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Is it fair to say that America was "Booming" in the 1920s?

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Introduction

Is it fair to say that America was "Booming" in the 1920s? "We in America are nearer to the financial triumph over poverty than ever before in the history of our land. The poor house is vanishing among us." Herbert Hoover's declaration in 1928 over the level of prosperity that America had gained. However, was America really 'booming - a period of economic growth'? The effects of the war, left most of Europe in debt, and America's main economic problem was for the Europeans to repay loans that they had taken out to finance the First World War. Unfortunately, European countries could not afford to repay the loans and the prohibitive tariffs made it more difficult, as European countries could not export their manufactured goods to the USA in mass quantities, thus being unable to earn the money to repay their loans. To make matters more confusing, the USA had lent money to Germany for them to repay reparations to other European countries through the demands of the Treaty of Versailles. These European countries then used the money from Germany to repay America - therefore America was paying itself. This became more confused through the Dawes and Young Plans which scaled down German reparations, which in turn meant that they repaid less of their American loans and reparations, therefore Europeans were even more unlikely to be able to pay American loans back. This showed that America was actually not prospering economically through loans, as the cycle of international debt meant that in the end they were paying themselves, which doesn't show a boom, as each factor made the cycle more tangled and confusing. ...read more.

Middle

People were also able to afford goods such as the vacuum cleaner and the washing machine because of the introduction of easy credit. It was a way of enhancing the massive consumer boom. By 1929, almost $7 billion worth of goods were sold on credit; including 75% of cars and half of major household appliances. This enabled those in the working class to buy goods that they could not otherwise afford. Everyone seemed to be in debt but they didn't seemed to be concerned as it was assumed that everyone's credit must be good and banks and loan companies seemed to be falling over backwards to lend money, with few questions. Easy credit also meant that Americans were able to invest in stocks and shares and the Stock Market Boom was a way for Americans to get rich quick, and many Americans went 'Wall Street Crazy'. Stocks and shares could be bought 'on the margin', on credit with loans from their broker. Increasingly people purchased them not to invest in a company but as a speculation. If the price rose they would sell, making a quick and easy profit. The banks became eager to lend to foreign governments, to businesses and to individuals, with the extension of credit at low rates, increasing the Americans spending power. New technology increased advertisement particularly on radio, which created consumer interest. In 1920, Americans owned 60,000 radios, but by 1929, this had raised to 10 million creating a mass audience open to new forms of communication such as the telephone. ...read more.

Conclusion

Mass production kept products at low prices, and with easy credit schemes, many people bought on credit. However, the view that not everybody shared in the prosperity must be seen, as there were many lower class as well as farmers who didn't share in the boom, and many families were earning below the survival wage. Therefore it can be said that it wasn't fair to say that America was booming, because not everyone was able to share in the boom. The boom seemed to occur because of the government's laid back policies, which meant that people's access to more money was unrestricted, leading to having more power to spend as much as they like and borrow as much as they wanted with low interest rates to pay back as banks were happy to lend out money to anyone. I don't think that it is fair to say that America was truly booming in the 1920s, because of the various factors that contributed to this 'boom'. The government's laid-back policy and the banks eagerness to loan out money to everyone showed that there was indeed an enormous increase in money that could be spent within the economy. However, people increasingly owed money to the bank as well as to stores through their hire-purchase schemes for luxurious goods. Overall, people's debts increased, and this became prominent after the Federal Reserve Board further inflated the currency by creating several more billion dollars. The economic status was worsened when "Black Thursday" came along resulting in everyone selling their shares so that America eventually went into the Great Depression. Kay Lam ...read more.

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