Buying on Credit

• People could buy consumer goods by paying a weekly installment.

• Individual stores offered “credit” to customers.

• If used responsibly buying on credit is not a bad thing.

• Problems arose when people overextended their credit and did not plan for unexpected loss of income.

Flat Income Growth

If income does not keep up with inflation workers can’t afford to by the goods they produce.

Unequal Distribution of Income

Overproduction

If producers can’t sell all of their products they must cut production; this means they need fewer workers.

Unemployment

• Overproduction led to layoffs in factories.

• Workers without incomes could not pay rent, buy food, buy clothes, or pay for their consumer goods.

• There was no government assistance for unemployed Americans.

• Men especially were affected because they were seen as the breadwinners of the family.

Overproduction on Farms

• Farmers had been able to sell all of their surplus crops during WWI.

• After WWI ended those surpluses caused prices to drop and incomes to plummet.

The Dust Bowl

• Over use of farmlands in the WWI years combined with severe drought conditions to produce huge dust storms that buried much of America’s farmlands.

Bank Failures

• There were few regulations banks had to follow. They made very risky decisions.

• If a bank failed all deposits were lost and there was no getting the money back.

Collapse in Construction

This had a ripple effect in the economy as demand for building materials, furniture, appliances and other home goods fell.

Stock Market Crash

Banks and private investors lost millions of dollars when the market crashed. This event signals the historical beginning of the Great Depression.