THE FORGOTTEN DEPRESSION 1920-1921

James Grant

James Grant is the publisher of the Interest Rate Observer, a highly-regarded Wall Street investment sheet.

Grant’s book adumbrates the Depression of 1920-1921, following the 18 month participation in World War One. From April 1917 to January 1922 is not five years. It was a boom and bust. In all of American history little supports this time as economically and socially significant, except war and peace their after effects and the advent of Prohibition. 

What were the United States like? It is a short book; Grant does not explain. He mentions 12 Regional Banks of the Federal Reserve, and in a few passages notes that interest rates vary among the Regions. Who knew that interest rates might vary that much, a half point or more, especially today when a decision is made centrally and that’s it. 

Grant’s book is written like many history books about economics, incidences which were separated by time and place. Each incident is not dispositive, and collectively it is difficult to know the interconnections, if there were any: Each seems power fading, misfortune and no loss in the departure. 

The only national effect was in the markets, where the stock market fell, commodities markets fell, real estate prices fell – all observable by some sort of national statistic.

The biggest historical fallacy in Grant’s book is his recounting, without correcting, Andrew Mellon, Secretary of the Treasury for Warren Harding and Coolidge. Mellon was a big fan of Alexander Hamilton because Mellon mistakingly believed (as does Grant) that Hamilton was a small government and smaller debt person. FALSE! Hamilton was a BIG DEBT, FAT GOVERNMENT MAN. While Secretary of the Treasury and until 1803 Hamilton tried to weaken the Constitution (using, inter alia, the Alien and Sedition Acts); he supported a monarchial government and he proposed war with France. Mellon and Grant should read history, especially Grant who wrote John Adams: Party of One. Apparently Grant does not know that Adams said Hamilton was of the British Faction, which outraged the former Treasury Secretary.

Mentioning Mellon and Hamilton together detracts from anything Mellon did on his own, in response to events and circumstances before him. Mellon was not Hamilton’s clone. He was more akin to Jefferson and Madison’s Secretary of the Treasury, Albert Gallatin.  

THE FORGOTTEN DEPRESSION indicates how loose was national sentiment and communication. Something might happen in New York City and only be known in Montana two weeks later. Indeed, communications into the exchanges and markets were weak and inadequate. The experience of there being too many market orders and not enough people to process them was not realized until October 1929. Nothing in the country seemed connected. Entertainment was a nationalizing and unifying force, but little mentioned in the text. Automobiles and roads were just beginning. Dwight Eisenhower’s cross-country trip in the Twenties gave him the experience to propose the Interstate Highway System, begun when he was President. 

It was a disjointed United States. Many points are raised but not well put. Despite the change within America the experience that the people may do something without the government is a message that may be discerned, not fully or well, from this history. 

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