The other Great Depression? The really bad one? Government did nothing, and it went away on its own.
And that’s why nobody talks about it now.
That’s the conclusion of economist Thomas E. Woods, Jr., who says the Great Depression of 1920 was over in a year because the government let it run its course, primarily due to the fact that President Woodrow Wilson suffered a couple of semi-debilitating strokes that left him unable to intervene.
Consequently, very little was done to arrest the economic decline and, by the summer of 1921, recovery was on its way.
“Because Wilson was not able to… solve the problem, the problem went away,” Woods pointed out during a speech at the Ludwig von Mises Institute.
“Today, we’re told that if we experience an economic meltdown or recession…(we) can’t get out of it without some type of government counter-cyclical policy.”
In 1920, economic conditions were actually worse than they were in 1929, Woods notes, with production falling by 21 percent, a 24 percent reduction in GDP and unemployment rising from 4 to 12 percent very rapidly.
This time around, we have government that does plenty, and it’s going to cost us.
The tax cuts of the last decade, combined with this year’s tremendous federal spending binge, are creating a “fearsome” fiscal crisis, the worst budget deficit that that U.S. has faced in 75 years, says former Clinton administration Deputy Treasury Secretary Roger Altman.
Writing in The Financial Times, Altman, who was also an economic advisor to the presidential campaigns of Hillary Clinton and John Kerry and is an investment banker with Evercore Partners, said the government’s fiscal crisis has been exacerbated by recession.
“America's fiscal dilemma is unprecedented,” writes Altman.
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