Tuesday, July 19, 2011

Riding It Out On The Great Financial Roller Coaster - The United States' Early Panics: Part 3 (a)

In this, part 3 of a 4 part series examining the tumultuous history of American financial crises, we will examine the boom of the 1920s that led to the Great Depression. In part 2, we examined the Panic of 1819 and the precedent it set for the bigger financial meltdowns that would come.

The Panic of 1929

World War I was finally over. War production had wholly ceased by June 30, 1919. The government lifted the controls it had imposed on the economy during the war and hastened the discharge of soldiers. By Christmas of 1919 the soldiers were finally returning to civilian life. Many of the servicemen coming back from the war expected a hero's welcome and a job, only to find their former jobs in occupied by someone else. These servicemen were previously assured in every way that they would receive fair economic treatment after serving their duty and were rightly bitter.

The stimulus of war contracts bought a high level of profitability for Americans usage. When the 1920s rolled around the economy was in an upswing. The returning veterans found the country in a tremendously prosperous state with a new generation of millionaires and well-to-do's borne from war profits. America belonged to the businessmen. The prestige of all businessmen hinged on the irrefutable prosperity of this era. Harding's slogan "Less government in business, more business in government," was popularized by Will Hays, Republican national chairman. Calvin Coolidge's statement was, "The business of America is business." During this period the Republican Party had installed in the White House three of its Presidential figures: Warren G. Harding (in office 1921-1923), Calvin Coolidge (1923-29) and Herbert C. Hoover (1929-1933). "The differences among the three men reflected three evolutionary stages in the relationship of government to business." Out of the three, Hoover was the best at business and running government.

The country was greater in population, increased by record immigration and more industrialization. The laboring class depended on wages gained largely for their survival and happiness. It was a "Postwar Boom Period." Economic growth created successful business profits. This raised the standard of living for most Americans enabling them to find a better way to improve their situation and to enjoy life.

A speculative boom in farm property made it possible for those who sold their farms to obtain a larger return on their investment. Since the average person during the 1920s often made a lot of money, they had enough spare cash to get involved in speculations and investments in the stock market. A wave of stock speculation was sweeping the nation and everywhere there was riotous wasteful spending and mighty profiteering. The increase of money deposited into saving accounts grew rapidly as did the bulk of depositors.

American businessmen met each year with a smile and swagger as they continued to wallow in their overconfidence as the economy steadily rolled along. They would boast that the turmoil in the nation's financial system, which had dominated everyone's lives over the last century, was now a thing of the past, no longer to be concerned about. In plain words, "Things looked real good through their rose-tinted glasses." Plenty of them even agreed that Providence had been kind to them. Never before would our nation suffer such a serious downward economic spiral as the one resulting from the crash of 1929.

To be continued: Part 3 (b)

To contact: miriammedina@earthlink.net

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