There are many similarities between 1920s and now, and I have read that everybody then bought cars, appliances and especially stocks on massive credit just like now, only now instead of stocks it is housing and CC debt. Was the little American broke then, too, and just had debt, or were they smarter than today?
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Much smarter than todays people who think credit is an extension of their spendable income.
There was credit – but carried by individual merchants. Not the mass credit card industry of today.
The stock market crash of 1929 was triggered by massive stock speculation bought on margin borrowing. Investors were buying stocks but putting up only 10 cents on the dollar – the other 90 cents was borrowed. When stock prices declined, the lender/brokers called their margins due and, of course, they couldn’t come up with the cash even by panic selling their stocks.
In 1920s, the stock market saw a massive boom. You could own stock by putting 10% down. That is you pay for 1 share only and get 10 shares and you can but the 9 shares later. Speculation led many on mains street to buy a lot of stock at 10% down. One day in 1929, someone decided to “cash in” and when they called in for the other 90% of the money, no one had it. That started a massive sell off run. You have a 100 shares but only 10 paid for and no one has the money to buy 90 shares from you! The entire market panicked and there was a selling frenzy. Not enough buyers and lots of sellers and stocks tanked and became worthless. FDR instituted regulations to not buy on pure speculation so we don’t see such a massive sell off and run out of money. The sub prime crisis is a it different. What we have right now is the sub prime inventory that no one wants to buy so those who are holding it are stuck with it. Think of it like a shop where you have inventory which you can’t move, have paid for it in cash and now your money is trapped. The govt’s plan is to buy this inventory and pay cash for it so institutions can start lending again. Off course there will be regulations about maintaining liquidity and not make the same mistakes. Investment banking is now under regulations. Previously they were under no control what so ever so now the govt. will keep a watchful eye on the state of economy and liquidity issues. All that is collapsing before us is due to liquidity only. 30 to 1 leverage ratios is asking for a disaster sooner or later. What happened in 1929 was that ppl bought 10% with savings and 90% on paper and when paper was called in, no one had money to buy it.
No- people didn’t have the sort of credit that we have to day! MAYBE, just maybe- you were able to get a “tab” at your local stores. And if you didn’t pay up that bill at the end of the month- you got cut off real quick.
They didn’t have much back then! No, they didn’t have many appliances then at all.
I can fully remember my early childhood and the only appliances one had then was a stove, a fridge, and a wringer washer. And a furnace. Our family didn’t even own a car. You walked everywhere or took a bus.
We ate FAR more simple food too. I fully remember a typical breakfast- it many times was regular white rice, just over-cooked with lots of milk, and we’d get to put some butter and sugar in it. There wasn’t cream of rice in a box! I remember eating many organ meats like sweetbreads, and beef tongue. The bread was mostly homemade.
Mom made our clothes for many years. Everything came in glass bottles there was no plastic like now. You never threw them away- you turned them in. You really lived by “waste not want not” People waste too much today. It’s a darn shame.