What Happened in the Last Economic Slump the Government Didn’t Try to Fix

[Valin]

Daily Signal:

Norbert Michel

December 14, 2014

 

James Grant’s excellent new book, The Forgotten Depression: 1921: The Crash That Cured Itself, tells the story of “America’s last governmentally untreated depression.”

 

Just prior to the Roaring Twenties, the U.S. went into a deep economic slump but soon recovered—despite no active government stimulus policies. That sort of government inaction, of course, is very different from what we find in all subsequent economic downturns.

 

Grant’s book, consequently, has received sharp criticism from some economists eager to reject the notion an economy can recover without massive government intervention.

 

These critiques miss the mark for several reasons. First, most of the criticism counters arguments that Grant doesn’t even make. Additionally, one of the more serious critiques gets bogged down in the age-old fallacy that lower interest rates always reflect easy monetary policy.

 

(Snip)