Submit your comments on this article |
Economy |
The Depression That Was Fixed by Doing Nothing |
2015-01-04 |
![]() Not so long ago, the authorities did hardly anything. In response to the severe, little-known economic slump of the early 1920s, they virtually sat on their hands. It is an often forgotten episode that suggests the potential for constructive federal inaction—and underscores the healing power of Adam Smith ’s invisible hand. Beginning in January 1920, something much worse than a recession blighted the world. The U.S. suffered the steepest plunge in wholesale prices in its history (not even eclipsed by the Great Depression), as well as a 31.6% drop in industrial production and a 46.6% fall in the Dow Jones Industrial Average. Unemployment spiked, and corporate profits plunged. What to do? “Nothing” was the substantive response of the successive administrations of Woodrow Wilson and Warren G. Harding. Well, not quite nothing. Rather, they did what few 21st-century policy makers would have dared: They balanced the federal budget and—via the still wet-behind-the-ears Federal Reserve—raised interest rates rather than lowering them. Curiously, the depression ran its course. Eighteen months elapsed from business-cycle peak to business-cycle trough—following which the 1920s roared. More at the link |
Posted by:badanov |
#6 When a Quarter, Half-Dollar, or Dollar Coin, etc. was actually worth as much, and not the 5-10 cents-n-getting-lower its worth now. |
Posted by: JosephMendiola 2015-01-04 21:52 |
#5 Falling prices are NOT bad. Depends whether you're buying or selling. |
Posted by: Glenmore 2015-01-04 11:39 |
#4 "The U.S. suffered the steepest plunge in wholesale prices " Sorry but do journalists do a special test enabling them to write dumb things like this? Falling prices are NOT bad. |
Posted by: Bright Pebbles 2015-01-04 11:03 |
#3 People in the center/right keep pining for the next Reagan when they should be pining for the next Coolidge. |
Posted by: no mo uro 2015-01-04 08:49 |
#2 Part of the problem is context. The popular image of the Great Depression is the gritty black and white pictures and film. Somewhere around three quarters of the work eligible population were employed. You didn't work, you went without the benefits of government food and housing welfare. Today, a lot of those people are dropped from the numbers the bureaucrats manipulate. So we're left with a false comparison. |
Posted by: P2Kontheroad 2015-01-04 08:21 |
#1 Given the cooking of the books by the BLS, the Fed and other agencies, I'm not all that sure the Depression is over. Given the number of people working two to three part time jobs to make ends meet, I believe that at best we are in a recession. |
Posted by: Vespasian Sholuting3430 2015-01-04 03:05 |