miércoles, 10 de abril de 2013

Just Nine Months

Watching this excellent and short video, I heard a very interesting comment made by Rothbard. I have also seen many people in internet asking about this "nine months' quote".

He was talking about the 1920-21 Depression and in 00:55 Rothbard said: 
"[T]he recession which was very deep, it was a real depression, there was big unemployment, prices fell sharply and there was a lot of bankruptcies. Was over in nine months."
I wondered where did he get that data? So I went to Fred II and this is the excelized result:

There you can see the peak before the continuos falling of industrial production. Production fell nine months before it starts to recover. This is what I think Rothbard could be referring. 

Vernon[1] and Friedman-Schwartz[2] confirm that the real severe part of the contraction took place in months or a year at maximum.

[1] "By July 1920, the Federal Reserve Board's index of industrial production had declined by only 7 percent from its January peak, and factory employment had fallen 7.3 percent. The contraction then became severe. By the year's end, industrial production had fallen 25.6 percent below its January 1920 peak and bottomed out at 32.6 percent below its January 1920 level in July 1921, the general business trough." Vernon, J. R. “The 1920-21 deflation: the role of aggregate supply” (1991)

[2] "From their peak in May, wholesale prices declined moderately for a couple of months, and then collapsed (see Chart 16). By June 1921, they had fallen to 56 per cent of their level in May 1920. More than three-quarters of the decline took place in the six months from August 1920 to February 1921. This is, by all odds, the sharpest price decline in the period covered by our money series, either before or since that date and perhaps also in the whole history of the United States. The only possible "competitors" are the price declines that followed the War of 1812 and the Civil War." Friedman, M. & Schwartz, Anna J. A Monetary History of the United States, 1867–1960 (1963) pag. 231-32.

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