The Roaring Twenties was a time of innovation, exploration, and expression. The twenties presented new inventions such as the car and the radio, the first flight to Alaska, and new freedoms for women. However, this time of general prosperity came to a halt with an event that would leave America in a slump for ten years. On October 29, 1929, the stock market crashed, shattering the American economy and setting the stage for the Great Depression. Many Americans never thought that government intervention to prevent such economic turmoil was necessary because of concepts like supply and demand, Say’s Law, and the business cycle. Each concept provided a way for the economy to always keep itself afloat. The idea behind the law of supply and demand …show more content…
During the 1920s, people bought nearly anything they could think of on credit, from stock, to radios and cars. Much of this can be attributed to installments. Many Americans were buying on installment faster than what they could afford which, of course, landed them in debt (Doc H). Since consumers did not have the money to pay back their debts or or to buy other goods, companies were struggling to make money which “sap[ped] the whole economy” (Doc H). By the same token, Americans began buying stock on margin. In this process, an investor paid a fraction of the stock price then a stock broker would cover the additional cost and deposit the investor’s stock into the bank as collateral. Unfortunately, if stock values declined, the investor would then have to pay the additional cost of the decrease in his collateral. When people could not provide the money to over this cost, the broker would sell the stock to protect himself and the bank (Doc G). As prices decreased, investors who bought stock on margin were more inclined to “dump” their stocks back onto the market. In hopes of getting a quick return from buying security on margin, these investors aided the United States’ fall into the depression. Overall, credit built up a large deal of debt in America and would be a contributing factor in the Great