Gilded Age Of Credit Essay
While some refer to the 1920s as the return of the Gilded Age, it was really the development of the age of credit. With World War I, came an economic system of borrowing money with the intention of turning credit into economic growth that would prosper the country. After all, this was the example set by the government with their gracious loans to the allies during war time to reap the benefits of war. During the war, many areas of the economy prospered, especially agriculture, because the United States became the primary providers of goods for the world with Europe being in shambles. This economic growth and new inventions led to the birth of consumer consumption that, built on credit, surged the economy with new jobs and industries; particularly
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Being that baking systems were comprised of small, institutionally run establishments (that still functioned on the gold standard), they relied on their own funds to conduct business and transactions. When people wanted all of their money at once, small banks turned to bigger, privately owned banks for loans that they couldn’t repay, which caused massive deflation. Soon these banks crashed and people that had once had life savings now watched their wealth disappear, being that banks were not insured by the government (thank you Andrew Jackson). This created a domino effect where the credit system locked up, prices dropped, businesses cut costs by laying off workers who then didn’t have money to spend on products, the products stockpiled, finally resulting in businesses going bankrupt. The dominos then fell globally because when the United States’ credit dried up, Germany couldn’t borrow any more money to repay the allies the money they owed them under the Versailles Treaty and then Britain and France couldn’t repay the U.S. the money they had borrowed during the war. With financial deadlocked in western societies, world trade basically came to a halt. By 1933, industrial production fell thirty-seven percent, construction plunged seventy-eight percent, prices of crops that were already low dropped fifty percent, and the U.S. GDP fell by
Being that baking systems were comprised of small, institutionally run establishments (that still functioned on the gold standard), they relied on their own funds to conduct business and transactions. When people wanted all of their money at once, small banks turned to bigger, privately owned banks for loans that they couldn’t repay, which caused massive deflation. Soon these banks crashed and people that had once had life savings now watched their wealth disappear, being that banks were not insured by the government (thank you Andrew Jackson). This created a domino effect where the credit system locked up, prices dropped, businesses cut costs by laying off workers who then didn’t have money to spend on products, the products stockpiled, finally resulting in businesses going bankrupt. The dominos then fell globally because when the United States’ credit dried up, Germany couldn’t borrow any more money to repay the allies the money they owed them under the Versailles Treaty and then Britain and France couldn’t repay the U.S. the money they had borrowed during the war. With financial deadlocked in western societies, world trade basically came to a halt. By 1933, industrial production fell thirty-seven percent, construction plunged seventy-eight percent, prices of crops that were already low dropped fifty percent, and the U.S. GDP fell by