The Great Depression of 1920?

Yes, I am stealing from Glenn Beck, but it's something that I think should be spread around. I truely enjoy history, and especially being able to apply it to the present. It's a cliche to say, "insanity is doing the same thing over and over again expecting the same result." If you neglect history and continue to repeat the same mistakes, is that not insanity?





Everyone remembers the Great Depression 1929-1939. The stock market crashed in late 1929. Starting a spiralling decline in our economy that ushered in FDR and the New Deal. The New Deal was a set of massive Federal Government spending laws. It not only changed our economy, but changed how our government works. The government grew like never before. This is the where our Constitution began to become irrelevent in the eyes of our elected officals. Unemployment even after the spending skyrocketed and peaked around 25%.





Even FDR's own Treasury sectretary Henry Morgenthau testified before the House Ways and Means committee in 1939 said:





"We have tried spending money. We are spending more than we have ever before and it does not work. And I have just one interest, and now if I am wrong ... someone else can have me job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises...I say after eight years of this administration, we have just as much unemployment as when we started... And an enormous debt to boot."





The Great Depression was horrible. For the first time really in American history, the American public looked to the central government with their hands out.





I'm really not going to get into an economics lesson or whether the New Deal or WWII was what really got us back on our feet. I would like for you to pay attention to two things about the Great Depression and the "Forgotten" Depression of 1920. First, the length of recovery. Second, the actions taken by government.





To set the scene, the U.S. was getting back to business following WWI. We had exploded our debt from wartime expenditures and CPI (Consumer Price Index) jumped 20%. In less than one year, unemployment rate jumped from 4% to nearly 12%. GNP fell 17%. The income tax rate for high income earners was around 70%. Basically, for one year, it was more dramatic than 1929.



So what did President Harding do? He cut Federal spending nearly in half by 1922. He worked to cut high income earners tax rate. By the time he left office, it was nearly around 25%. CPI fell 15.8% from June 1920 to June 1921. Amazing!



What was the effect on unemployment? By mid-1920, it peaked around 12%, and by the following year, it was 6.7%. By 1923, it was 2.4%. When Harding left office, it was 1.8%. In economics, full employment is considered around 4%. It is the fastest recovery ever in peacetime in American history.



That brings us full circle. Here we are in the middle of an economic castrophe. Our leaders have decided to spend more money ever in human history. Why haven't we tried to do the same thing that we did in 1920? I know mirco and macro economics are different, but basic cost control is the same either way. We keep spending more then we earn and adios mofos. We will be bankrupt. Or maybe that's what our leaders want?