One of history’s most famous philosophers, Plato, once said “Excess generally causes reaction, and produces a change in the opposite direction, whether it be in the seasons, or in individuals, or in governments.” This is a trope of history, where many know the dangers of excess but cannot resist the temptation. In particular, it is the dangerous attraction to wealth and excess in the 1920s that will lead to the most devastating economic crash in world history. And even in more modern times, including the 1980s, the excessive habits of the modern world will be a bitter reminder of how toxic superfluous wealth can be. Plato may have lived more than two thousand and five hundred years ago, yet his insight on the perils of decadence will continue …show more content…
Yet, this post-war boom was not representative of the catastrophe that awaited. One issue that existed was the unregulated stock market and investment funds that rose out of the post-war boom. The American economy in the 1920s was built upon credit, where Americans borrowed money from banks to reinvest into the stock market with the expectation of always making money. In this practice, called buying on margin, it gave businesses money to expand their manufacturing beyond what was needed for the economy. As the economy seemed to rise infinitely, the average American thought of it as an infinite amount of prosperity. However, economists and financial expert tried to warn banks and the American people that what goes up must come down. However, it was too little too late. An article by the Great Depression and the New Deal Reference Library describes the crash due to speculation and buying on margin like this: “Eventually a house of cards developed, one holding company on top of another. When the stock market crashed, there were no more cash investors, and people could not afford to buy the goods of the operating companies. The operating companies could not make enough profits to support the various levels of holding companies. Therefore, the holding companies could not get enough cash to pay dividends and interest to the public investors. The whole house of cards collapsed, wiping out the public's investments.” Overall, it can be seen that the 1920s mindset of prosperity for all and a lack of long term insight was a contributing factor the stock market crash of 1929. If there was less desire for wealth and a more focused state of mind, perhaps there would have never been a stock market