U.S. Economic History 1900 to 2017

Part 1 A New Decade Brings Change  
Populists End to the Gilded Age  
Depression Brings Government Safety Net

Part 2  US Dominance    
Economic Normal Changed  
World Changed and Good Jobs Disappeared   
Great Recession 1p or 3 p

Part 3 The 20th Century
Most Severe Recessions  
Recent Decades Ranked by Problems
  20th Century Decade Evaluation 
History of US Banking

Part 4 Difficult Beginning for 21st Century
The Cost of 20th Century Wars     
U.S. Terror Episodes Since 1900   

Return to U.S. History and Political Economy     9/23/18         Please link to, use to educate and 


Part 1
A New Century Brings Change

Populists End to the Gilded Age but Business Power Would Return After WW I.. The 1896 realigning election resulted in a republican forged conservative coalition consisting of businessmen, professionals, skilled factory workers, and prosperous farmers. There would be opposition which created two unsettled decades called the 
Progressive Era. It was a period of social activism and political reform that flourished from the 1890s to the early 1920s.
See Progressive Era 15 min. video One main goal of the Progressive movement was eliminating corruption in government by exposing political machines and their bosses in hopes of creating a more direct democracy.  This put election reform high on the agenda. Progressives also sought regulation of monopolistic trust corporations through antitrust laws which were seen as a means to promote fair competition for the benefit of consumers. An increase post WW I Communist and Union activities caused a fear of anarchy not seen since the French Revolution. It led to public desire for a return to more peaceful Republican led government. It would not be the last Red Scare. 

1) The 1898 Spanish–American War victory resulted from our desires for a colonial empire and business interests. Business  also had pushed for the 1897 Dingley Tariff Act which  promoted industry at the expense of consumers as the tariff was added to the price paid by consumers. The Gold Standard protected savers but its inflexible money supply caused hard times.
2) The Panama Canal acquisition of 1903 eventually resulted in improved transportation.
3) Progressive Republican FDR successfully fought party Trusts. First with the 1906 Meat Inspection Act and Pure Food & Drug Act. The Hepburn Act increased Interstate Commerce Commission  regulation of Rail Road Trusts which still managed to control rates and competitors.
4) American Antiquities Act of 1906 created National Monuments and was one of many conservation activities.
5) Panic of 1907 needed help from both J.P.  Morgan and the Treasury as more liquidity was needed than his wealth could provide. The 1913 the Federal Reserve System resulted and it became the Lender of Last Resort. Designed by Wall Street bankers the FED would continue under Wall Street's thumb until ... 2015 and counting! Think Great Recession.
6) Democrat Woodrow Wilson would continue progressive the  agenda.  The Revenue Act of 1913 substituted income taxes for lower tariffs and this lowered the price of consumer goods. The Federal Trade Commission Act of 1914 was a major effort to control business trusts. The Clayton Antitrust Act of 1914 outlawed specific conduct putting teeth into Sherman Antitrust Act. The Federal Farm Loan Act of 1916 increased credit to rural family farmers and the Keating–Owen Act of 1916 temporally lowered child labor abuses..
7) Segregated government continued as
Wilson was like progressives  T Roosevelt and T Jefferson in  that he felt Americans were not ready for integration.
8) Revenue Act of 1921 and Revenue Acts of 1924,1926,1928 reduced  taxes so only richest 2% paid  income taxes. Think 2 Bush tax cuts. The Fordney McCumber Tariff Act was one of many  protectionist measures during the decade. Smoot–Hawley Tariff Act of 1930 to protect US industries failed to help as Canada, France and others retaliated. A Mexican Repatriation program help unemployed Mexican citizens return home. It represented  forced migration. Think current immigration problems.
9)  Great Mississippi Flood of 1927 resulted in the Flood Control Act of 1928. It created the U.S. Army Corps of Engineers to watch over public infrastructure..
10) The 16th, 17th, and 19th amendments made some progressive policies permanent.

Depression Brings Government Safety Net

Hoover had trouble helping during the Great Depression. Tension increased when the U.S. Senate refused to agree with the House which had and move up the payment of a WWI veteran bonus. There was much distress from high unemployment. A 1932 Army of U.S, Veterans  march on Washington for their bonuses. Trouble resulted. Over the years many have marched, some have died. FDR would bring change. 

Liberals around the world said socialism was the economic answer to depression. The Share the Wealth movement was founded by Louisiana Governor Huey Long was one of many liberal social activists seeking political power throughout the U.S. and Western Europe. He would later be assassinated.

These activities would be countered by conservative banker and business leader oligarchs who backed Herbert Hoover’s use of laissez fair Classical economic policy.

Hoover's first policy mistake was to follow the Republican party against his own beliefs of those of many economists. Signed the Smoot-Hawley Tariff Act caused many countries soon followed and the resulting decrease in world trade hurt everyone.

The Federal Reserve tried to maintain the Gold Standard with two discount rates increase of 1 point each.

Then there was the Revenue Act of 1932 which dramatically increased federal taxes. Both  were right out of the Classical Economics toolbox. So was the $200,000,000 U.S. bank loans to keep Britan on the Gold Standard. All efforts failed. 

Britan went off the Gold Standard first followed  the U.S. in 1933. The economy hit bottom in 1933 and spending printed money was the only way out of deflation which made existing loans more expensive in real terms and also made business less apt to borrow.

Hover lost the 1932 election. as FDR promised to use liberal Keynesian economic government action to solve the continuing economic recession.


His New Deal employment programs would be the first time U.S. government would use massive debt to solve a major non-military problem. Like the war debt from WWI and following wars, the debt would not be paid back. As debt was retired the funds came from new debt. Inflation and economic growth would ease the pain of interest payments. Major legislation included the Social Security Act which covered  Old-Age, Survivors, & Disability Insurance, the Fair Labor Standards Act/1938 which set maximum work  hours and minimum wages, the  Agricultural Adjustment Act/1938 which provided fair price for farmers, and the  Prohibition Discriminatory Employment related to federal employment .The Wagner Act  along with other pro labor reforms were also passed.

Conservative fought back using a conservative Supreme Court which declared some New Deal legislation illegal. The battle over Keynesian  vs. Classical Economics continues today.  Many conservatives do not mind government action and debt for military problems but disagree with Liberals who want to use debt to solve economic problems. Both oligarchies to date have not believed that cost effectiveness applies to their perceived governmental responsibilities.

Politicians from both political parties act unhappy despite benefiting from an electorate that lives much better because of massive federal annual deficits. Also helping voters is the economic benefits of an annual balance of payments deficit amounting to $1,700 per person. The later represents cheap goods from abroad.  Dollars accumulate and eventually return to the U.S. in the form of public and private US financial instruments, US travel and fixed assets.

Voters let politicians buy their vote with these debts disliking all members of Congress but their own! After Germany invaded Poland starting World War II President Roosevelt asks the Congress for a defense budget hike and the United States declares its neutrality. Many wanted the U.S. to stay out of the war and just as many profited as U.S. loans to Europe,, Loans were spent with US companies that supplied war arms and food to belligerents.

Bonus marchers 05510 2004 001 a.gif

Members of the Bonus Army camped out on the lawn of the Capitol building in mid 1932. Click for larger photo.

Shacks that members of the Bonus Army erected on the Anacostia Flats burned  after the Vets confrontation the military.

Willis C. Hawley (left) and
Reed Smoot in April 1929,  shortly before the Smoot-Hawley Tariff Act passed the House of Representatives.

A 1936 impoverished American family living in a shanty. click to enlarge

US Economic Dominance
Economic Normal Changed

 Adjustment 1945-2015


1 Rising Income
2 Increased Foreign Competition Began 1970's Wage Stagnation
3 1980's Failing Manufacturing Brings Less Financial Regulation
4 History of U.S. Financial Bailouts and Economic Recovery
5 Poverty Stuck at 15%
6 Profit Beats Wages
 7 Economic Wellbeing

See Post WW2 International Economic Competitive Adjustment
#1 Rising Income

WW 2 generated savings, pent-up demand and few foreign few competitors generated 25 years of high profits higher wages and cooperative unions. Normality ended when Carter appointee FED Chairman Volker found higher interest rates were  not enough so he  lowered commercial bank reserves. This quickly pushed the Federal Funds Rate to 20%. Banks would not loan. Two recessions followed. The first cost Carter reelection and the second, though severe, was over so Reagan was reelected.


#2 Increased Foreign Competition Began 1970's Wage Stagnation

As if Watergate and the Cold War were not enough, an oil cartel called  OPEC proclaimed an oil embargo. The embargo was targeted at nations  perceived as supporting Israel during the  Yom Kippur War.

High Oil prices pushed Japan into more valued added exports like automobiles, machinery and computers. This competition caused a stagnate Rust Belt with lower wages and eventually lower employment. Japan's manufacturers got lucky from increased demand for gas efficient small green cars with catalytic converters. Detroit  protected profit by seeking tariff  protection. Investment needed to  lower cost and increase product quality was ignored. Auto union leaders protected their positions. Current worker protected existing jobs and salaries by accepting a two-tier wage system.  It minimized the need for new workers who would receive lower wages for a similar jobs. Feeling political pressure Japan built many modern U.S. plants often in the nonunion southern states offering the highest tax incentives.  Use PDF for Color Printing.    provided by textbooksfree.org


#3 1980's Failing Manufacturing and
 Less Financial Regulation

Events Causing Financial Instability Causes Great Recession
1980's U.S. and England Returned to Conservative Lax Business Regulation
because increased regulation and increased welfare provisions had upset many voters. Think Great Society and lax derivative regulation which result in major increases hostile leveraged buyouts plus and over-investing in Real estate caused. They caused  the Savings and Loan Crisis. Think Michael Milken Scandal, Keating Five results from poor Alan Greenspan advise.
1980's Major Investments Banks Went Public creating a need to balance client needs with equity needs.
 Think expansion of financial industry's share of GDP.
1980's Accounting Standards Declined as accountancy firms struggled to balance commitments to audit standards with the desire to grow their consultancy business. Think off-balance-sheet items and

Arthur Anderson Scandal.

1980's Home Equity Loans Increased Current Consumption and Lowered Savings as they replaced equity building home improvement loans. Think many not prepared for retirement.
1983 Reverse Mortgages Approved for FHA loans. Think less retirement savings.
1986 Big Bang
deregulates London's financial services industry, other will follow.
1999 Gramm–Leach–Bliley Act Increased Systemic Financial Risk once limited by the Glass-Steagall Great Depression Act. Initiated by Republicans it was signed by President Clinton.
Think financial industry expansion. See Five Bad Bush/Clinton Policies
2004 Uptick Short Rule of 1938 rescinded. Think stock market gambling.
2006 FASB requirement that housing assets be mark-to-market decreased financial system collateral. Action resulted from a 1991 Government Accountability Office investigation of the $160,000,000,000
savings and loan bailout. Think moral hazard.

From Financial Crisis to Recession to Great Recession to Recovery
Great Moderation preceded the Great Recession 2. 2007-8 Financial Crisis was tamed by the Federal Reserve. 3. 2008-9 Recession was tamed by both monetary and fiscal policy.
4. European financial instability and world-wide austerity slowed economic recovery and income growth for all but the very, very, very wealthy. Think top 1/10th of one-percent

5. Great Recession Recovery Has Varied Around the World

Understanding Balance Sheet Recessions
They are infrequent, severe, and long-lasting. Understanding them is necessary when judging society's efforts to manage The Great Recession. It is like understanding a doctor's attempt to relieve a headache requires knowing the level of difficulty. Was it a Migraine Headache? A balance sheet is caused by high levels of private sector debt. Assets must equal liabilities plus equity. If assets values like housing collateral fall below their associated debt, equity must make up the difference or insolvency results and debt must be repaid. Think 1837, 1873, 1890 & 1929 See
Most Severe US Recessions.

Was Our Great Recession a Balance Sheet Recession?  Economist Paul Krugman feels the financial crisis ..."was one manifestation of a broader problem... associated with a "balance sheet recession." Economist Richard Koo wrote Japan's 1990- ? "Great Recession "was a "balance sheet recession."
What Led To The Great Recession?
1. Free Market Capitalism Lowered Regulation.
2. Innovative Expanded Investment Banking.
3. Global Trade Imbalances

China 2012       
Germany 2012         
Saudi Arabia 2009   
Japan 2011     
Russia 2012
4. Finance/Housing Easy Money Bubbles


Great Recession Stages
from The Shifts and the Shocks by Martin Wolf

1. A more complex unstable financial/credits system resulted in extreme optimism in good times and panic in bad times. Think
Derivatives, securitization, credit default swaps managed by hedge funds.

2. Savings glut created as emerging countries lowered borrowing and increased trade surpluses after the 1997 Asian Debt Crisis made their foreign dollar dominate debt unsustainable. They expanded trade and kept personal consumption below economic growth. Less consumption and borrowing plus a trade surplus increased Dollar, Euro, and Yen reserves. Like the Petro Dollars in the 1980's this excess savings would be loaned for poor investments (housing).
Think savings from China and Russia and other re

3. Aggregate demand stagnated as trade surplus countries didn't spend. Germany's 2005 economic renewal was saved and Japan's private sector saved much more after their 1990's credit bubble exploded. Adding to the demand shortage were companies who maintained profit by decreasing capital investment spending despite historically low interest rates. Globalization and technology also helped them maintain profit as wage increases were limited to most valuable employees. State and local governments, especially those with underfunded pension systems, also cut expenditures.
Mercantilism.4. Increased current account deficits by wealthy nations balanced world trade. Higher demand for foreign goods
was made possible by massive central bank supported low interest loans. The FED's historic monetary expansion was made possible by continued low inflation caused by expanded Flat World competition and low oil prices. Innovative financing and lax financial regulation also fostered expanded financial asset demand. Think excess OPEC savings financed the 1970's Latin American Debt Crisis leading to Savings and Loan Crisis.

5. Real Estate and Stock bubbles came as expected from low long-term real interest rates. New home buyers borrowed surplus savings and investors devoured growing unique debt securities created by an expanding finance industry promising insured difficult to understand almost guaranteed financial instruments. Leverage rose dramatically. Fraud, near fraud and data manipulation exploded as mortgage servicers, banks, and the law firms broke the law to force people out of their homes. See Chain of Title and Brief History of Financial Bubbles.
6. Poor Crisis Management by politicians as their economic advisors believed market capitalism would prevent serious recessions. The Great Moderation solidified this view. Possibility of new financial instrument contagion were not understood. When panic started, political, intellectual and bureaucratic leaders resisted quick action in areas that required cooperation. A US depression was avoided by FED, Treasury and Congressional efforts that were slowed by austerity. Iceland, Ireland, Greece, Spain and Portugal experienced economic depression.

See The Great Recession. See
Bubbles Credit and Their Consequences to see FED analysis of trying to slow down a bubble.

New Normal # 4

History of U.S. Financial Bailouts and Economic Recovery
Bailout History
The $700 billion 2008 financial-sector rescue plan is the latest of many bailouts that go back to the Panic of 1792 when the federal government bailed out states over-burdened by their Revolutionary War Debt. Thereafter private banks and investment bankers took over financial bailouts until the Panic of 1907 when the economy was so big that even J.P. Morgan needed U.S. Treasury help. This led to the 1913 Federal Reserve System designed to be the lender of last resort. Recently the 1987 Savings and Loan Crisis bailout cost about $160 billion. Other recent government private sector bailouts have included: 1970 Penn Central 1971 Lockheed 1980 Chrysler 1984 Continental Illinois 1991 Executive Life Insurance Company by states assessing other insurers and the 1998 Long-Term Capital Management bailout by commercial and investment banks. See History of U.S. Government Bailouts. Think overcoming greed is difficult. U.S. does better than most! 12/28/15  Use pdf for color printing.

Great Recession Cost Were High But Growth Cured Budget Problems
Economic Cost of Great Recession Estimated at 12.8 Trillion. Some add home values loss but this
is a reach since the housing bubble had inflated values. U.S. FED Profit of $100b in 2014 was up
from $47b in 2009. The 2010-14 total was $ 420b. 

See Treasury Financial Analysis of Great Recession in Charts
Recession, Stagnation, and Monetary Policy EconTalk Podcast 1/9/17




Some believe the 15.5% poverty rate should be lowered. After  "...correcting the 2013 poverty rate for noncash food and housing  benefits, refundable tax credits, and the upward bias in the CPI-U ..."the rate drops from 14.5% to 4.8%. War on Poverty-Was It Lost Others believe it should be raised as it doesn't account for geographic and demographics differences. See Poverty Rates How Flawed Measure Drives Policy Other Data 1  Data 2 


Think many use true but not necessarily appropriate data to foster their POLITICAL beliefs. Example: With our obesity problem how could anyone have believed that many went to bed hungry during the Great Recession. Calculation ignored food stamps and subsidized school lunches.

New Normal # 6
Profit Beats Wages

Twenty-first century war expenditures helped profit recover after a dot-com bubble recession, then crash with The Great Recession and then grow to new heights. US Companies have competed very well in a flat world using technology, outsourcing to Asia, Mexico...and by keeping wage increases low. Source Total compensation has done better although Obama Care gave companies an opportunity to again lower compensation. Source More Data 1 Data 2 Think Rust Belt then NAFTA and soon TPP?  See How Democratic Failed Workers 11 min Short Term vs. Long Term Returns 52 min

New Normality #7
Wellbeing Growth Continues

1. Society's continued stability has resulted in tremendous economic growth which is the key determinate of well-being. Public safety net, child safety, and adjusted poverty rate have all improved dramatically since the Gilded Age. Think economic continued economic distress in Russia, Europe, Japan and China.
2) Scientific achievements have continuously added to citizen well-being. Think cured diseases, smart phones, streaming audio-video, Gillette Stadium ... See Health Problems Solved.
3) Personal Income increased continuously if not always rapidly because nature and nurture improved the personal characteristics needed to enhance wellbeing. Think Russia, China, and Europe's really slow recovery from the Great RecessionSource Is The Country In Trouble, Will Stagnate Income Hurt Our Children and Recent Decades Ranked By Problems.
see Crisis of Capital


Send thoughts to antonw@ix.netcom.com






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