Full Text

recession of the 1920s


Subject History

Place Northern America » United States of America

DOI: 10.1111/b.9781577180999.1997.x


Extract

The end of W orld W ar i caused the federal budget to decline from $18.5 billion in 1919 to $6.4 billion in 1920. Although this decline in budgetary stimulus required an increase in investment and spending by the private sector, Congress raised taxes on individuals and corporations, while the Federal Reserve Bank restricted credit by raising its discount rate for member banks from 4.75 percent to 7 percent by 1920. Unemployment rose from 4.0 percent in 1919 to 11.9 percent in 1921, but subsided to 7.6 percent in 1922 and 3.2 percent in 1923. The recession contributed to the failure or merger of 2,024 banks (6.5 percent of the total) by 1925. The economy's industrial and commercial sectors revived after 1921, but agriculture did not. Farm prices dropped sharply as world output rose after the war, and US farmers responded by overproduction, which created surpluses that drove commodity prices progressively downward through the 1920s. Farm income dropped from 15 percent of national output in 1920 to 9 percent in 1928; 454,866 owner-managed farms disappeared in the 1920s, and the farm population decreased by 3,000,000. The agricultural depression led to the closure of 5,400 rural banks during the decade. ... log in or subscribe to read full text

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