Credit and Hire purchase

In the 1920s, the USA went through a series of changes, from the economic aspect. Each of them affected the country in different ways, some for good and others for worse. During this period, USA's economy boosted, it led most of the world’s industries, the economic growth was huge.

To start, we have to mention the “Buy now, pay later” hire purchase system. People were encouraged by the government to buy the new products that were starting to come out, even though you didn't have the necessary money to buy them. Every bank started offering people new ways to lend them money. Banks lended money to speculators as well. "Speculators" were investors who borrowed money from the banks to buy shares from the companies and when the price of them got higher, they sold them again, this way, they would get a profit from them. Then, they would pay the loan and still win money. However, they didn't have to pay the complete value of the shares.

Marketing and advertising played an important role because they encouraged people to buy goods. Americans were encouraged to spend their money and not save up, people's mind changed. Before this, they saved up money and used it for things they really needed to buy, but now they started spending their money because they were told that was the right thing to do. Many people thought that credit and hire purchase did not really help the economy, because poor people spent money they didn't really have, causing them long-term economic problems.

But, did this actually helped the economy to grow? At that moment it looked like it did, industries were producing at a mass scale due to Fordism (More production in less time). People were able to acquire what they needed and even more, due to the "Buy now, pay later" scheme. However, even though it looked as if the economy grew a lot, later on, the country would fall into a huge depression, because people couldn't pay their debts as they had no saved money. Industries and shops would also stop selling goods and that meant a huge loss of money. Many millonaire people would go in bankrupt.