The Roaring 20s were a time of cultural change and a fresh economy after World War I. There was rapid growth happening in industrial economies and consumerism. With prohibition in place, underground bars to drink were popular, and would have been crowded with young people enjoying their lives. However, much of this stopped on October 29, 1929 when the stock market crashed when Dow Jones stock dropped 23% over two days.
The eighties, like we learned about in "Greed is Good" and "A New World," was a time of economic prosperity for a handful, and a lot of hard work for others. Americans wanted more for themselves, and young people found their opportunity on Wall Street. However, there was a lot of fraud, as some huge names in the market were being charged with fraud and found guilty. Between 1982 and 1987, Dow Jones Average more than tripled, leading up to Black Monday (October 22), when it dropped 22% in a single day.
There's obviously the large similarity of how the economy in both decades was growing and growing, until all of a sudden it plummeted. In both cases, there was a reduction of taxes that year, and young people were anxious and ready to be working in the economy. Coolidge and Reagan were both extremely pro business presidents.
However, in the 20's the economic crash was due to the unsustainable boom caused by the Federal Reserve. The Federal Reserve also wasn't able to stop the Great Depression that started after the crash at the end of the 20s. In the 80s, there wasn't any government help like in the 20s, but there were much riskier investments made by bankers because they believed (or at least hoped) that it would pay off and they'd end up richer.
Both of these decades were filled with the good and bad, and it'd be hard to compare every aspect of them, but we can see how history repeats itself even just in the larger themes between the two times, of short lived prosperity ending in an economic depression.
Sources:
http://webhome.auburn.edu/~garriro/c5fedres.htm
https://www.investopedia.com/terms/s/stock-market-crash-1987.asp
https://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929
https://www.chicagotribune.com/news/ct-xpm-1986-09-18-8603090762-story.html
This was really well written! I loved how you were able to spot a pattern and connect these two periods of time. I researched this pattern more and found that it is called the "boom and bust" cycle. This inevitable cycle is often caused by 3 factors (supply and demand, availability of financial capital, and future expectations) working together and occurs in 4 phases: First is the "boom." This is when the economy expands, house prices rise, wages grow, and unemployment is low. The GDP remains at a stable 2-3% range, but it often leads to inflation. Then comes the end of the boom, or the peak. At this inflection point, the economy stops expanding. The peak is followed by the "bust," also known as the contraction phase of the business cycle, and rarely lasts more than 18 months. It is usually triggered by a stock market crash (as it did in the 20s and 80s) followed by negative GDP, unemployment higher than 7%, and falling value of investment. It is called a recession if it lasts more than 3 months. The last phase is the "trough," which is another inflection point where the economy stops contracting and begins to expand.
ReplyDeleteSource: https://www.thebalance.com/boom-and-bust-cycle-causes-and-history-3305803