consumer manufacturing. Only wealthy business owners profited from the return to consumer manufacturing. Prices for goods soared while workers’ wages slowly gained an increase resulting in an enequal distribution of wealth/income. Prices for goods soared while workers’ wages slowly gained an increase resulting in an enequal distribution of wealth/income.

Plight of the Farmer Overproduction of crops (corn, wheat, barley etc.) from WWI led to a decrease in prices. Overproduction of crops (corn, wheat, barley etc.) from WWI led to a decrease in prices. Lack of profit leads to a decrease in consumer spending. Lack of profit leads to a decrease in consumer spending. Farmers eventually default on mortgages, go out of business and foodstuffs eventually decrease driving prices even higher. Farmers eventually default on mortgages, go out of business and foodstuffs eventually decrease driving prices even higher.

What is the relationship between wages and consumer spending? Workers could not afford to buy consumer products at high prices and therefore either decreased spending or became prime candidates for the: Workers could not afford to buy consumer products at high prices and therefore either decreased spending or became prime candidates for the: “BUY NOW, PAY LATER” PLAN Credit offered people the chance to buy products upfront and pay for the items monthly with interest. Credit offered people the chance to buy products upfront and pay for the items monthly with interest.

False Security, False prosperity… Rising prices of stock during the late 1920s gave people a false sense of security regarding the economy. Rising prices of stock during the late 1920s gave people a false sense of security regarding the economy. Many people purchased stock on margin, paid a down payment and hoped to repay the remainder of the loan/interest with profits from stock. Many people purchased stock on margin, paid a down payment and hoped to repay the remainder of the loan/interest with profits from stock. Stock Market Crash of 1929, people could not repay their loans- stockbrokers and banks went bankrupt which led to a mass panic and the Great Depression. Stock Market Crash of 1929, people could not repay their loans- stockbrokers and banks went bankrupt which led to a mass panic and the Great Depression.