America’s greatest depression fighter was Warren Gamaliel Harding. The people running the show today could learn something from him including the Fed.
“In the fall of 1921, Harding’s Secretary of Commerce Herbert Hoover prompted him to call a Conference on Unemployment. Hoover wanted government intervention in the economy, which as president he was to pursue when he faced the Great Depression a decade later, but Harding would have none of it. Good thing, since Hoover’s policies were to prolong the Great Depression. Harding said, “There will be depression after inflation, just as surely as the tides ebb and flow.”
http://www.lewrockwell.com/orig4/powell-jim4.html
Warren Harding and the Forgotten Depression of 1920
“The connection between this version of history and the events of today is obvious enough: once again, it is claimed, wildcat capitalism has created a terrific mess, and once again, only a combination of fiscal and monetary stimulus can save us.
In order to make sure that this version of events sticks, little, if any, public mention is ever made of the depression of 1920—21. And no wonder: that historical experience deflates the ambitions of those who promise us political solutions to the real imbalances at the heart of economic busts. The conventional wisdom holds that in the absence of government countercyclical policy, whether fiscal or monetary (or both), we cannot expect economic recovery — at least, not without an intolerably long delay. Yet the very opposite policies were followed during the depression of 1920—21, and recovery was in fact not long in coming.
The economic situation in 1920 was grim. By that year unemployment had jumped from 4 percent to nearly 12 percent, and GNP declined 17 percent. No wonder, then, that Secretary of Commerce Herbert Hoover — falsely characterized as a supporter of laissez-faire economics — urged President Harding to consider an array of interventions to turn the economy around. Hoover was ignored.
Instead of “fiscal stimulus,” Harding cut the government’s budget nearly in half between 1920 and 1922. The rest of Harding’s approach was equally laissez-faire. Tax rates were slashed for all income groups. The national debt was reduced by one-third. The Federal Reserve’s activity, moreover, was hardly noticeable. As one economic historian puts it, “Despite the severity of the contraction, the Fed did not move to use its powers to turn the money supply around and fight the contraction.”2 By the late summer of 1921, signs of recovery were already visible. The following year, unemployment was back down to 6.7 percent and was only 2.4 percent by 1923.”
http://www.lewrockwell.com/woods/woods125.html
The problem was that the Fed was still keeping prices levels stable when prices should have been falling due to increased production.
Thus inflation was still in the system and caused malinvestment and a 'boom' that resulted in the 'bust' of 1929.
Hoover's 'little new deal' only prolonged the agony and FDR never got us out of the Depression.
Our unemployment was 'solved' by WW2.