Difference Between Debt And Great Depression In The US

            The twenties was a decade full of new financial opportunities in a society unable to adopt so much so quickly.  All of the new possibilities, such as credit and loans, led to greater debts and bigger holes to fill.  Society began getting too deeply in debt and was becoming increasingly unable to get itself out.  So, they began searching for alternate means of wealth.

During the 1920s, farmers were in debt. During WWI, Europeans bought farm products from America which raised prices and gave American farmers a large profit. The American farmers borrowed money to buy land and tractors and planned to pay off loans from their increased profit. After WWI, European farmers were able to produce enough products for themselves. Prices of American products dropped so American farmers could not pay off their debts. Labor Unions were also in debt. During WWI, labor unions worked with the govt. to keep production from decreasing. Wages could not keep up with the high prices. When WWI was over, workers demanded to be paid more. However, employers refused and labor unions went on strike. (Davidson and Stoff 736-737 )

America’s agricultural economy had already been suffering for a decade when nature conspired against the country to exacerbate the Great Depression. From 1931 through 1939,

Farmers did well after the Civil War and into the 1880s with plentiful rainfall and easy credit from banks. In the 1890s, however, American farmers suffered from drought, poor harvests, restrictive tariff and fiscal policies, low commodity prices, and competition from abroad. A downward swing in the business cycle exacerbated their plight, and many farmers in the Plains filed for

The Roaring Twenties is known as an age of parties, jazz, and overspending. After World War I, the optimistic American people reacted by celebrating and overspending. They purchased new appliances such as cars, radios and refrigerators; they purchased luxury items like clothes and invested in stocks. Their new attitude towards the booming American economy was carefree, leading to a series of events. First the stock market crashed. Next, the banks failed. Then, companies laid off employees who were unable to make the payments on the items they purchased. Tariffs and droughts further complicated the situation. This decade became known as the Great Depression, because the economic setbacks impacted everyone and everything. But the question is “Why did Americans lose so much money in such a short period of time?” One answer is, the failing stock market. A second is unregulated banking systems which allowed for buying on margin. Third, the lifestyle following World War I was too materialistic. The Great Depression was caused by Americans failing to responsibly manage their money.

Other than overproduction, another economic issue that drastically effected farmers was the Panic of 1893 that left millions of Americans unemployed, hungry, and homeless. In Susan Orcutt’s leter to Lorenzo D. Lewelling, she states, “I had the prettiest garden that you ever seen and the hail ruined it and I have nothing to look at my husband went a way to find work and came home last night and told me that would have to Starve he has bin in ten countys and did not get no work.” (Document H). Economic conditions such as overproduction, the Panic of 1893, and sharecropping systems that developed from it only led to the downfall of farmers.

With the static money supply in the 1880s, farmers suffered from a deflationary impact on the price of goods. They were forced to grow three times their products in order to pay off their mortgages with its high interest rates. The enlarged national market became an issue when Americans began buying imported goods rather than domestic goods. Farmers were left with a surplus of goods, but no consumers. Eventually, the government decided to step in and place the Mckinley Tariff on all foreign goods in an effort to get Americans to begin buying more domestic goods. However, the tariff not only indirectly reduced the national market, but also hurt the farmers because they were unable to keep up with the rising prices of imported farm machinery. The second Industrial Revolution was only able to briefly benefit the U.S.

“Much of the Roaring '20s was a continual cycle of debt for the American farmer, stemming from falling farm prices and the need to purchase expensive machinery.” (“The Farming Problem”). Tractors had just graced the U.S. markets which boosted the production of goods greatly. Most would think this was good, but it was more of a problem, the farmers would overproduce goods without enough people to buy them all which made the goods almost worthless. The farmers had to borrow money to pay for their tractors, assuming they would be able to pay back the debt with the money that the tractor made, but when they found they could not it set them up having no money and a debt with no way to pay it back. “When the stock market crashed in 1929 sending prices in an even more downward cycle, many American farmers wondered if their hardscrabble lives would ever improve.” (“The Farming Problem”). The stock market crashing made the stocks the farmers though they would be able to get some money from virtually worthless.

The United States had just gained victory from World War I and was thriving. The period known as the roaring 20s was a time of success and materialism. Consumers were buying more and more products and spending money on credit. People were frivolously spending money and buying stock in the stock market. Although things may have appeared to be a time of success and prosperity, a storm was brewing and there were underlying weaknesses in the economy.

Yet it wasn’t a change that could have been made overnight. Once the Stock Market Crash in October 1929, the collapse in industrial production and the financial crisis of 1931 led to a great depth depression in agriculture and more in industrial production (Kindleberger 70). There is without a doubt that were having difficulties prior to the Stock Market Crash, with falling prices, rising stocks, inability to sustain borrowing, and the necessity to maintain debt service (91). To begin with, farm debt was serious that the total farm mortgages in the United States had risen from $3.3 billion in 1910 to $6.7 billion in 1920 and $9.4 billion in 1925 (84). National agricultural policies attempted to reduce production of certain crops and animals products, though the initial motivation was to raise prices, increase farm income and stimulate the depression economy (Hornbeck 1480).

Farmers faced many issues in the 1800’s. First off, debt was a huge issue for farmers. Falling crop prices, unpaid loans, and crashing banks all led to the huge debt of farmers. Because the crop prices were falling in the horrible economy loans could not be paid back, unemployment soared, and businesses went under. There was also the tariff issue. Tariffs on imported goods were discouraging people to buy these products. They raised

During the twenties the economy had a definite impact on the society. It benefited some, but hurt others. The people that benefited were the prairie farmers and the oil companies. The people who didn’t benefit were American soldiers returning from WW1. Around the middle of the twenties, a wheat farmer was the person to be. Business was booming for all the wheat farmers, places

One of the reasons why farmers had debts was because of the switch to industrialized farming. Farmers used new industrial technology to increase the amount of crops that they grew. For instance, they started using equipment and supplies for planting such as big tractors and harvesters. Farmers were competing and had to buy these machines in order to produce more crop. To buy these big machines, farmers took out loans from banks. However, by using this concept of industrialized farming, farmers produced more and more food which meant that prices for these produces in market dropped because there was a lot of production of same food in the market. This

After 1927, consumer spending declined and housing construction slowed. Inventories piled up, and in1928 and 1929 manufacturers began to cut back on production and lay off workers. Reduced income and buying power in turn reinforced the downturn. By the summer of 1929 the economy was clearly in a recession. Although the stock market crash and its immediate consequences contributed to the Great Depression, longstanding weakness in the American economy accounted for its length and severity. Agriculture, in particular, had never recovered from the recession of 1920-1921. Farmers faced high fixed costs for equipment and mortgages incurred during the high inflationary war years. At the same time prices fell because of overproduction, forcing farmers to default on mortgage payments and risk foreclosure. Because farmers accounted for about one-forth of the nations gainfully employed workers in 1929, their difficulties weakened the general economic structure. Other industries also had experienced economic setbacks during the prosperous 1920s. The older industries such as textiles, mining, lumbering, and shipping faltered, newer and more successful consumer- based industries, such as chemicals, appliances, and food processing, proved not yet strong enough to lead the way to recovery.

The Roaring Twenties is known as a time of prosperity due to consumerism and mass-production from the years 1920 to 1929. This era in American history could be considered one of the most excessive times to date. Because of the United States’ triumph in World War I, the country had its first involvement of being a world power. The increase of consumer goods greatly impacted the U.S. economy during this time of success. Also, the start of the airline industry along with the expansion of automobile manufacturers helped profit banks. Several Americans became dependent on the newly developed methods of payment, which eventually became the American standard way of living. The quest to achieve this ideal lifestyle also known as the American Dream led to a severe shift in the nation’s economy. Through both fiscal and monetary policy along with laissez-faire tactics, the Roaring Twenties ended with the 1929 Wall Street Crash, which was the precursor to the worst economic decline in history, The Great Depression.