Advertising and Credit
By the 1920s, while manufacturers of automobiles, refrigerators, radios and other labor-saving devices used advertising to increase demand, retailers developed new forms of credit to encourage people to make purchases. Installment plans enabled Americans without great means to buy the wondrous new products widely advertised in newspapers and magazines. As the wealthiest 5% earned one-third of all income in 1928, the vast majority of Americans needed credit to make larger purchases. Over the objections of his father Henry, Edsel Ford began selling automobiles in 1928 through Ford's Universal Credit Corporation. Yet, when the Great Depression arrived in 1929, many people lost, in addition to their jobs and homes, the consumer goods they had bought on installment.
During the post-World War II prosperity, more new forms of credit and sophisticated advertising, low unemployment and a wider distribution of wealth fueled consumer demand. Beginning in the 1970s, credit cards provided consumers new ways to accrue debt, often at high interest rates. Recently, after local banks and mortgage lenders made easy credit available through sub-prime mortgages, home fore-closures skyrocketed as borrowers saw low introductory rates balloon to unaffordable rates. The credit crises mushroomed into a financial collapse and a major economic recession, the effects of which we still face today.