ations, and be able to exercise a wide and important influence in restoring the world to a normal and livable condition.” You can call it monetary malpractice — farmers called it worse — but tight money hastened the liquidation of misconceived wartime investments. And just as Strong predicted, the banking system weathered the storm. In 1920-23, the biggest institution to fail was little First National Bank of Cleburne, Tex.
Well, how did the nation ever climb out of the deflationary abyss? By the age-old magnetic power of high interest rates and low investment values. Foreigners sent their gold to America to seize the bargains before they vanished — and up went the prices that had fallen so frighteningly. As for Harding, he fostered recovery as much by what he didn’t do as by what he did. The Bureau of the Budget brought public spending to heel, but the president encouraged private spending by speaking up for business. The Harding administration’s “avowed purpose,” historian George Soule writes in “Prosperity Decade,” “was to withdraw as far as possible from exerting any influence on the economic life of the country except the encouragement that might be derived from a balanced budget and nonintervention with private enterprise.” The nation was duly encouraged.
Harding, the 882-day president, died on Aug 2. 1923. He lived to see the first fruits of his policies, though not their full flowering under his boom-time successor, Calvin Coolidge (nor, happily, the disgrace of some of his crooked friends and deputies in the Teapot Dome affair). Remarking on the depression that came and went, Murray observes that “the art of economic prognostication and statistical evaluation was still in its infancy.” A good thing, too, if one judges by the results.