Businessmen/Bankers Flashcards
Buying on the Margin
People didn’t have to pay the full price of stocks they could buy stocks on the margin. Buyers gave 10% of their money and the rest they borrowed. It was very risky. If the stocks increased in value they can sell and pay the brokers the loan they owed.
Installment Plan
Enabled people to buy goods over an extended period of time without putting much down at the time of the purchase. People were able to purchase automobile, household appliances, homes, furniture, and other items. It was supported by advertisers. Economists and businessmen were worried about this plan because it was a sign of fundamental weakness no fake economic prosperity. The company would give the buyer the product first and every month hey would have to pay a certain amount of money until it is paid off.
Advertising in the 1920s
The mass production and the lowering of prices on consumer goods meant people could buy more things. There was mass communication technologies that helped advertise items. Advertising “commercials” made radio another vehicle for American free enterprise. The flickering movie first attracted attention in the naughty peep-arcade shows.
New Deal Policies that Helped Bankers in the 1920s
Created the Emergency Banking Relief Act of 1933 which let the president invest with power to regulate banking transactions and foreign exchange and to reopen solvent banks. Enacted the Glass-Steagull Banking Reform Act which insured individual deposits up to $5,000. Roosevelt’s principal instrument for achieving inflation was gold buying.
Businessmen and Consumers
New business and production methods allowed manufacturers to make large profits which they plowed back into new factories and wage rises. Increased incomes and introduction to credit funded a huge increase in consumer spending.
Causes and Effects of Stock Market Crash
The crash resulted in a Great Depression. The causes were the overvalued stocks. People were buying on the margin in which investors only paid 10% of the total value. The stock market couldn’t stabilize since a huge amounts of money was being borrowed. Banks were insolvent and closing faster than they were opening. The effects of the stock market was the banks lost about $14 billion. They had a slow gradual improvement. The Glass Stegall Act was passed in which they gave $5,000 to each family.
