The US suffered a severe economic downturn in 1920/21, worse than the first year of the Great Depression of the 1930′s.
In my opinion the reason for the quick upturn in the economy was due to the fact that the central planners in the Government and at the Central Bank were unsure what to do and therefore did very little. This allowed the market to correct the mistakes of the past, poorly run businesses were liquidated and the strong businesses survived and prospered. In addition Government expenditures were reduced.
This is in contrast to what happened in the 1930′s when the policies chosen included price fixing of farm wages, increased regulations, increased tariffs on imported goods and the devaluation of the US Dollar.
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