Posted on 09/22/2010 6:31:25 AM PDT by SeekAndFind
The Panic of 1920 started out as a contender for the greatest depression of all time, with a drop in prices and production during its first twelve months that dwarfed those of any other economic crash, and she piled on an unemployment rate that skyrocketed from invisible to 12% in a flash. Ignoring calls to do something, anything, to "help", Washington, DC simply allowed the economy to adjust wherever it chose to go. In tandem, Federal Reserve officials looked upon the rapid deflation in prices not with horror but with a declaration of its necessity. Yet, despite the lack of government intervention and monetary "pump-priming", the economy corrected itself within two years. As a modern day American, I can hardly imagine.
Prior to the denouement, the Fed money spigot had been on full blast for seven years; an index of wholesale prices had surged from a base of 100 in 1913 to 226 in early 1920. One economist from the time noted a concurrent "outbreak of speculation in business and stock market circles that for recklessness has had few parallels".
The storm broke in May of 1920 and arrived as these things usually do - almost everyone at the opera was caught napping when the lights suddenly came on. Bank failures, which numbered 63 in 1919, spiked to 506 by 1921. By June of the latter year, the money supply had dropped 9%, GNP 17%, and the index of wholesale prices collapsed from 247 in May of 1920 to 141 by July of 1921. To this day, the index has yet to show a more precipitous drop in such a short time.
Across America, the suffering began
The prevailing opinion on the proper response was summed up in Warren G. Harding's speech as he accepted the 1920 Republican presidential nomination. He pledged an "intelligent and courageous deflation, and (to) strike at the government borrowing which enlarges the evil". He was a man of his word. Between 1920 and 1922, the federal budget fell by almost one half, tax receipts by 38%, and outstanding debt by 5%. Meanwhile, Federal Reserve officials made no attempt to maintain prices at any level.
With prices allowed to adjust, the recovery was already underway by August of 1921.
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Interesting, especially in light of the fact that Harding generally tops most prominent historians’ lists of Worst U.S. Presidents (at least until George W. passes him up in their next edition). No doubt it’s why the guy is buried across the street from a shopping mall in Marion, Ohio.
Harding and Congress cut spending by 50% in 2 years. It is a stronger case for conservativism than the article implies.
Too bad Warren Harding was brought down by corruption within his party...
Not sure if he would have won a second term as he suffered from a Heart Attack in 1923, paving the way for Calvin Coolidge, who presided over the roaring 20’s.
Traditionally, polls of historians and scholars have ranked Harding as one of the worst Presidents (nonetheless the nation’s unemployment rate dropped by half during Harding’s administration); primarily due to the multiple scandals in his administration caused by the “Ohio Gang”. These were Harding’s cabinet and appointees who warranted federal corruption investigations, charges, and convictions.
His presidency has always been evaluated in terms of presidential record and accomplishments in addition to the administration scandals and very few considered his accomplishment in leading America out of the panic of 1920.
The most recent Presidential rankings have had various lower results for President Harding.
A 2008 study for The Times placed Harding at number 34, and a 2009 C-SPAN survey ranked Harding at 38.
In 2010, a Siena College poll of Presidential scholars placed Harding at a very low 41 ( almost the worst ).
Too bad Warren Harding was brought down by corruption within his party...
Not sure if he would have won a second term as he suffered from a Heart Attack in 1923, paving the way for Calvin Coolidge, who presided over the roaring 20’s.
Traditionally, polls of historians and scholars have ranked Harding as one of the worst Presidents (nonetheless the nation’s unemployment rate dropped by half during Harding’s administration); primarily due to the multiple scandals in his administration caused by the “Ohio Gang”. These were Harding’s cabinet and appointees who warranted federal corruption investigations, charges, and convictions.
His presidency has always been evaluated in terms of presidential record and accomplishments in addition to the administration scandals and very few considered his accomplishment in leading America out of the panic of 1920.
The most recent Presidential rankings have had various lower results for President Harding.
A 2008 study for The Times placed Harding at number 34, and a 2009 C-SPAN survey ranked Harding at 38.
In 2010, a Siena College poll of Presidential scholars placed Harding at a very low 41 ( almost the worst ).
Great:
Reagan
Coolidge
Harding
Good:
Eisenhower
Kennedy
The rest of the Presidents in the 20th and 21st centuries were disasters.
No doubt it’s why the guy is buried across the street from a shopping mall in Marion, Ohio.
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We should make a shrine of it then to make people realize that there is an American and successful option to Keynsian economics.
Article somehow manages to not mention that a world war had ended shortly before all this happened. Would seem to be a relevant point in comparing it to 1929, which occurred in a time of peace.
You don’t like Teddy Roosevelt (1901-1909) I gather...
If he was a disaster, why is his face up there on Mt. Rushmore?
Uhhhh. He’s buried across the street from a cemetery and a hospital and park area.
With all the debt we have saddled them with, not much nice, I'm sure.
Because the guy who carved Mt. Rushmore was a big TR fan.
I don’t like Teddy Roosevelt at all. His Bull Moose fiasco led to Wilson’s election which then led directly or indirectly to Lenin’s train into Moscow, the Treaty of Versailles, hyperinflation in Germany, Hitler . . .
Roosevelt’s progressive policies started the train down the tracks that lead to our ruin.
It’s a shame we didn’t get a good or great President following Reagan. What a difference that would have made for the country. I hope the next Republican nominee if they are conservative considers how important the VP is for carrying on thier ideas and values and stops this geographic/idealogical calculation crappola (I’m conservative as Reagan so I’ll get a moderate Veep like Bush) . . .
Not sure Harding was great, but he did get the 20s going. Coolidge was definitely great, and is underappreciated. I didn’t know how well he had done because nothing he did is taught, even in college US History classes. 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. I learned about Coolidge in greater detail when researching the history of the 20s and the Great Depression that followed. He was a supply sider and free market, limited government advocate long before Reagan made it a movement.
I have always wondered which recession had the greater intial ferocity -— the one that Harding had or the one in 1929 that Hoover had.
This article claims that Harding’s recession was far greater than the one Hoover had in 1929.
Yah, just because of the scandals, I might move him into the good category. The reality is though that Harding ALONE of all the Presidents in the last century ended a depression successfully and quickly. I don’t know how much greater you can get than that other than winning the cold war without a shot being fired.
I have always wondered which recession had the greater intial ferocity -— the one that Harding had or the one in 1929 that Hoover had.
This article claims that Harding’s recession was far greater than the one Hoover had in 1929.
Harding did end that threat very well and quickly. I don't know whether his actions were grounded on the same principles as Coolidge, or whether he just had good advice. Whichever, he did a great job there, hurt his legacy later. Where you put him on the spectrum doesn't matter much, the fact is he did well in his response to a crisis.
Sadly, a similar response in September 2008 could have worked. The Bush progressives never even considered not using the government to respond--it's not in their playbook. I wrote at the time (not having studied Harding and Coolidge, but Reagan and Friedman) that we should not do anything except continue to insure bank deposits to stop the run on the banks, drop capital gains taxes to zero for one year, and allow oil drilling without restriction (remember, oil was $150/barrel that summer). Housing was toast but unleashing economic activity would make up for the prior government interference.
McCain flying to DC to vote for TARP completely encapsulates what is wrong with Republicans these days.
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