“There was a depression in 1920? Really?” That was the comment I
received recently from a smart, usually well-informed editor.
Yes, there was a depression. But it was over so fast that few
people seem to have heard of it. Yet almost everyone knows about
the Great Depression, which began in the late 1920s and extended
into the late 1930s. Urban legend, however, is that a laissez-
faire president, Herbert Hoover, made it worse by not saving
failing businesses, not pumping money into the economy, and not
running deficits. The second part of the legend is that another
president, Franklin Roosevelt, using countercyclical,
interventionist economic policies for the first time in American
history, restored prosperity through large doses of inflation
and deficit spending. This is much the same as what leaders in
Congress and President Obama now propose for the ailing U.S.
economy. These economic recipes are likely to be applied in part
because of the myth of Roosevelt as an economic savior. It is a
myth, as anyone who