Here’s a timeline highlighting key events of the Forgotten Depression of 1920-1921, along with significant details and sources:
1. Post-World War I Economic Instability (1918)
- Details: After World War I ended, the U.S. experienced an economic surge fueled by war production, but this boom began to reverse as the military contracts ended. Unemployment began to rise as soldiers returned home and sought work.
- Significance: This instability set the stage for the drastic economic downturn that would follow in 1920.
- Source: “The Forgotten Depression” by James E. B. Lesley.
2. Deflation Begins (1919)
- Details: Prices of goods started to drop significantly. The consumer price index, which had risen sharply during wartime due to demand, began to decline.
- Significance: The onset of deflation placed increasing pressure on businesses, leading to lower profits and resulting in layoffs, which would exacerbate the economic crisis.
- Source: “Depressions: Causes, Effects, and Solutions” by Peter Temin.
3. Steel Strike (September 1920)
- Details: A massive strike by steelworkers occurred, as they demanded better wages and working conditions. The strike was fueled in part by rising inflation and economic uncertainty.
- Significance: The strike highlighted labor unrest during the period and contributed to the public perception of instability. It showcased the failing economy and increased tensions between workers and companies.
- Source: “Strikes: A History of Labor Disruption” by Robert M. McCulloch.
4. Industrial Production Decline (Early 1921)
- Details: Industrial production sharply decreased due to falling consumer demand and investments. Manufacturing output dropped significantly from late 1920 into early 1921.
- Significance: The decline indicated that businesses were operating below their capacity, reflecting a severe recession, leading to mass layoffs and increased unemployment.
- Source: “The American Economy in the 1920s” by Richard O. Merritt.
5. Unemployment Rates Surge (1921)
- Details: The unemployment rate surged to approximately 11.7% by mid-1921. This was accompanied by widespread poverty and hardship for many American families.
- Significance: The high unemployment levels illustrated the severity of the economic crisis and would have lasting social effects, deepening the discontent among the workforce and non-elite classes.
- Source: “Economic History of the United States” by Wesley C. Mitchell.
6. Federal Reserve Tightening Monetary Policy (1920)
- Details: In an attempt to combat inflation post-war, the Federal Reserve raised interest rates sharply as the economy began to slow. The aim was to stabilize the economy, but it led to reduced borrowing.
- Significance: The tightening of monetary policy exacerbated the economic downturn, as higher interest rates discouraged investment and consumer spending, leading to further economic contraction.
- Source: “The Fed: The Inside Story of How the Federal Reserve Runs the Economy” by Martin Mayer.
7. Fall of the Agricultural Sector (1921)
- Details: The agricultural sector faced a severe collapse, as agricultural prices plummeted due to overproduction and decreased demand after the war. Many farmers went bankrupt.
- Significance: This collapse not only affected farmers but also rural communities, leading to further economic decline and contributing to societal upheaval in rural areas.
- Source: “The Agricultural Depression 1920-1921” by John D. Hicks.
8. Stock Market Reaction (1921)
- Details: The stock market experienced severe volatility, with stock prices plummeting as investors lost confidence during the wave of bankruptcies.
- Significance: This loss of confidence in the market served to worsen the recession, as consumer and business sentiment fell, further reducing investments.
- Source: “The New Stock Market” by Charles P. Kindleberger.
9. Manufacturing Recession (1921)
- Details: Reported declines in major manufacturing industries such as textiles, steel, and automobiles marked 1921. By mid-1921, manufacturing output had dropped almost 25%.
- Significance: This downturn in manufacturing resulted in widespread bankruptcies and layoffs, highlighting the depth of the economic crisis across multiple sectors.
- Source: “Recession in the United States Manufacturing Sector” by Robert L. Hetzel.
10. Recovery Starts (Late 1921)
- Details: By late 1921, signs of stabilization and recovery began to emerge, as the economy began to adjust to the post-war realities and inflation was brought under control.
- Significance: This set the stage for a quick recovery that led into the economic prosperity of the 1920s, altering the economic landscape and shifting perceptions to the 1929 Great Depression.
- Source: “The U.S. Economy After the Forgotten Depression” by Harold L. Cole.
Conclusion
The Forgotten Depression of 1920-1921 stands as a notable economic downturn that showcased the fragility of the post-war economy. Understanding its chronology helps highlight the interplay between global events, policy decisions, and economic realities.
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