History Doesn't Repeat. But the Mellons Do.

In 1921, the United States felt like it was coming apart. Public debt had ballooned to $24 billion (roughly $400 billion in today's money) from just $1 billion before World War I. Wartime price controls, lifted in 1919, sent inflation spiking. Workers who'd held the line through the war couldn't afford groceries on their wages. Labor strikes swept the country. The Red Scare and the 1918 flu pandemic had done their own damage to the national psyche.

Into this, Warren G. Harding ran on three words: Return to Normalcy. Less government, less intervention, less chaos. He won by the largest popular vote margin in American history to that point.

To fix the economy, Harding turned to Andrew Mellon, a banker and industrialist who was one of the richest men in America. Mellon served as Treasury Secretary under three presidents: Harding, Coolidge, and Hoover. For much of the 1920s, he was arguably the most powerful man in Washington who didn't live at 1600 Pennsylvania Avenue.

For much of the 1920s, he was arguably the most powerful man in Washington who didn't live at 1600 Pennsylvania Avenue.

His prescription? Cut taxes on top earners and businesses, and growth would follow.

The Mellon Plan slashed the top marginal income tax rate from 73% to 25% by 1925, while preserving a progressive structure underneath. The theory was that reducing the burden on capital would free business to invest, and that prosperity would filter through the economy. He made his case to Congress bluntly: big business would prosper in proportion to the lightening of its tax load, and the profits would spread to the rest of the nation.

Sound familiar?

From One Pocket Into Another

Mellon was also a creative creditor.

The U.S. had extended $11 billion in loans to European Allies during World War I. Through the World War Foreign Debts Commission, Mellon renegotiated the terms. Lower interest rates, repayment timelines stretched across 62 years, to ensure the U.S. recovered its principal without triggering cascading defaults among its debtors. It's what we'd call payment-in-kind restructuring today. The Treasury Department credits his policies with pulling federal debt down from $24 billion to roughly $17 billion by the end of the decade.

The 1920s boomed. Industrial output soared. A new consumer culture took hold. Wealth climbed. The decade got a name: the Roaring Twenties. Andrew Mellon was its architect.

Kicking the Can

But the boom carried a flaw that his theories couldn't account for.

Much of the prosperity was being funneled into speculation. Banks operated under minimal regulation; lending was loose and debt was widespread. Share values kept climbing long past any rational valuation. Wealth was concentrating rapidly at the top while consumer spending, by 1929, had begun to slow and manufacturing output was falling.

The market kept climbing anyway. October 1929 ended that.

The crash exposed what the boom had masked: banks operating under minimal regulation, lending loose, debt widespread, and a decade of speculation that had nowhere left to go. By 1933, U.S. unemployment had reached 25%. About one in three American farmers had lost their land. Nine thousand of the country's 25,000 banks had gone under.

The crash exposed what the boom had masked: banks operating under minimal regulation, lending loose, debt widespread, and a decade of speculation that had nowhere left to go.

Mellon's reputation collapsed almost overnight.

As Hoover recorded in his memoirs, Mellon's advice during the Depression ("liquidate labor, liquidate stocks, liquidate the farmers") became one of the most infamous phrases in American economic history. President Hoover, compounding the damage, signed the Smoot-Hawley Tariff Act in 1930, raising import duties across thousands of goods and triggering retaliatory tariffs from trading partners worldwide. It worsened what was already catastrophic.

War ended the Depression, through government spending on a scale Washington had never attempted.

By 1943, the federal government accounted for 67% of U.S. capital investment, up from 5% in 1940. The massive spending doubled economic growth rates. Businessmen who'd spent a decade railing against government intervention quietly cashed their government contracts.

When History Rhymes

Now consider where we are in 2025 and 2026.

The current administration has cut taxes, pursued deregulation, and deployed tariffs as its primary economic lever. Tax cuts, deregulation, tariffs or the Mellon playbook, verbatim.

The national debt stands above $36 trillion.

Conversations about extending debt timelines and restructuring what America owes its creditors track Mellon's European debt renegotiations closely enough to raise an eyebrow. The administration frames its approach as a return to something: American strength, American industry, a reset from the preceding era's overreach.

The 1920s is the template.

Tax cuts concentrated at the top have historically boosted near-term growth while widening inequality. Tariffs have historically raised prices for consumers and invited retaliation. Loose regulation has historically enabled the speculative excess that unravels booms.

Tax cuts concentrated at the top have historically boosted near-term growth while widening inequality.

History is rarely so tidy. But the people running economic policy today know what happened to the people who ran it a hundred years ago.

No Free Lunch

Which brings us back to Timothy Mellon. He is Andrew's grandson. Reclusive, rarely photographed, enormously wealthy.

Beyond his half-billion in conservative donations, he reportedly contributed $130 million specifically to cover U.S. military salaries during a government shutdown, making him one of the most consequential political donors in the country. His money has helped fund the very administration now pursuing the policies his grandfather made famous a hundred years ago.

Whether that's poetic or alarming depends entirely on your read of the 1920s.

The Roaring Twenties did roar. The decade that followed was called something else entirely.

The author is the Head of Research and Analysis at Icarus Asia, a risk and advisory firm based out of Hong Kong. Views are his own and do not reflect those of his employer.

From One Pocket Into Another

Kicking the Can

When History Rhymes

No Free Lunch

Sources

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