Finance in the 1920s Flashcards
What were Consumer Goods?
Consumer Goods were goods/products that ordinary families could buy using their disposable income.
Examples = Refrigerators, Vacuums Cleaners, Washing Machines and Radios.
What was the most important industry/consumer good in the 1920s?
Motor Industry; cars.
By 1930, there were 30 million cars in the USA.
Why did the advertising industry suddenly become vital?
Mail/catalogue order was invented. Americans could order consumer goods from the comfort of their own homes.
Billboard Advertising came about; Americans would see these giant billboards whilst driving to work/around in general.
Newspapers were vital for advertising. Adverts for properties, consumer goods and all sorts were printed in newspapers
Radio became a new medium for advertising; jingles, slogans etc.
What was hire purchase? And how did it affect America’s attitudes to spending money?
Hire Purchase = putting down an initial deposit for a product and paying for the rest of it in instalments over a period of time. Interest rate added.
Hire purchase made money very easy to spend because you didn’t have to have to pay for the whole product upfront and all in one payment, it was flexible.
Low interest rates made hire purchase even more popular.
Let me introduce you to the cycle of economic growth?
More Demand for Consumer Goods = more production of aforementioned goods = more workers needed = more jobs = more disposable income available for people to spend = thriving economy.
What was ‘buying on the margin’?
Buying on the Margin = Americans would borrow money from banks to purchase shares in the stock market, they’d then wait for the value of the shares to increase until the share was worth substantially more than what they’d originally paid for, they’d then sell it and make a profit.
Why did the purchase of shares in the stock market become more popular during the 1920s?
Americans purchased shares in companies as investments. With the increasing demand for consumer goods, the value of shares in thriving companies/industries rose at an exponential rate.
Companies richer = shares more valuable
What happened as the value/price of shares increased?
Americans believed that as the price of shares increased, the value of their shares would continue to increase, so they borrowed more money from the bank and bought even more shares.
Americans often used their houses as guarantees.
What percentage did share prices increase by during the 1920s?
On average, share prices increased by 300%.
Why were banks more willing to lend money during the 1920s?
Because they too believed that the prices/value of shares would continue to rise, therefore they’d earn back all the money they’d lent out, + profit from interest, before investors wanted to withdraw their savings.
