The Great US Depression 1920/21

Never heard of it?

Come on sure you have.  You know of the Great Depression of the 1930s.  So you must know of the Great Depression of 1920/21.


Why do you think that might be?

Let’s look at what happened.

After the First World War (the epitome of ugly politics combined with narcissism – yet you may not know much about that either…) with the men returning from Europe, the great manufacturing concerns decided that demand for their goods would soar.  So they ramped up production in the expectation of fantastic business.

It didn’t happen.

There was massive oversupply.  Prices plummeted.  Businesses had great problems.  Unemployment soared from 4% to 12%.  By some accounts, the GDP fell 24%.  This was a huge depression.  Still ring no bells?  Curious huh?

Woodrow Wilson – in his last Presidential year – suffered TWO debilitating strokes.  So he stopped governing.  His wife took over and made no big decisions.  In other words, they did not intervene.

The great free marketer and true capitalist Warren G Harding took over and he had Herbert Hoover (who became Pres going into the 1930s…) in his ear (Economic Secretary) shouting we need to stimulate, we need to borrow, we need to ‘help’.

Harding replied with, in effect, ‘Yada yada’ and promptly took the following action

  • He CUT Federal spending 40%
  • He BALANCED the Budget
  • He let businesses – including big powerful corporations – go bust

The Federal Reserve also did nothing.  How could they with a capitalist in charge?

Prices of goods and services collapsed.  The costs of living and of running businesses collapsed.  They had that beautiful thing – deflation!  (Oh, how I dream of my living costs and business running costs falling.)

Within 18 months the US was back to full employment and then they had the Roaring 20s…

Do you still wonder why you know nothing of this period?




Want to know more?

Copyright Jonathan Davis 2014

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18 Responses to The Great US Depression 1920/21

  1. I still love it when people tell me the US and UK are capitalist countries
    the more capitalist the more equal. the less capital the less equal

  2. Anonymous says:

    a much better an longer lasting example of a successful government response to recession was that of switzerland in the early 2000s, where they concentrated on increasing wages and investing in education and infrastructire. another would be the response of germany to the credit crunch, where they subsidised (for a limited period) employers to keep staff on on shorter hours. many leading german industrialists said this measure was invaluable – and cheaper than putting them on the dole, like thatcher did in the 80s.

  3. Anonymous says:

    harding was not a austrian school free market capitalist. he intervened in the market with huge tarrifs and imposed an 8 hour working day on private businesses. he also introduced socialist child welfare policies.. he was also hugely unpopular with the general public, partly due to cronyism with his freemason chums and also for gassing protestors and the fact that starvation was the leading cause of death under his tenure.

    • Anonymous says:

      he was also hugely blackmailed due to his lascivious sexual proclivities, which probably explains why he got embroiled in the teapot dome scam, benefitting his big oil cronies handsomely. he worked for monopolists mellon and rockefeller, the latter of whom he helped secure (steal) oil from iran and iraq – a legacy we still live with today.

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  5. David Nixon says:

    so what we need is free market for corporations but socialism for people – right now we have the opposite

    • We need no socialism of any kind. It always leads to marxism/fascism.

      • David Nixon says:

        so you would let the hungry starve and deny medical care to the indigent sick? back to the jungle…

      • Amazing you cant see that is what is happening right now. Parts of uk and most of EU
        Capitalism will cut costs of living and of running businesses. Inflation hurts poor and middle class the most
        Elite actually benefit

      • Anonymous says:

        utopian rubbiish – there has never been, nor will ever be a pure free market. and the idea that a bit of socialism leads to marxism is just one of von mises’ unsientific axioms. sometimes public ownership and central planning are a good thing – look at singapore’s ports, the swiss railways, finnish state education and the dutch flood defences.

      • Anonymous says:

        capitalism has made the costs of education soar in the US and UK. capitalism in bolivia caused a revolution due to private control of water supplies increasing prices dramatically and claiming ownership of rainwater from native peoples. capitalism has made british trains the laughing stock of europe.

      • Anonymous says:

        so which is your favourite country with a pure capitalist economy? it aint singapore, which has a welfare system which can pay poor families 500 euros a month, free public healthcare, subsudused education and heavily subsiidised council housing. all of the land, and infrastructure are wholly state owned (transport, ports, telecomms, singapore air) through tamasek holdings who pay loads of tax and dividends to the singapore government.

  6. Joe Smith says:

    You don’t have to go back to the 1920’s we had the same thing when Paul Volcker was head of the Fed in the 80’s. He let the debt game reset, let the chips fall where they may, which was followed by 20 years of economic boom. I suspect Volcker was pushed out of the Fed because he was an obstacle to removing Glass Steagall. But history proves him right! Best Fed chairman in my lifetime.

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