The Fragile Economy of the 20's and 30's
The Fragile Economy of the 1920's and 30's
Post WWI and the Roaring Twenties
Prior to the roaring twenties the global economy was unstable. World War I had created fragile trading bonds between the U.S. and many countries, war reparations needed to be paid by the countries that lost the war, countries such as Germany and Great Britain were indebted to the United States, and, as we know well, wars cost money. The economy was weakened and the developments made in the 1920's didn't help to rebuild it.
The money that was earned during the twenties was poorly distributed with the top one percent of the population having about 32 percent of all the wealth. This meant that the rest of the population was extremely poor and had very little buying power. Approximately 70 million people out of the 105 million in America were classified as poor during the 1920's. The economy appeared to be booming but it was merely the rich getting richer and the poor struggling with debt.
The 1920's seemed to be a prosperous time with many innovative technologies being brought to light. The idea of credit began and with the already poor population the bills began to stack up. People were buying more than they could afford to pay for and as these "delinquent bills" stacked up the economy lost money. Assembly lines made mass production very easy and gave the U.S. an abundance of supplies. This abundance was added to the surplus of army provisions that the war had left behind thus putting the U.S. in a state of profusion. The small wealthy population invested largely in certain stocks. This caused overproduction of many supplies and the unsold goods piled up. We could not export these goods because other countries were too poor to be importing U.S. goods. Eventually the supply surpassed the demand and there was a sudden fall of prices that led to deflation.
And as if this deflation wasn't enough, the government joined England in participating in the Gold