How important were credit and hire purchase as reasons for economic growth in USA in the 1920's?

During the 1920’s there was big economic growth in the USA. Industry production doubled and the economy grew very fast. Some historians agree this was due to credit, loans from the bank, and hire purchase, paying for something in installments over time. But this is still being debated.

To begin with, people started to invest money they didn’t have in speculation. People knew prices would continue to go up so they got credits from the banks and spent the money in shares. When the prices rose, they sold the shares and used the money they earned to repay the loan. They still were left with profit. Furthermore, speculators could buy shares “on margin”. This means they didn’t have to pay the full price of the shares, they had to put only 10 percent of the money needed and borrow the rest. Moreover, some industries, such as the car industry started to use new methods to sell their products, such as hire purchase. People could buy a car or even smaller products like radios or TV’s and pay for them later, making people spend money they didn’t have. This way it was more accessible for poorer families to buy this products even if they didn’t have the money needed.

On the other hand, there were other important reasons for rapid economic growth in the 1920’s. For instance, Republican policies. Laissez-faire was the belief government should interfere as little as possible in people’s lives and that that was where prosperity came from. They imposed import tariffs which made it expensive to import foreign goods. This policy protected local businesses from competition and let them grow more rapidly. Finally, Republicans kept taxation as low as possible believing that if people kept their own money they were more likely to spend it on American goods. In addition, advertisers who had learnt their skills in making propagandas during the war were now setting up agencies to sell cars, cigarettes, clothing and other items. They knew how to encourage people to spend. The country was able to exploit its resources of raw materials to produce steel, chemicals and machinery. Electrification and new methods of production, such as the moving production line, made it easier for industries to mass-produce goods fast and made them cheaper for people.

After taking everything into consideration, it can be said that credits and hire purchase were important reasons for economic development in the USA since they made it easier for people to spend money, and if people didn’t buy the things the industries were mass-producing the way they did, there wouldn’t have been any economic development.