Avoiding Default: The Role of Credit in the Consumption Collapse of 1930
High consumer indebtedness threatens future consumption spending if default is expensive. Consumer spending collapsed in 1930, turning a minor recession into the Great Depression. Households were shouldering an unprecedented burden of installment debt. Down payments were large. Contracts were short....
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| Veröffentlicht in: | The Quarterly journal of economics 1999-02, Vol.114 (1), p.319-335 |
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| container_title | The Quarterly journal of economics |
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| creator | Olney, Martha L. |
| description | High consumer indebtedness threatens future consumption spending if default is expensive. Consumer spending collapsed in 1930, turning a minor recession into the Great Depression. Households were shouldering an unprecedented burden of installment debt. Down payments were large. Contracts were short. Equity in durable goods was therefore acquired quickly. Missed installment pa5niients triggered repossession, reducing consumer wealth in 1930 because households lost all acquired equity. Cutting consumption was the only viable strategy in 1930 for avoiding default. Institutional changes lowered the cost of default by 1938. When recession began again, indebted households chose to default rather than reduce consumption. |
| doi_str_mv | 10.1162/003355399555927 |
| format | Article |
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| source | Oxford University Press Journals All Titles (1996-Current); Business Source Complete; JSTOR; Periodicals Index Online |
| subjects | Automobiles Consumer credit Consumer economics Consumer goods industries Consumer spending Consumption Consumption (Economics) Consumption function Default Default (Finance) Economic depression Economic recessions Economic theory Great Depression History Household consumption Household food consumption Households Installment credit Installment payments Prevention Recessions Sales finance companies Studies |
| title | Avoiding Default: The Role of Credit in the Consumption Collapse of 1930 |
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