Two Great Depressions
24th May 2009
David Friedman does an interesting historical comparison.
We can learn a little more by looking at a different Great Depression—the one that didn’t happen. From 1920 to 1921, the consumer price index fell by 10.8%, more than in any year of the Great Depression; it fell another 2.3% in the next year. Unemployment rose to about its 1931 level. Looking just at that data, it’s obviously the start of a depression.
Harding did what Hoover is supposed to have done, reducing taxes and government expenditure. By 1923 the recession was over. It was the Great Depression that didn’t happen.