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As a result of World War I being fought in Europe and Asia, the manufacturing base in the United States was not only strong but growing exponentially because they were exporting to the damaged regions of the world. Many people remember the period after World War I as the ‘Roaring 20s’. Important events like woman’s suffrage, new innovations, culture, and art were a big part of society. The first Oscars nomination was held, the first Miss America competition and the first musicals were taking hold of society and spreading throughout American culture. New York was the heart of the country; Wall Street represented the financial district; Madison Avenue was consumed with advertising and consumer culture, while Broadway showcased entertainment (The Great Depression Part 1. YouTube). New lifestyles were emerging in the new popular urban areas that prospered after World War I. New career opportunities, innovations, and leisure was being made available in the largest cities in the country. Yet, a majority of these benefits were only being enjoyed by the wealthier people in the country, while the lower and middle classes continued to suffer.
Behind the scenes of the Roaring 20s, significant moments were occurring like the Dawes and Young Plan, the 1920 Wall Street bombing, the Red Scare, the growth of the KKK, an explosion of gangs, the prohibition of alcohol with the 18th amendment, and economic poverty with the Great Depression were all major events that took place in the aftermath of World War I that affected our government structure, economic policy, and societal wellbeing and illustrates why the United States roaring 20s was filled with empty euphoria. We won’t have time to get into everything, but we will discuss some of the most important events in the interwar period that have far-reaching effects on the lives we live today.
Dawes Plan
(Charles Dawes 1865-1951)
As we have previously discussed J.P Morgan was assigned by Great Britain to be the sole purchasing agent for loans made to the Allied Powers in 1915 before the United States' entry into World War I. The loan was worth 500,000,000$, which at the time was the largest loan made in financial history. During the various meetings with British and French leaders, one of the various American businessmen Morgan would run into and get thoughts from was Charles Dawes. Charles Dawes was a banker himself, who would eventually be chosen by President Calvin Coolidge to become the vice president from 1925-1929. During World War I, he served very high up in the military, acting as a financial ambassador. Dawes publicly supported the loan, benefitting Morgan’s ability to continue business in Europe, despite the United States' official stance of being neutral.
After the war was over, Germany was tasked with paying reparations to various European countries, when Germany began defaulting on their loans in the early 1920s, French troops began occupying German land leading to military tension. Dawes proposed a change to the reparation payments in 1924 known as the Dawes plan. When Germany was failing to pay its debts. There were five main ideas proposed in the Dawes plan in 1924:
- The Ruhr area was to be evacuated by French troops
- Reparation payments would begin at one billion marks in the first year, increasing annually to two and a half billion marks after five years
- The Reichsbank would be re-organized under Allied supervision
- The sources for the reparation money would include transportation, excise, and customs taxes
- Germany would be loaned about $200 million, primarily through Wall Street bond issues in the United States
Put simply, the United States was going to give tremendous amounts of money to Germany, so Germans could pay their reparation payments, and the US government would pay for it by taxing the public. When it was decided who would handle the United States loan to Germany, none other than J.P Morgan was selected to lead the charge. He quickly began raising money from Wall Street and US government debt obligations while making money and increasing his influence at every step of the process (Modern World History Text Book, Ben Walsh OCR Exam Board). Therefore, the solution was temporarily resolved by giving Germany money that would be used to profit foreign Money Changers and politicians while leading to inflation for the lower- and middle-class citizens. Charles Dawes was awarded the Nobel Peace Prize in 1925 for his efforts in creating the Dawes Plan.
However, Germany would not be out of the water yet, and still maintained issues paying back their debt during the onset of the Great Depression. During the Depression, the United States halted its payments to Germany, creating instant insolvency on Germany’s behalf and leading to economic devastation.
To resolve this issue, Owen Young would produce the Young Plan in 1930, another resolution to German reparation payments and the international banking community. Owen Young was an American industrialist who was part of the Rockefeller foundation’s Board of Trustees and assisted with the creation of the earlier Dawes plan. He partnered with Thomas Lamont, a senior banker for JP Morgan who worked closely with Morgan Jr. on various economic issues.
Their main goal? To create a central bank for central banks, called the Bank of International Settlement (BIS). Their role is taken right from their website, the BIS, “is an international financial institution owned by central banks that ‘fosters international monetary and financial cooperation and serves as a bank for central banks’” (About BIS. Web page of Bank for International Settlements. 2005). After it was initially met with resilience by European governments, the Great Depression gave European countries no choice but to join the newly formed organization in 1930. The BIS will have important implications for the future of international finance and economics, including in our lives today.
(BIS main building in Basel Switzerland)
Red Scare
To understand the Red Scare, we need to take a quick step back and look at how some important characters developed in the early 1900s, one of the characters is a man that we have briefly discussed because of the concentration and abuse of power demonstrated during World War I, Mitchell Palmer. For a quick recap, Palmer was appointed to the Office of Alien Property Custodian during World War I by President Woodrow Wilson and served from 1917-1919 where his job was to confiscate foreign property and businesses worth hundreds of millions of dollars for the war effort.
After the war ended, President Wilson, who served from 1913-1921, appointed Mitchell Palmer as the Attorney General of the United States, despite pushback from his lack of legal experience. During his tenure as Alien Property Custodian and the Attorney General, the United States was going through its ‘first red scare’ which was a government fear of communists and socialists rising up to overthrow the government because of the success of the Russian Revolution in 1917. During the First Red Scare, there was a large political turmoil that included strikes, bombings, assassination attempts, and chaos because of the deprived conditions of the working-class citizens. In addition, Mitchell Palmer was overseeing the Red Summer in 1919, which is where white supremacists including the KKK murdered hundreds of black citizens in the south.
The combination of government centralization, impoverished economic conditions, and concentration of power in the hands of Money Changers illustrates why the roaring 20s was more like a cat meowing when discussing the progression of human existence.
The first strike that occurred during this period was the Seattle Strike. In January 1919, over 65,000 workers in Seattle came together to fight against low wages and poor working conditions which worsened because of American involvement in World War I, and was now over. The strike wasn’t geared toward a specific industry but was a general strike. The streets were filled with people of diverse backgrounds and cultures. The strike only lasted 5 days, and after the Seattle Mayor, who made 5x more than the average mayor at the time, with the support of the federal government threatened to deploy 3000 armed troops on the strikers if it were to continue. The strike came to an end, over 30 protesters were arrested and the wages and working conditions stayed the same.
(Headlines announcing the Seattle General Strike of 1919, the nation's first general strike)
After the strike, a series of bombings in 1919 sparked more fear in the government that a bloody revolution was on the horizon.
The first series of bombings occurred in April 1919. Over 36 bombs were shipped in the mail to various business leaders, politicians and advocates that supported the crony capitalism efforts of exerting their wealth and power. Two of these high-class individuals were John D. Rockefeller and Mitchell Palmer. Thankfully, no one died from the bombings, but the government and Money Changers took this attempt as a sign they needed to increase the security within their own borders.
(Mitchell Palmers House after the bombing)
The next event occurred on May Day in 1919. Mayday is a holiday that is celebrated on May 1st and was created in 1889 by two Marxists in Paris who rallied people and unions from around the world to recognize May 1st as an international date for workers, labor activists, 8-hour work days, and world peace. The day was chosen and recognized by the socialists because of the events that took place in Chicago known as the Haymarket Massacre in 1886 where a large group of protesters was in the streets asking for an 8-hour work day when a bomb went off, leading to 4 being dead and the arrest of nearly one hundred protesters. Many consider the Haymarket affair one of the single most important days in American labor history, “No single event has influenced the history of labor in Illinois, the United States, and even the world, more than the Chicago Haymarket Affair. It began with a rally on May 4, 1886, but the consequences are still being felt today. Although the rally is included in American history textbooks, very few present the event accurately or point out its significance ("The Haymarket Affair". illinoislaborhistory.org.).
When thinking back to the May Day riots of 1919, it was decided by labor unions across the country that a march would help to recognize and respond to the federal court case that involved the imprisonment of Eugene Victor Debs, who was one of the founding members of the Industrial Workers of the World Union and a five-time president of the same organization.
The demonstration celebrating May Day started peacefully, with groups of people marching through the city with a socialist flag and American flag being held in the center. The march broke up into 4 groups across the city resulting in 3 separate riots after army lieutenants and police officers ordered the protesters to lower the flags and they refused. After this disobedience, the lieutenants and police ordered their soldiers to begin attacking the protesters and with the help of tanks and equipment prepared for fighting wars, the activists had no choice but to surrender and leave the area. “Casualties amounted to two people killed, forty injured, and 116 arrested” ("May Day Riots". The Encyclopedia of Cleveland History. Case Western Reserve University. May 19, 2019.)
There was a second barrage of bombings sent through the mail in June 1919. These bombs were far larger than the ones previously attempted to deploy in May. Again, these bombs were targeted at high-level politicians and businessmen including Mitchell Palmer. One of the two deaths that occurred during these bombings involved a Galleanist member setting a bomb on Palmer’s front step and simultaneously blowing himself to pieces when it malfunctioned. Palmer and his family weren’t hurt. However, they were again traumatized by the experience.
Also, the Wall Street bombing of 1920, which was never officially solved, occurred on September 19, 1920, killing 40 people and seriously injuring hundreds more. A wagon pack with 100 pounds of dynamite and 500 pounds of steel exploded across from the J.P Morgan headquarters in New York’s financial district, making him the clear target. When it occurred, it was the deadliest terrorist attack on US soil and sparked a wave of government centralization in the next decade.
(Aftermath of explosion)
Furthermore, throughout 1919 there were numerous other strikes that swept the nation including the Boston Police Strike, Steel Industry Strike, and Coal Strike which were largely ineffective at achieving their goals of better working conditions. In some cases, higher wages and fewer hours were offered, but it still was a drop in the ocean relative to the wealth the industries were bringing in for the owners and largest stakeholders.
As we previously mentioned, simultaneous to the leftists striking and rioting, the Red Summer was occurring throughout the Southern United States led by the KKK, racists, and bigots that practiced looting, stealing, and murder. It's important to make a distinction between the Red Scare and the Red Summer. The Red Scare was the government’s reaction to fear of being overthrown by revolutionaries as a result of the Russian Revolution in 1917. The Red Summer was a bloody wave of killings and lynchings that occurred throughout the US without many repercussions for the people responsible.
Throughout World War I, there was a Great Migration of African Americans from the south to the north in order to fill much-needed jobs in the quickly expanding industrial economy. With many Americans serving their country abroad in the military or just additional opportunities opening up, there were many riots against the black population from whites because of their new active role in society and fighting for equal rights. In 1919, half a million African Americans migrated and were in positions previously held by white Americans before they left for the war. American politicians and the white population in general began to have a negative sentiment toward minority groups because they saw African Americans seeking equal treatment as trying to overthrow the government. President Woodrow Wilson even went as far as saying, "the American Negro returning from abroad would be our greatest medium in conveying Bolshevism to America." (McWhirter, Cameron (2011). Red Summer: The Summer of 1919 and the Awakening of Black America.
By the time these numerous strikes, riots, bombings, murders, lynchings, corruption, and other activities were occurring in the United States, the citizens were all highly wound up. After a report by Dr. George Edmund Hayes, it was discovered that over the course of 1919, there were around 38 separate instances of whites rioting against African Americans within the United States that resulted in mobs lynching, murdering, burning people alive, and raping women. In addition, in Hayes’s report he highlighted that from 1889-1918, “more than 3,000 people had been lynched; 2,472 were black men, and 50 were black women”.
(Will Brown, victim of Omaha, Nebraska lynching)
This led to what is now known as the Palmer Raids, which is when Attorney General Mitchell Palmer, who we discussed earlier, used his power to the fullest extent of the law to push forward government centralization and control. While Palmer was the Attorney General, he conducted raids that included illegal, unethical, and immoral tactics that involved over 10,000 people being arrested, 556 foreign citizens being deported, a concentration camp for holding prisoners, property being confiscated, and death.
Some of the alleged suspects appealed their convictions up to the Supreme Court of the United States. In a landmark case, Schenck v. the United States, the supreme court justices decided that restrictions placed on free speech by the Espionage act were constitutional and therefore upheld the convictions on hundreds of foreign suspects. Again, another supreme court case was heard in 1919 that involved the conviction and deportation of a foreigner for handing out paper newsletters in Abrams v. the United States. The content of the newsletters was simply discouraging the United States' involvement in the Russian Revolution that was going on at the time and the supreme court convicted him under the espionage act and was deported to Russia.
Palmer carried out his raids without fear of repercussions from the highest court in the country, and as you may guess these decisions by the supreme court prompted free speech advocates in the United States to voice their opinions and gather in protest.
The concentration camp created for the Palmer Raids was Camp Upton in Long Island, New York, and is a United States military base. However, during the Palmer Raids, the Times Newspaper reported the U.S government was using the military base as a concentration camp for left-wing prisoners to perform forced labor, even though no laws were broken and their constitutional rights were being violated. This camp was also used as a concentration camp during World War II when the U.S imprisoned millions of Asian Americans simply for the way they looked, we will discuss this in more detail later.
It’s not just me who believes Palmer’s actions were unethical. Many of the cases Palmer brought were later reversed or looked at with scrutiny in the following years. Despite his distasteful actions, Palmer would nearly become a presidential candidate but failed to secure a bid in the primary elections. Regardless, the impact Mitchell Palmer had on the concentration of power for the Federal government and the willingness of the President of the United States and the highest court in the land to allow these actions will resurface when we discuss the creation of the secret government organizations with large militias backing their interests like the Central Intelligence Agency (CIA) and National Security Agency (NSA).
(Men arrested in raids awaiting deportation hearings on Ellis Island, January 13, 1920)
After Woodrow Wilson left office in 1921, Warren Harding was elected as a republican president. Harding died two years into his term from a heart attack, but his short time in office wasn’t absent of controversy. The most important and unethical schemes Wilson allowed during his appointments were the Teapot Dome Scandal, his appointment to the justice department, and his involvement with the Veterans Bureau. When Harding was first appointed to president, he surrounded himself with the so-called Ohio gang of politicians that sought to increase their power, control, and wealth at the expense of the American people.
During Harding’s presidency, Charles Forbes was appointed as the director of the newly created Veterans Bureau that was established after World War I with the main goal of assisting the nearly 300,000 wounded veterans by consolidating and constructing hospitals (Adams, p. 287). Forbes and the Veterans Bureau's top lawyer, Charles Cramer, went on to create a deal with a construction company headed by Elias Mortimer that would increase the construction costs and materials needed for the hospital more than the market rate. The difference between the government's cost and the real cost would be funded by US taxpayers and government debt and could be used as profits to be split between Cramer, Forbes, and Mortimer. Once President Harding became aware of this scandal, he demanded Forbes's resignation. However, Harding allowed him to flee to Europe before being pursued by authorities (Murray 1973, p. 103). During the senate investigation that occurred two weeks after the resignation, Cramer committed suicide and Mortimore told the Senate everything because Forbes was having an affair with his wife. Forbes was eventually sentenced to two years in jail after returning to the United States from Europe to try and plead his case.
Another appointee Warren Harding made during his presidency was Harry Daugherty as the Attorney General. Daugherty had been riddled with corruption, bribery, and payoffs for the confiscation of foreign companies including the American Metal Company, which was originally a German company, but came under American possession after Daugherty paid off a military colonel 500,000$ to illegally confiscate the property. He was prosecuted by the government, and although the colonel was found guilty Daugherty’s charges were dropped after two juries were hung on their decision.
In addition, Daugherty’s chief advisor Jess Smith was appointed by President Harding and had been involved with corruption involving Daugherty, but it’s not exactly concrete what was done. One day Warren Harding sought advice from Secretary of Commerce and future president Herbert Hoover, who wasn’t necessarily in Harding’s inner circle of the Ohio Gang. Hoover stated,
“One day after lunch when we were a few days out, Harding asked me to come to his cabin. He plumped at me the question: "If you knew of a great scandal in our administration, would you for the good of the country and the party expose it publicly, or would you bury it?" My natural reply was "Publish it, and at least get credit for integrity on your side." He remarked that this method might be politically dangerous. I asked for more particulars. He said that he had received some rumors of irregularities, centering around Smith, in connection with cases in the Department of Justice. He had followed the matter up and finally sent for Smith. After a painful session, he told Smith that he would be arrested in the morning. Smith went home, burned all his papers, and committed suicide. Harding gave me no information about what Smith had been up to. I asked what Daugherty's relations to the affair were. He abruptly dried up and never raised the question again.” (Hoover, The Memoirs of Herbert Hoover: The Cabinet and the Presidency, 1920-1933, pg. 49.).
However, some people had their doubts, including Senator James Heflin who pronounced on the Senate floor, “Nobody else knew what he [Smith] knew, and with him dead there was nobody to tell the story – so Jesse Smith was murdered,"
Furthermore, Daugherty and Harding were involved in being complicit during the Teapot Scandal. The Teapot Dome Scandal involved the Secretary of Interior Albert Fall taking bribes and making secret deals with large private oil companies to supply the Navy with fuel. The two companies Fall worked with included Sinclair Oil headed by Henry Sinclair, and Pan American Petroleum owned by Edward Doheny. Initially, the job of finding oil was left to the US Navy, however, Harding created an executive order transferring that responsibility to the Secretary of Interior in Albert Fall.
Albert Fall is a bit of a wild character himself, is accused of having involvement with murders and the disappearance of a father and son because of courtroom battles, although he was never convicted, we don’t have time for this discussion (The Infamous Fountain Murders).
The Teapot Scandal involved Edward Doheny being accused of offering bribes to Albert Fall. However, he was acquitted. Albert Fall was convicted and sentenced, making him the first-ever federal cabinet member to be given prison time (Edward Doheny, Croesus of Oil Empire, Is Dead). This scandal was considered the worst governmental disgrace is known to the public until Watergate. During Doheny’s prosecution, he sold a majority of his shares in Pan American Petroleum to Rockefeller’s Standard Oil. In addition, during the start of the Great Depression, Sinclair sold a majority of his assets in Sinclair Oil to Rockefeller, making Sinclair oil part of the Rockefeller tree (During Depression Years Canny Sale, Purchases. 2015). Throughout the trial, Henry Sinclair and Sinclair Oil were being represented by a well-established, hot-shot lawyer named Bradley Palmer, who is crucial to our understanding of tying this all together.
The United Fruit Company and Banana Wars
Bradley Palmer was an American lawyer that was involved with some of the largest corporations in the country including Gillette razors, the International Telephone & Telegraph Corporation (ITT), and most importantly for our concern the United Fruit Company. In addition, Palmer was a large contributor to the Paris Peace Conference on behalf of the United States, serving in numerous subcommittees with the end result of the Peace Conference leading to the creation of the Treaty of Versailles, which deemed J.P Morgan the principal agent for transferring funds and managing Germany's reparation payments. Finally, Bradley Palmer served on a committee in 1918 that was tasked with supporting the creation of the Federal Reserve System making suggestions on different rules and lobbying politicians on its behalf.
(Bradley Palmer)
Palmer was not part of Harding’s ‘Ohio Gang’, although, he was closely affiliated with many of the cabinet members. He immediately had a reputation of wealth and power because of his father’s appointment to the Attorney General of the State of Pennsylvania and election to the US House of Representatives in the late 19th century. Bradley Palmer's legal career started by working with the Boston Fruit Company but quickly escalated after he successfully merged the business interests of Minor Keith, a businessman who owned railroad, agriculture, and cargo businesses. The merger of the two interests created the United Fruit Company in 1899. Right away, Palmer used the wealth of his American cronies and the power of the American government to consolidate 14 other foreign fruit companies that operated primarily in Central America and the Caribbean allowing them to control 80% of the importation of bananas inside the United States which brought in enormous profits for Palmer (Noonan, John T. 2002). In 1909 Palmer's activities were so viscous that antitrust lawsuits were brought upon him because of the destruction of competing firms through his vast financial interests in competing companies, although nothing came of the lawsuits (Noonan, John T. 2002).
During this period of Palmer's success, the Banana Wars were occurring throughout Central America. After the Spanish-American War ended in 1898, the United States government would go on a spree of sending the Marine Corps to foreign countries to carry out systematic military interventions that would shape the politics and economics of the region resulting in hundreds of American soldiers dying and thousands of men, women, and children being raided in their villages in Central America, the Caribbean, and South America that led to their torture and death.
The United States government was intervening in foreign territories to establish a monopoly over bananas, tobacco, sugar cane, and other vital commodities that can be harvested from the region. With Bradley Palmer at the helm of the United Fruit Company and his close relationship with important politicians and American power, the United States government backed him every step of the way. There were numerous insurrections by the native populations in Panama, Cuba, the Dominican Republic, Nicaragua, Mexico, Haiti, Honduras, and a handful of other Latin American countries.
(US Marines in Nicaragua in 1932)
During the Banana Wars, the United States was able to take control over the Panama Canal in 1903, where they established American sovereignty against the native government's interest. They gave themselves a permanent lease of a naval base on Guantanamo Bay in 1903. American influence on Nicaragua forced politicians to elect “good men” to political offices that would support American policy, or else be threatened by Military intervention. The United States was occupying territory in Mexico, which led to the Zimmerman program and the U.S eventually justified America's entrance into World War I. Americans changed the Haitian constitution to allow foreigners (Americans) the ability to own land in Haiti, leading to poverty for the natives.
All of this military intervention and forceful politics were justified by American politicians as necessary to establish economic and political influence in the region that they saw as easy targets. With Bradley Palmer at the wheel of consolidating native companies and taking part in cartels, the United States used military force was used to ensure the locals would follow his rules. The United Fruit company would fund guerrilla fighters, elections for local office and presidents, bribe government officials, and with the direct intervention of a more advanced military and technology, bloodier warfare occurred that left the locals scarred (Rivera, Miguel Caceres; Carranza, Sucelinda Zelaya. 2005).
After Palmer left United Fruit after the anti-trust case in 1909, he represented Sinclair Oil, which was owned by the Rockefellers, in the Teapot Dome Scandal. After his ‘success’ in defending the company, he moved onto public service where he joined Mitchell Palmer as a top executive in the Office of Alien Property Custodian by helping confiscate foreign property. Then in 1918 Bradley Palmer was appointed to a committee on the Federal Reserve Board, acting as their attorney. Then, President Woodrow Wilson selected Bradley Palmer to represent the United States delegation in the Paris Peace Conference, where he assisted in the creation of terms for the Treaty of Versailles, which choose Morgan as the transfer agent.
The Banana Wars occurred throughout the 1920s and early 1930s and were eventually ended under President Franklin Roosevelt in 1934 when the United States pulled its remaining troops out of Haiti. The political atmosphere in the United States after the war was a restructuring of power toward the federal government and away from the people while using their imperialistic tendencies to create an empire the world has never seen.
The American government constantly contrasts its actions against other foreign governments by explaining how Americans are not corrupt, fraudulent, causing death, taking bribes, and other illegal acts. In fact, the aftermath of World War I saw most of the middle and upper class being concerned with the brand-new luxuries that were becoming commonplace, as opposed to focusing on our government working in the background taking place in military conflict around the globe to secure our position of being an imperialistic empire. Furthermore, Americans today do not have the slightest clue of what the United States has done across the world to cause suffering to millions of people worldwide. Instead, they would rather be distracted by listening to the radio or watching their favorite television program. Americans are being just as complacent as our ancestors when it comes to the struggle for the American Dream.
The government's corruption and bribe-taking were focused on improving the businesses of the world’s wealthiest Money Changers. J.P Morgan, Rockefeller, and the Rothschilds are connected to these politicians, lawyers, and business interests and use them as a means to an end. Politicians abuse their power because they understand the system. Politicians understand the Federal Reserve will print out as much money as is needed to fund their projects, which only causes the lower classes to suffer. Politicians understand that business deals and foreign intervention benefits the largest corporation in America. They are not dumb; we just allow it to happen.
In addition to the massive political corruption that was occurring through the early 1900s, at the start of the 1920s another financial innovation was taking hold of American society that would lead to the world’s largest economic bubble in world history forming. It was a system of installment credit that allowed retail users to buy now and pay later.
For the first time in world history, everyday people were able to use credit for purchases they otherwise couldn’t afford. In addition, technological innovations had made inventions that were previously looked at as luxuries available to everyday people. Inventions like the vacuum, washer and dryer, dishwasher, cameras, motion pictures, the radio, and other everyday conveniences we take for granted today were being built and used for the first time for mass consumption in the 1920s. In its early forms, installment credit was being used in the mainstream for purchases of the now famous automobile, leading to business owners of other industries realizing they could extend credit for a wide variety of products and taking part in the scheme themselves. The benefit is obvious for the company, with such a low barrier to entry to purchase the products, companies are able to sell magnitudes more than they could previously. Secondly, they could charge interest on the amount that is being ‘loaned out.'
(New York City in the 1920s)
Lower- and middle-class citizens were using installment credit to purchase houses, furniture, cars, radios, dishwashers, and other conveniences. The advertising industry was propped up by the mainstream demand for new goods that psychologically forced consumers to compulsively buy new technology while taking on debt and paying interest. The advertising industry as a whole went from around 200 million dollars in the 1880s to 3 billion dollars in the 1920s representing a 1500% growth in just 40 years that was being spent on advertising (http://historymatters.gmu.edu/mse/ads/amadv.html). The art of marketing was now an established culture in America and the world we live in today began to form. In 2018, 419 million dollars was spent on Superbowl advertisements by cooperations. Almost half a billion dollars, on one three-hour event.
They do it because it works. They do it because we’re all suckers. The rise of advertising in the 1920s intrigued psychologists who began implementing the scientific method to the effectiveness of radio ads. Prominent figures in society such as Secretary of Commerce and future president Herbert Hoover actively promoted the industry where he titled one of his speeches, “Advertising Is a Vital Force in Our National Life” (Leach, William. 1993. Land of Desire).
A mentality was being engrained into Americans' minds. Rather than saving money to obtain these goods, people should fall into debt so they could obtain things they wanted. Money Changers created a scientifically incentivized system of credit that would change the psychology of consumers to believe that having the money to buy goods and services wasn’t necessary. It was a matter of habit. See a trigger, take the action, and get rewarded. Human brains are as simple as rats in a cage that scientists run experiments on.
In addition, this mentality crept its way into the stock market with margin. Margin is where traders and investors can borrow money with interest from the broker-dealer (BD) to buy stock. When the markets are up, this works great for the trader. However, when the markets are down, liquidations can occur that result in the BD selling out of the client’s positions to pay down the debt, allowing the BD to make back their money one way or another. In some cases, investors could put as little as 5% down and borrow the rest of the money from the BD. Then, if the market were to fall below the collateral requirements, a house call would be issued that would require clients to deposit more money into their accounts.
However, during the 1920s the stock market only seemed to go up, people were being issued margin calls, but instead were only making money. Ticker tapes that showed the prices of securities were in hair salons, bars, restaurants, grocery stores, and more filling people’s mindshare with numbers and ticker symbols. Discussions occurred nightly at family dinner, with your shoe-shiner, car washer, server, landscaper, and the mailman. Every day people were getting rich quickly without any perceived risk and quickly became addicted when the price went up and they became wealthier without doing a thing or putting in a hard day’s work in the office. During the time, you would have been stupid to not take part in the exponential gains. In a five-year span in the second half of the 1920s, the Dow Jones Industrial Index quadrupled from 100 points to 400 points, essentially illustrating an up-only market.
Before the 1920s, the stock market was largely closed off to the public and consisted of insiders trading amongst each other. So how did so many regular people become involved with speculating, trading, or investing in the US? This mentality changed during World War I when most Americans were buying government bonds that would pay them semi-annual interest. The interest investors made from the government bonds sparked their awareness of other investments that were being marketed by some of the wealthiest and most powerful people in the world through the advertising industry, including the president of the United States. Herbert Hoover, who served as the President from 1929-1933, predicated his entire presidential campaign on the idea of letting the markets work without any government regulation or oversight. In March 1929, during his inaugural address, Herbert Hoover spoke to the nation and proclaimed, “The election has again confirmed the determination of the American people, and opportunity must be given for the expression of popular will and we must keep it so.”
Through the summer of 1929 the stock markets increasingly rose because of their confidence in the lasting conditions, then in October of the same year stocks began to drop, people began to panic, and in the third week of October. things took a turn for the worse. The Banking elite and high-profile government officials performed a classic pump and dump while talking up the securities and selling them as they reached their peak. The bubble burst and the Great Depression swept not only across the United States but the entire world. (1929 The Great Depression Part 1 Feb 2nd, 2013).
(A gathering outside the Stock Exchange after the 1929 crash)
