*Written by Rob Rimes.
Being that we are at the steepest economic low since the Great Depression, I figured that I would write about the forgotten depression of 1920. Somehow this drastic brief economic dip has seemingly become a forgotten piece of history, mainly because it is overshadowed by the monster that was the Great Depression, which happened a decade later. I felt that it was important to write about this event, in order to shed light on how we bounced back so quick, compared to the Great Depression and the economic crisis of today.
In 1919, there were jobs galore, as most people were working for the war effort at the end of World War I, then known as the Great War or the keep-fighting-so-I-can-keep-my-friggin’-job war. When the war ended and troops came home, things quickly fell apart. A lack of war killed industrial production as well as many other industries. Unemployment went from 4% to 12-13% in a matter of months. War is good for the economy, which is why we fight in a lot of them. Yet war doesn’t seem to be saving our current economy. However, war and economics is for a later blog.
In 1920 America, we had an economy that was powered by agriculture. About 40% of the economy relied on farming which made it the go to industry for troops and laid off industrial workers to find employment. The mass influx of farm workers created agricultural overproduction, which caused the prices of their goods to drop significantly in a very short time.
Enter Republican Warren G. Harding, the new President of the United States, a man often looked at as corrupt and evil and sometimes thought to be a Sith Lord. Most of the evils you hear about Harding are liberal lies and their version of the untruth, which I will touch on as this blog progresses. In reality, he was the architect that rebuilt a failing economy quicker than it takes most politicians to vote on a single bill.
Harding lowered taxes all while stating that there is no way to stop the depression and that the market would quickly correct itself, if it were left alone to do so. Harding knew that any government involvement would only lead to more instability. He wasn’t willing to experiment with an unstable concoction because he knew that it’d blow up in his face and send the country into a tailspin it might not get out of. Harding truly understood capitalism.
Harding then hired Andrew Mellon as his Secretary of the Treasury. Mellon, who was skeptical of taking the position at first, ended up being possibly the best person ever in that position. He reduced the national debt 33% during his tenure and cut the top income tax rate from 73% all the way down to 24%! Dude, was a fucking economic messiah! His homies used to call him Money Jesus.
Mellon studied income and outflow and found that when the government raises taxes the revenue depletes, creating a law of diminishing returns. This is where the tax cuts began all across the board. These tax cuts and the fact that the government didn’t try to tame the beast, allowed our economy to rapidly bounce back and give birth to what became known as the Roaring 20′s.
Under Harding, with help from Mellon, federal spending was cut in half within two years! All this was made possible because the Federal Reserve, at that time, was staying out of the economy. The economy quickly adjusted and corrected itself without the printing of Monopoly money and open market operations. This event is empirical proof that the system corrects itself! Capitalism is self-sustaining and self-correcting!
Now why would liberals lie about Harding? Sure, he was corrupt but nothing like the politicians of today. The real reason, and also the reason why the don’t really teach the kids in schools about the Depression of 1920, is because of their hero Franklin Dumbhoe Roosevelt. FDR and his economic meddling is what caused the Great Depression to be a great depression and not just a flash in the pan like the economic crisis of 1920. Between FDR and The Federal Reserve, our self-sustaining and self-correcting economy was unable to do so, due to the incessant attempts at trying to fix it. Ten years after Harding saved our economy, FDR and his cronies took a sasquatch shit all over it. They obviously weren’t paying attention to what happened only a decade earlier.
The Forgotten Depression is barely a footnote in most history books and the fact that it’s almost unknown today is a travesty. The lessons it provides to our leaders and economists are now lost. Today, we live in a world where the government constantly tinkers with the system and the system can’t survive this way. You can’t force a river upstream and you can’t force your will upon the blood-flow of capitalism.
Were these lessons forgotten by design? And if so, why? Sometimes things just conveniently don’t add up.