In 1929 the worst economic downturn in history took place. The Great Depression sent the world in a downward spiral. The hardship and trauma suffered through the Great Depression can be connected to overproduction of product, buying on margin and installment buying.
The overproduction of product took down business and then the economy. Overproduction is the production is the process of producing more product than can be bought by consumers.The majority of the population in 1929 was living on a $2000-1000 income, with $2000 marking the poverty line. With most of the population only able to barley to provide for themselves and their family, they werent able to buy lots of food or any luxury items. Farmers also were widely impacted, they were growing too many crops and not enough people were purchasing them. This caused prices of wheat and cotton to drop, putting farmers further and further in debt.
Buying on margin led to the downfall of the stock market and ultimately the Great Depression. To buy on margin is to borrow money from a broker to buy stock, almost like a loan. This process was a danger that could not be stopped. It allowed prices to be further depressed and compelled more stocks to be dropped on the market. The value of stock bought fluctuates putting brokers and banks in bad positions, they were unprotected and had no way of stopping the flow of money leaving them.
Installment buying is a payment plan which you will end up fully paying in a set period of time. Everyone would buy on installment with debt no longer seen as shameful. 60% of all automobiles and furniture were bought on installment plans. With nobody paying full price for products up front, business were losing money waiting for them to pay off their plans. This inevitably caused the reduction of prices and the loss of so much money, overall tearing down the economy even further.
The damage done during the Great Depression can be contributed to overproduction, buying on margin and installment buying. This was time of suffering and survival for most. Without these contributions, the world itself would be completely different.
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