of great, dysfunctional wealth disparity.
This is societal deja vu.
(snip)
Because of the banking crisis, thousands of small businesspeople failed because they could not secure loans. Thousands more went bankrupt because they had lost their working capital in the stock market crash. A heavy burden of consumer debt also weakened the economy. Consumers built up an unmanageable amount of consumer installment and mortgage debt, taking out loans to buy cars, appliances, and homes in the suburbs. To repay these loans, consumers cut back sharply on discretionary spending. Drops in consumer spending led inevitably to reductions in production and worker layoffs. Unemployed workers then spent less and the cycle repeated itself.
A poor distribution of income compounded the country's economic problems. During the 1920s, there was a pronounced shift in wealth and income toward the very rich. Between 1919 and 1929, the share of income received by the wealthiest one percent of Americans rose from 12 percent to 19 percent, while the share received by the richest five percent jumped from 24 percent to 34 percent. Over the same period, the poorest 93 percent of the non-farm population actually saw its disposable income fall. Because the rich tend to spend a high proportion of their income on luxuries, such as large cars, entertainment, and tourism, and save a disproportionately large share of their income, there was insufficient demand to keep employment and investment at a high level.
Even before the onset of the Depression, business investment had begun to decline. Residential construction boomed between 1924 and 1927, but in 1929 housing starts fell to less than half the 1924 level. A major reason for the depressed housing market was the 1924 immigration law that had restricted foreign immigration. Soaring inventories also led businesses to reduce investment and production. During the mid-1920s, manufacturers expanded their production capacity and built up excessive inventories. At the decade's end they cut back sharply, directing their surplus funds into stock market speculation.
The Federal Reserve, the nation's central bank, played a critical, if inadvertent, role in weakening the economy. In an effort to curb stock market speculation, the Federal Reserve slowed the growth of the money supply, then allowed the money supply to fall dramatically after the stock market crash, producing a wrenching "liquidity crisis." Consumers found themselves unable to repay loans, while businesses did not have the capital to finance business operations. Instead of actively stimulating the economy by cutting interest rates and expanding the money supply--the way monetary authorities fight recessions today--the Federal Reserve allowed the country's money supply to decline by 27 percent between 1929 and 1933.
(snip)
https://www.digitalhistory.uh.edu/disp_textbook.cfm?smtID=2&psid=3432#:~:text=During%20the%201920s%2C%20there%20was,24%20percent%20to%2034%20percent.
When there is that much wealth and income disparity society starts fraying at the edges.
Policies have consequences
Thanks for the thread IronLionZion
= new reply since forum marked as read
