The Economy Prosperity of the 1920s “Return to Normalcy”- Economy Overview • Economic boom “prosperity”- 1920-1929 – Impact of Automobile= launching pad to many other industries, business, growth, new way of life – Airplane Industry= transatlantic passenger flights – Alternating Electrical Current= able to transfer electricity over longer distances; new appliances – Increased production= mergers, chain stores, banks branch out, growth in business= wider income gap – Modern advertising= Wants become needs.= Growth of Consumerism Example= Listerine – Installment Plan= Buy on credit, banks lend at low rates = accumulation of debt Henry Ford and his Model T, 1921 Airplanes Electricity • Alternating Electrical Current • New appliances • Makes peoples’ lives easier Production and Consumerism On the Farm • Farmers bought new farm equipment on loans (farm credit)– predicted the crop prices to stay high • New technology/machines=increase crop yield • Farmers no longer had a market in Europe post WWI– farmers were producing more than they could sell • Law of Supply and Demand= increase amount of the good, decrease in price. • Farmers started to default on their loans, they could not pay the banks back. Stock Market Bull Market 1921-1929 • Because of economic prosperity between the years of 1921 and 1929, many investors became instant millionaires. • Speculation & Buying Stocks on Margin– over inflated market. Businesses were not actually worth as much as their stocks were. • Fear and panic took hold once people realized they were losing money • Black Tuesday 1920s Underlying Problems that caused the The Great Depression • Financial crisis for • Uneven distribution of farmers? wealth? • Industries in trouble? • Speculation? • Consumer debt and • Lack of foreign market? living on credit? • Cycle of Depression?