Setting the record straight on the recovery from the 1920–1921 recession.

This article critically examines the recovery from the 1920–21 U.S. recession, challenging the view that it was a triumph of laissez-faire policies and a refutation of Keynesian economics. Using newly revised economic and debt data, the study argues that the recession was largely engineered by the Federal Reserve's tight monetary policy, and the subsequent recovery aligned with Keynes's theory, driven by a reversal of this policy alongside pent-up private consumption and residential investment. The recovery was fueled by a significant expansion of private household debt amid weakened organized labor and rising income inequality, setting the stage for the Roaring Twenties' unsustainable credit boom that contributed to the severity of the Great Depression. The article concludes that while the recovery occurred without fiscal stimulus, it cannot be attributed solely to price flexibility or purely endogenous market forces.