The Great Depression - Essay Example

When, on that Black Monday, the stock market did actually crash, and when bankruptcies and layoffs followed on its heels, the country was unprepared-due to ideology as well as limited governmental infrastructure-to deal with the economic repercussions. All signs pointed to a booming American economy in the 1920s. Between the years of 1925 and 1929, the number of factories, shops, and other establishments of production rose from 183,900 to 206,700, better than a ten percent increase; the value of the products coming out of those establishments rose similarly, from $60.

8 billion to $68 billion (Galbraith, 2). In addition, the number of new cars rolling off the assembly line rose from 4,301,000 in 1926 to 5,358,000 in 1929 (Galbraith, 2). The power of the American dollar was such that it was in constant circulation; Americans were making money at a faster rate than ever, and they were spending it at a faster rate as well. In addition to the unprecedented growth in the production factor, the question for many middle-class Americans came to be what they should do with their newfound surplus.

The Twenties provided no shortage of opportunities in this regard. . Higher incomes and better transportation were making it increasingly accessible to the frost-bound North. The time indeed was coming when the annual flight to the South would be as regular and impressive as the migration of the Canada Goose" (Galbraith, 3). Indeed the potential for making money was so great in Florida that speculation ran rampant; properties, often swamp land and nowhere near the ocean, could be purchased for a mere 10% down payment, and by 1925, empty lots were trading for many thousands of dollars, based exclusively on the assumption that they would some day be worth a great deal to developers (Galbraith, 4-5).

The stock market was another popular investment opportunity. The New York Times securities index averaged, at the time, the prices of twenty-five "good, sound stocks with regular price changes and generally active markets," usually industrials (Galbraith, 7). The average price for those stocks rose steadily and dramatically throughout the Twenties, from $106 in May of 1924 to $245 at the end of 1927, and they continued rising (Galbraith, 7-9). The culmination of these factors lulled Americans into a sense of false security.

Somehow, it seems, the prevailing opinion was that success and prosperity would continue; it was seen as the ultimate fulfillment of the American dream. Only the markets could not support the growth; investment and speculation had overvalued stocks, commodities, and real estate. Production would wane, layoffs would occur, and America, precisely because of its blind adherence to this dogma of optimism, would find itself stricken and unprepared to deal with the consequences. In the aftermath of the stock market crash, it became apparent quite quickly that the country was not ready for an economic