How did consumer credit help the economy in the 1920s?

Answer 1

In the 1920's, credit enabled consumers to boost corporate profits to new levels. But, when the Stock Market crashed, credit forced consumers into poverty. As a result, businesses who relied on credit failed.

Answer 2

Consumer credit is a method of payment where the borrower "does not immediately reimburse the spender, but instead sets up some reimbursement plan, incurring a debt" (Wikipedia's definition).

In the 1920's many people could not afford to purchase even the most necessary goods, due to the Great Depression's onset. Credit was a way to get the people what they needed, not only to survive, but to stay in healthy, working condition. It was a short-term solution, but it was effective at helping people relieve the burdens of most expenses.

This program cannot survive forever, however. Like I said above, it was a short-term fix. Since the 1920's, the economy has gotten much better overall (not being partisan, just stating a fact). This program's downfall lies in people's laziness and irresponsibility. Ideally, a user of credit will eventually be able to pay off their debts. While this is true for most credit users, a significant portion work around repayment. This results in more money leaving a business than coming in, which can harm the economy as more people need help from the system than can provide for it.

In conclusion, the system will most likely be problematic in the future because not enough people are supporting its' cash supplies.

Answer 3

The development of consumer credit permitted people to buy products before they had saved up the purchase price, thus increasing industrial sales.