Great Depression in the United States
Links and subpages
- For an annotated chronology of the main events, see the Timelines subpage;
- for an article about events in the United States and elsewhere, see the article on the Great Depression;
- for a summary of the relevant economic statistics, see the Tutorials subpage;
- for definitions of terms shown in italics see the Glossary.
Overview
The early 1920s
The condition of the United States in the 1920s differed markedly from its pre-war condition. The wartime destruction of much of Europe's productive capacity had made it the richest country in the world and Europe's wartime borrowing had made it the largest creditor. The full convertability of the dollar into gold under the gold standard which had been suspended during the war, was immediately resumed. There was a minor recesssion immediately after the war, followed by a resumption of strong output growth. The severest bout of deflation ever experienced in the United States was not during the Great Depression, but a decade earlier in 1920-21 when wholesale prices fell by 56% in a little over a year following a tightening of the federal budget, increases in Federal Reserve discount rates and a very sharp reduction in the monetary base. [1]
There was nothing unexpected about the later turndown in the economy. On the contrary, a great deal of thought had been put into how to counter its next occurrence. In 1923, a committee appointed by Herbert Hoover (then Commerce Secretary) had published a 300-page report on the subject [2]. The committee had regarded it as inevitable that every boom would be followed by a slump, and had considered how a future boom could be restrained and how the following downturn could be countered. Among their recommendations were the postponment of commercial and public investment projects and the control of credit expansion by the banks. Although he endorsed those recommendations at the time, he subsequently proposed severe limits upon the government's ability to act upon them. He has been quoted as saying - at the depth of the depression - that there should be "...no tampering or inflation of the currency"; that the budget should be "unquestionably balanced, even if further taxation is necessary"; and that "the Government credit [should] be maintained by refusal to exhaust it in the issue of securities" - which John Kenneth Galbraith took to amount to the rejection of both fiscal policy and monetary policy actions in face of a depression[3]
[5].
Boom
Slump
Rescue
References
- ↑ Milton Friedman and Anna Schwartz A Monetary History of the United States 1867-1960 (p. 289), Princeton University Press for NBER, 1963
- ↑ Business Cycles and Unemployment, Report and Recommendations of a Committee of the President's Conference on Unemployment, McGraw Hill, 1923
- ↑ John Kenneth Galbraith The Great Crash 1929, Penguin Books 1992
- ↑ Ellis Hawley: The Great War and the Search for a Modern Order: A History of the American People and Their Institutions 1917-1933, Waveland Press 1997
- ↑ Allan Meltzer: A History Of The Federal Reserve, Volume I: 1913–51, University Of Chicago Press, 2003
- ↑ Peter Temin Did Monetary Forces Cause the Great Depression, W W Norton, 1976
- ↑ Historical Background and Development of Social Security, Social Security Administration 2008