New York Times, January 28 1922: Farmers Demand Capital and Labor Share in Deflation.

Below is linke to a very interesting historical document. An article from the New York Time arcives about deflationary discussions during the Post World War I 1921 – 1923 Deflationary Recession.

FARMERS DEMAND CAPITAL AND LABOR SHARE IN DEFLATION; National Conference Adopts Broad Declaration, Also a Special One on Railroads. GOMPERS FIGHTS LATTER And Defeats a Proposal to Urge Repeal of Adamson Act and Specify Wage Cut Only. FAVORS WORLD CONFERENCE America Should Join It, Says Resolution Adopted at theFinal Session.

Special to The New York Times.

January 28, 1922, Saturday

Page 1, 1913 words

WASHINGTON, Jan. 27.–Opposing elements in the national agricultural conference forgot most of their differences in the final session today and united in denunciations of those whom they believe are their common enemies. [View full article.]

And here is an overview of the Deflationary Recession itself:

The National Bureau of Economic Research dates the 1921 recession from a general business peak in January 1920 to a trough in July 1921. The recession in the United States was brief relative to the Great Depression later that decade, but it included a very sharp price deflation. The decline in the GNP price deflator from 1920 to 1921 is the largest one-year percentage decline in the series in the more than 120 years covered.

Various estimates show that one-year deflation figures were 18 percent, 13.0 percent, and 14.8 percent, respectively. The closest comparator is the 11.5 percent deflation recorded for 1931-32, the third year of the Great Depression. Wholesale prices declined by 36.8 percent for 1920-21, the largest one-year decline on record, going back at least to the American Revolutionary War period. The 1921 deflation contains another striking feature. Not only was it sharp, it was large relative to the accompanying decline in real product. The ratio of the percentage decline in the GNP deflator for 1920-21 to the percentage decline in real GNP is 2.6 using the Department of Commerce figures. By contrast, during 1929-30, the first year of the Great Depression, the GNP deflator declined by 2.7 percent and real GNP by 9.4 percent, for a ratio of 0.3. The ratios of the percentage decline in GNP prices to the percentage decline in real GNP for 1930-31, 1931-32, 1932-33, and 1937-38, the other Great Depression years in which real GNP declined, were 1.0, 0.9, 1.2, and 0.3, respectively, all well below the 1920-21 figures.

Deflation was so sharp, both in itself and in relation to the decline in real product, because the deflation was produced by a sharp decline in aggregate demand combined with an increase in aggregate supply, a supply increase in which deflationary expectations played a prominent role.

A buoyant expansion followed the severe contraction of 1920-1921. In the 22 months after the depression bottom, industrial production rose 63%, the money stock expanded by 14%, and wholesale prices rose by 9%. Net national product rose 23% in the corresponding two calendar years.

Note, that because there was not government attempts to prop up the asset prices and interfere into normal economic cycle. The recession was painful, but very quick compared to the Great Depression and Japanese deflatinary malaise that has now entered its second decade. Current policies of the US Government, the privately owned Federal Reserve and in fact all other governments in the world are telling us that this current economic downturn will prove to be very very long.


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