By the start of 1937, things were looking up for the U.S. economy. Although the Supreme Court had struck down both the NIRA and the AAA—the chief pillars of the original New Deal's recovery plan—some time earlier, like a glider released by its tow plane, the recovery itself kept going.
Indeed, the glider analogy doesn't quite work, because instead of gradually declining, economic activity started rising faster than ever: whereas in 1934 and 1935 real GNP grew by 7.7 and 8.1 percent, respectively, in 1936 it grew by a whopping 14.1 percent. Between May 1935, when the NIRA was struck down, and April 1937, unemployment fell by a third—as compared to a 28 percent decline while the NRA codes were in effect. Bank lending, long stagnant, also started to revive. And the stock market, which bounced around but otherwise made little headway while the NRA did its thing, rose by a hefty 70 percent.Read the rest of this post →