The economy prior to the Forgotten Depression of 1920-1921 was characterized by rapid post-World War I inflation and an overheated economy. Following the conclusion of World War I in 1918, the United States experienced a period of economic expansion, fueled by wartime production and pent-up consumer demand. However, the removal of wartime controls and the return to peacetime production led to significant inflation as prices for goods and services began to rise steeply, driven by demand that outstripped supply.
In 1919, inflation rates surged, with consumer prices rising markedly due to various factors such as labor union demands for higher wages, shortages of goods, and increased consumer spending. This inflation was compounded by the fact that the economy was transitioning from wartime to peacetime operations, which created uncertainty and instability in various sectors.
Furthermore, the post-war economy was hampered by various challenges, including agricultural distress. Farmers had increased production during the war to meet the demands of both domestic and international markets, but as European agriculture recovered, demand for American crops plummeted, leading to falling prices and economic hardship in rural areas.
It is noteworthy that the Federal Reserve had also maintained a loose monetary policy during the war to finance government expenditures, which contributed to the inflationary pressures felt after the war. The confluence of these factors set the stage for a sharp economic downturn beginning in 1920.
One key source for this overview is:
- Author: A. B. Bowers, "The Forgotten Depression of 1920-1921: A New Perspective" (The Journal of Economic History, 2016).
This source discusses the growth and inflationary pressures of the post-war economy, as well as the factors that contributed to the eventual depression that followed. Make sure to reference multiple sources to broaden your analysis for your final paper.
1 answer