Take a look at the graphs below.
Posted on 01/03/2015 6:42:40 AM PST by SeekAndFind
To combat the Great Recession and its long-lingering aftermath, leading central banks have pulled some $10 trillion out of thin air. Governments of the world’s principal economies have rung up almost $20 trillion in deficit spending. We often hear that the authorities have done too little. Perhaps they have done too much.
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.
(Excerpt) Read more at wsj.com ...
But nowadays people just want free stuff, and as long as government giving stuff away, people will let government do anything. And things get worse and worse.
Yep. The government screwed up and did something right.
It does. Too bad we don’t have a Herbert Hoover around.
If you call WWII doing nothing then I guess that theory is correct.
Why would you want Herbert Hoover around? His policies actually made the early stages after the 1929 crash worse.
Calvin Coolidge once said the last person’s advice he would follow would be Hoover’s.
Hoover was against the policies that Harding and Coolidge advocated to get the country out of the 1920 to 1921 Depression.
Hoover was the ultimate RINO.
1. 30,000 tax lobbyists--HALF the lobbyists in Washington, DC--fighting for every scrap of a tax loophole. And you get political corruption on a huge scale over this.
2. The result is a tax code over 75,000 pages long so complex that it makes James Joyce's famously unreadable Finnegans Wake almost easy to read in comparison. Even the IRS can't figure out much of the tax code!
3. The sheer complexity means exorbitant yearly compliance and economic opportunity costs, estimated by some economists to soon approach US$1 TRILLION per year (and climbing fast in each subsequent year, especially with the imposition of Obamacare mandates through the tax code).
4. It also encourages the outsourcing of millions of jobs, thousands of factories, and hundreds of corporate headquarters for tax avoidance reasons. Care to explain why Apple manufactures its products in China, and why Google has to used that highly-complex and expensive Double Irish with Dutch Sandwich accounting scheme to lower its tax bill?
5. It results in (by some estimates) around US$15 TRILLION in American-owned liquid assets sitting in offshore financial centers and other foreign banks for tax avoidance reasons (care to explain all those "banks" in the Cayman Islands, Bahamas, British Virgin Islands, and so on? Or why Apple has 70% of its US$147 billion liquid asset reserve outside the USA?).
6. Government uses the tax code as a political instrument to favor or punish political constituencies as little as ONE taxpaying entity. The recent scandal using the IRS to target conservative 501(c)(3) and 501(c)(4) groups is clear proof of this.
7. Because the IRS needs to know intimate details of personal and business financial records in tax return filings, there are potentially serious issues with invasion of privacy. Care to explain why former Presidential candidate Mitt Romney's private tax returns ended up in the offices of Senator Harry Reid (D-NV)?
8. The IRS assumes you're guilty of tax evasion, and you end up having less rights than most common criminals!
Complete economic and political insanity. Maybe it's time to begin the phase out of the Federal income tax and replace it with something like FairTax (H.R. 25). It would be the biggest return of power to the people since the American Revolution, and would result in the next major American economic boom because we no longer tax the very process of earning money.
I don't have access right now to all that cool (no pun intended) Calvin Coolidge posters and info.
So have at it.
Harding knew that after the Great War the caused the Rise of Communism. the best thing to do was not to make it worse.
Both World Wars were like Growth Hormones for The Communists.
Ditto the Paris Commune after the Franco-Prussian War.
Thanks for the correction.
By doing nothing, average money wage rates were allowed to fall 19% in one year. The depression of 1920-1921 was extremely short-lived as a result, with no, or only a small decrease in the standard of living of the average wage earner, because of the simultaneous fall in prices.
I think you missed the timeline.
???Before I read that, I had never known of a theory connecting the Depression of 1920 (back then, a “depression” was the normal label for an economic contraction. They thought it sounded more reassuring than “panic,” which was the name used before they had a really bad panic in the 1890s) to WWII. My understanding of the history is that rumor that the Smoot-Hawley Tariff - a tax increase - would be enacted and signed caused the crash of 1929. Hoover signed it over the objections of economists who warned that it could lead to “a second world war.” Then, when the economy was in the tank, Hoover started the New Deal. He didn’t call it that, of course - that was FDR’s formulation - but if FDR had been president in 1929 he wouldn’t have been able to ramp up spending any faster than Hoover in fact did. And after running to Hoover’s right during the campaign of 1932, FDR proceeded to double down on everything that Hoover was already doing wrong - leading to the extension of the “depression” into the Great Depression. Which continued until FDR was “scared straight” by Hitler.
The US economy began recovering from the Depression when Britain started buying any war materiel which we could sell them - a process which dramatically accelerated upon the Fall of France in May, 1940. Having been under secretary of the Navy during WWI, FDR knew that America’s production capabilities had made no difference to that conflict because the US entered the war from a standing start, and was only in the war for about a year and a half.
FDR knew that the US couldn’t afford to enter WWII from a peacetime economic basis again, so he asked Bernard Baruch to be his mobilization czar (without using that title, but that is the sort of extra-constitutional position he had in mind). Baruch demurred on grounds that he was too old. FDR asked who he recommended for the job, and Baruch replied, “two names. Bill Knudsen, and Bill Knudsen.” (A Norwegian immigrant, Knudsen had become Henry Ford’s right hand man before Ford’s other right-hand-man forced him out. Knudsen then joined a struggling auto manufacturer called “General Motors” - and made Chevrolet the equal of Ford).
FDR asked Knudsen, a production genius, how long it would take for America to mobilize for WWII, and Knudsen said, “Eighteen months.” By the merest of coincidences (if you believe in that sort of thing), that is almost exactly the time from when Knudsen spoke until December 7, 1941. After the attack, FDR asked Knudsen how many planes America could build in 1942, and Knudsen replied, almost 50,000. FDR promptly went on the radio and pledged that America would build 50,000 planes in the coming year. But of course, America was caught with very little armament inventory in December, 1941. That was for the simple reason that while it had ramped up production over those 18 months, America had dedicated that output to keeping Britain afloat. BTW, the technology dump Britain sent to America - radar, the jet engine, the Merlin engine blueprints, lots of stuff - happened upon the Fall of France. But, even something you would think was highly specific and “shovel ready,” the Merlin engine design, had to be completely translated from British to US production technology (by Packard).
All of which is to say that WWII disrupted the New Deal, putting productive output on a much higher priority than “social justice,” and that is what ended the Great Depression. FDR himself said that he was changing from “Dr. New Deal” to “Dr. Win The War.” The New Deal wasn’t the cure for the Depression, it was the cause of the extent of it. Think of the choice you were faced with if you were a voter in 1932! Either the guy who caused the Depression, or the guy who would keep it going for the rest of the decade!!
Wasn’t there a tax cut involved as well?
And then big government boys Hoover and Roosevelt came along.
Take a look at the graphs below.
This article is about the 1920-1921 depression.
Your comments (unless I am mistaken) are about the 1930’s depression. I think you are talking about a different time period.
It looks like one long Depression to me.
My father had to abandon his contract plowing business in that depression.
From the lessons learned they thrived in the depression of 29 and saved enugh to start a business and build rhe 2,400 sq ft., 3 bedroom, 2 bath home that I grew up in.
There was a depression at the end of WW1. They fixed it by cutting budgets and nothing else. The article gives credit to Harding but I believe it was Coolidge who did the magic.
In any case, no one ever hears about the Depression of 1920 because they didn’t do what FDR did, turning a downturn into a decade-long slow-motion disaster.
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