Teachable Moments

Campus Report ^ | May 7, 2009 | Malcolm A. Kline

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Teachable Moments

by: Malcolm A. Kline, May 07, 2009

Here’s a couple of history lessons you are not likely to get in school.

The Depression That Wasn’t

The stentorian orator who as president saved America from the Great Depression in the first half of the last century was none other than—Warren G. Harding. “During and after World War I, the Federal Reserve inflated the money supply substantially,” historian Thomas E. Woods, Jr., writes in the May 4, 2009 issue of The American Conservative magazine. “Once the Fed finally began to raise the discount rate—the rate at which it lends to banks—the economy slowed as it started readjusting to reality.”

“By the middle of 1920, the downturn had become severe, with production failing by 21 percent over the next 12 months.” Woods is the author of The Politically Incorrect Guide to American History.

“The number of unemployed people jumped from 2.1 million in 1920 to 4.9 million in 1921,” Woods relates. In response, the newly inaugurated president promised—government austerity.

“Harding was true to his word, carrying on budget cuts that had begun under a debilitated Woodrow Wilson,” Woods recounts. “Federal spending declined from $6.3 billion in 1920 to $5 billion in 1921 and $3.3 billion in 1922.”

“Tax rates, meanwhile, were slashed—for every income group.” Woods currently is a scholar at the Ludwig von Mises Institute.

“And over the course of the 1920s, the national debt was reduced by one third,” Woods reminds us. “In contrast to Japan, which engaged in massive government intervention in 1920 that paralyzed its economy and contributed to a severe banking crisis seven years later, the U. S. allowed its economy to readjust.”...