Bubble in the Sun: The Florida Boom of the 1920s and How It Brought on the Great Depression

by Christopher Knowlton

With hindsight, it would become clear that the underlying health of the national economy during the twenties was more fragile than it seemed at the time. Most of the income gains during the decade would go to the wealthy, adding to the already considerable income disparities and social inequality and weakening the underpinnings of a society that still lacked a social safety net. Such problems are uncomfortably familiar to those who lived through the financial crash of 2008–09 and its aftermath, particularly in the

American heartland, where profound economic anxiety produced anger at the urban elites, resentment of immigrants, and ominous stirrings of economic nationalism.

“All the old rules seemed to be vanishing in the twenties. In exchange came a strange new world both gaudy and sad.” But no development was more significant than the changing attitudes toward the use of money. As the new live-in-the-moment spirit took hold, perhaps a natural response to the recent dour war years, Americans began to spend and borrow more freely than ever before. To do so, they used installment credit.

In reality, according to Lendol Calder, an expert on the history of consumer credit, overindebtedness was a headache for the Pilgrims, the colonial planters, and nineteenth-century farmers: “A river of red ink,” he writes, “runs through American history.”

Vickers, who studied bank records from the period that had been sealed for sixty-three years, concluded: “The sad story told by these records is that insiders looted the banks they pledged to protect. They tried to get rich by wildly speculating with depositors’ money, and when their schemes failed, so did their banks.”

So, one didn’t need to belong to the Ashley gang to rob a Florida bank in the 1920s. There were white-collar methods of theft that were equally effective and far less likely to be detected or prosecuted.

Perhaps the greatest contribution to the boom by Florida’s politicians was the change made to Florida’s constitution in 1924 that abolished the state’s income tax and inheritance tax. Florida was the first state in the nation to do so. The move was designed to tempt wealthy residents of other states to move their domiciles to Florida.

David Wiedemar, Robert Wiedemar, and Cindy Spitzer aptly describe this as “the Hamptons Effect” in their 2011 book Aftershock: Protect Yourself and Profit in the Next Global Financial Meltdown: “Wealthy people, stockbrokers, and asset managers have a deep need to keep believing we don’t have any bubbles and to keep investing in the stock market.… The bigger your house, the more denial you need to sleep at night.”