1920: The Great Depression That Wasn't (How Warren Harding avoided it and what we can learn)

I have to study Harding and Coolidge. My father always believed Coolidge was one of the great Presidents. I didn’t know about the Harding depression and his successful response until well after college! And I was an economics and poly sci grad. Completely blacked out of the schools and economics study. Stunning ommission because it doesn’t match their theories.

They provide a few quotes and sum him up as “Silent Cal” without explaining how his pro-business policies created the boom, and Hoover’s policies helped kill it.

Not quite.

Market trading during the 20s was built on the sand of borrowed money, under the assumption that the markets would always go up. (Same logic, and almost the same mechanism, that fueled the market disaster in 2008.) A collapse was inevitable.

Hoover's policies had little to do with the cause of the crash. His policies after the crash, however, certainly made things worse.

On the upside, it turns out that one Winston Churchill had bought into the hype and invested heavily in the US stock market. He was wiped out in the crash.

As a result, he had to forego the luxurious retirement he had planned, and instead had to go back to work writing and speaking about the issues of the day.

Were it not for the stock market crash, it is likely that Churchill would not have risen to Prime Minister of Britain in the world's time of need....

Silent Cal and his policies did not cause the depression. His policies fueled a boom that led people to invest and business practice of the day let them invest with borrowed money. The US government has no legitimate role in preventing bad business decisions, and when a bubble bursts, government needs to stay out of the way of that, too, and let it burst, the way that Harding did when Wilson's government spending led to economic problems. Had Coolidge been in power in 1929, I believe we wouldn't even remember the stock market crash of 1929, except as one of about 8 such "panics" that we have had in our history.

The economic growth and production during the 20s were real. Valuations on Wall Street outpaced reality. There was a radio bubble, just like the internet bubble of 1999. The crash was not that severe initially. I've looked at the charts from 1929; it was bad, sure. We've seen similar in 2000 and in 2008, and we recovered. Nasdaq went from a bubble high of 5200 to something like 1800, and then was recovering a little when 9-11 hit and it went to something like 1500. Now THAT is a crash. Dow went down from 14 to what, 7, in 2008. Now THAT is a crash. It took years of grinding for the market to reach its lows in the 1930s, but initially, in October 1929, it was not that horrendous, and it was not impacting the economy at large.

Hoover, being a technocrat, new age man, couldn't resist trying to fix it. Instead, he made it worse, and his policies turned a stock market crash and short term recession into a full blown depression that got worse over the remainder of his administration. So, in that sense, I do believe that Hoover's policies helped killthe pro-business policies that created the boom of the 1920s.

Hoover, like his successor Roosevelt, was a Progressive. He was the Mitt Romney of his day. Government is always the solution for those guys. We need to return to Silent Cal.

Silent Cal and his policies did not cause the depression. His policies fueled a boom that led people to invest and business practice of the day let them invest with borrowed money.

We agree... thanks for filling in details.

Had Coolidge been in power in 1929, I believe we wouldn't even remember the stock market crash of 1929, except as one of about 8 such "panics" that we have had in our history.

Probably true. Reagan's response to the Crash of 1987 was to let the markets recover on their own, and they came back pretty quickly.

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