If you've never heard of the Depression of 1921, it's because the federal government and the (then new) Federal Reserve did the opposite of what they did in 2008: federal spending was cut, the federal budget was balanced, and interest rates were allowed to rise. In other words, real austerity measures were implemented. The result? A short economic contraction that healed itself.
If you want to understand why TARP stimulus, too big to fail bank bailouts, and quantitative easing make our current economic crisis worse, there's nobody better than Jim Grant to explain.