Trends in the U.S. Economy in the 1920s

U.S. HISTORY: SPICONARDI

Consumerism• In order to emerge from

the recession, factories switched from producing military goods to consumer goods.– This switch was aided by

advertising– Advertising can create a

demand for a good• Can you think of an ad or

commercial that caused you to buy a good or product?

Consumerism• These advertisements created consumerism• Consumerism a system of creating and

promoting a desire to purchase goods whether they are necessary or not

The “Booming” Stock Market• Consumerism helped bring the U.S. out of its

post-WWI recession• With a “strong” economy, many people chose to

invest in the stock market– The more people invested in the stock market, the

more the value of stocks increased

The “Booming” Stock MarketBull Market• A period of an

increase in stock prices and investor confidence

Bear Market• A period of decline in

the stock market. It is a transition from high investor confidence to widespread investor fear

The “Booming” Stock Market• During the bull market, even people who

couldn’t afford to invest on Wall Street began to– Like consumer goods, people purchased stocks on

credit– Buying on Margin borrowing money in order to

purchase stockJane buys a share in a company for $100, using $20 of her own money, and $80 borrowed from her broker. The net value (share - loan) is $20. The broker wants a minimum margin requirement of $10.

Suppose the share goes down to $85. The net value is now only $5 (net value ($20) - share loss of ($15)), and Jane will either have to sell the share or repay part of the loan (so that the net value of her position is again above $10).

How much did personal debt increase during the decade of the 1920s?