According to Rothbard in “America’s Great Depression” (I havent read the whole thing yet but I have heard many reference it) the 20s were characterized by significant innovation and economic growth. Under normal circumstances, this would cause prices to drop because production efficiency would allow goods to be produced better and cheaper per unit (like computer products today which are dropping in spite of the feds monetary inflation). But this wasnt what we saw. Prices were either level or rose across the board. This leads Rothbard to conclude, and he explains this better in his book, that there was monetary inflation/credit expansion due to the fact that prices across the board did not drop but were level or increased coming up to 1929. As I remember he goes on to prove this thesis using data from the time.
So yes there was prosperity, there was innovation, there were increases in efficiency but there was an underlying bubble that popped in 29 due to malinvestments made during the bubble.
http://mises.org/document/694/Americas-Great-Depression
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