8. The first Great Depression followed the end of the First World War
It is widely believed that the American doughboys returned triumphantly from the fields of France to find the United States enmeshed in the pleasures of Prohibition and the Roaring Twenties, a happy time of jazz, jitterbugging, and bathtub gin. In truth, from early 1920 until mid-summer of 1921, the economy of the United States, as well as most of the globe, was locked in a deep recession. The surge of returning troops found a less than welcoming jobs market, exacerbated by the need to retool from war production to peace time. Wholesale prices in America’s markets fell by more than 35%, the largest drop in American history to that time, and larger than in any year of the Great Depression of the 1930s. The stock market slumped dramatically, reaching a loss of 47% at its nadir in August, 1921.
President Woodrow Wilson’s administration was slow to identify the causes of the recession as well as in implementing steps to combat it, in part because of his concern over the long-term peace he envisioned for the world through his League of Nations. The recently established Federal Reserve (1914) attempted to combat rampant deflation by raising interest rates, making money even more difficult to obtain, and adding to the problems stagnating the economy. Similar downturns in the economies of Europe, many of them shattered by the recently ended war, contributed to the lack of trade and the subsequent decrease in funds through tariffs. During the recession the rate of business failures in the United States tripled, and those businesses which managed to survive the brutal, albeit brief downturn, saw their profits decline by more than 75%.