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

During the 1920s, USA was in a boom. The country was growing very fast due to the fact of the new methods and technologies that industries were developing. Not all of the population can afford to bought a radio or a car, so the banks gave credits to the people to ´´buy now, and pay later´´ and also the hire purchase helped people to buy even more. Eventhought the overproduction due to mass production and the assemble line left industries into bankrupt.

To start with, the Republican government maintain taxes low, so people could spend more money, this was call laissez-faire. Moreover, people with a low income can not afford to bought a car or a radio, so they asked the bank to give them credits. As a result, people could buy products and the economy growth. The government have a powerful trust with the captains if industry because the knew better than politicians did. The industries asked for credits to developed new technologies and methods to increase the production to sold more and more.

Then, the hire purchase was mainly used in the motor industry. Americans took advantages of this new schemes of ´´buy now, and pay later´´ to buy a car which was revolutionized by Henry Ford. People did not have the money to afford one so they borrow it easily from banks. Talking about new schemes as ´´buy now, and pay later´´ there was another one called buy ´´on margin´´. Which means that Americans, specially speculators, have to pay the 10% of the cash needed to buy shares and could borrow the rest from the bank entering into the stock markets which was an easy and quickly way to get rich thanks to loans.

On the other hand, the overproduction was facing and economic problem. Despite the credits helped to increase the production, people did not wanted to buy more because they have what they wanted due to the mass marketing and propaganda. Which said that Americans had a right to prosperity and had to spend money to had the latest consumer goods for a better quality life so industries can not sold the same amount they were used to. Letting to unemployment and the discontent of population. Furthermore the industries went bankrupt and banks also, because they did not have money to give credits.

Another key thing to remember is that, in Europe the first war world was in process. The american industries exported foodstuffs, arms and machinery to Great Britain and France. Selling these products helped the economy to growth even more. But given the fact that the first war world had ended, European countries were destroyed and poor to buy products to USA. So some industries los the exportation income.

Despite the electrification allowed industries to developed faster and better products, like vacuum cleaners, radios and cars, which needed petrol to make plastic, was not important for credits and hire purchase for economic growth. Eventhough petrol was used in the majority of the industries, in building roads, and also electrification simplify the handmade jobs, the overproduction of the industries led to unemployment and poverty.

To conclude, eventhough the industries had an overproduction and people did not want to spend money, the credits give by the banks helped the USA to growth it´s economy in the 1920s.