ssion, and could it happen again?One of the main reasons for the crash in 1929 was the unequal distribution of wealth between Americans. Despite rising wages, and increased productivity; income distribution was extremely unequal. The top one percent of the population at the peak of the pyramid had incomes 650 percent greater than the 11 percent of Americans at the bottom. The top 0.1 percent of Americans had combined incomes equal to the bottom 42 percent; that same 0.1 percent of Americans in 1929 controlled 34 percent of all savings, while 80 percent of Americans had no savings whatsoever. One such example, was Henry Ford, founder of Ford Motor Company. Ford’s income in 1928 was 14 million dollars while the average American received wages of 750 dollars a year. Income per capita rose 9 percent from 1920 to 1929, while those with income in the top 1 percent enjoyed a exorbitant increase of 75 percent. (Alexander 2)This tremendous concentration of wealth in the hands of created some interesting problems. This scenario determined that the American economy was vastly dependant on high investment or luxury spending of the rich. This is okay except that high spending and high investments are very susceptible to fluctuations in the economy. These two instruments are much less stable than the alternative population expenditures such as food, clothing, and shelter. While food, clothing, and shelter matter they do not affect the economy as much as investment. The Federal Reserve was created in 1919 to prevent financial crisis and monitor economic activity. (North 7) The Federal Reserve reduced interest rates significantly in the 1920’s. When interest rates decrease investments increase. With rates low companies are more inclined to borrow money. This is because they will have to pay back less interest. This increased capital is used for new ventures, companies, ideas, and factories. This in turn creates more jobs an...
