Early 1950′s Recession

JULY 1953 – MAY 1954 (10 months)

The Early 50s recession, also known as the Recession of 1953, was mainly brought about because of the post Korean War financial bungles that often accompany the end of any war. False highs, this time in the form of a large inflationary period, came crashing down as the war came to a close and more funds were put into national security than were ever before.

Another factor in the Early 50s recession was that in 1952, the Federal Reserve changed its policy. They reformed the monetary policy to be more restrictive, and in doing so, hoped that it would control inflation.

Thus, with further straining of the post-war economic environment, a small collapse was in order. The modern economic cycle will need to relieve pressure once in a while, and the system relieves the pressure with these “recessions” as we call them. They happen every so often, and part of the Fed’s responsibility is to try to make it as smooth as possible.

Late 1950′s Recession

AUGUST 1957 – APRIL 1958 (8 months)

The late 50s recession, also called the recession of 1957, struck the late 50s with high unemployment rates and failing businesses. It was mostly due to the tightened monetary policy of the Federal Reserve.

However, as the policy had been tightened two years previous, towards the end of 1957 the policy was eased again. This shifting and then resifting had some interesting results on the U.S. economy. For example, the budget balance went from a budget surplus of 0.8% of GDP in 1957 to a deficit of 0.6% of GDP the following year.

With the year 1959, we saw a 2.6% of GDP. So, even though the recovery was fast, it didn’t help keep thousands from losing their jobs due to failing businesses and massive program failures. Many were forced to try to find new jobs after being laid off. However, as businesses closed, people soon realized that it was no easy task.

Late 1960′s Recession

DECEMBER 1969 – NOVEMBER 1970 (11 months)

The Late 60s recession, though not nearly as problematic as its predecessor in the early sixties, was characterized once again by unemployment and unhealthy amounts of inflation. The modern economic cycle seems, usually, to bring about smaller “aftershocks” when a notably sized recession comes to an end.

The late 60s recession is no different. While measures were taken to decrease inflation and help get some jobs opened up, this era marks the beginning of a new era of economic analysis in which governments try new ways of solving the recession problem.

While no recession has ever matched that of the Great Depression, it is important to understand what causes recessions so that they can be forecasted and, maybe, even avoided altogether! Or, at least get cut off early so that they do not get as far out of hand. Needless to say, recessions affect every aspect of life, from the highest executive to the most simple brick layer.

Post World War I Recession

1918 – 1921

The Post-World War 1 recession was a recession that was characterized by severe hyperinflation in Europe, which spread to North America. Though brief, the recession was sharp. A lot of it had to do with the lost production that was halted at the end of the war. This, coupled with the influx of labor that was caused by returning troops who needed jobs, drove unemployment through the roof.

As a result, nobody had any money to spend, so companies and businesses closed from lack of sales, etc. etc. With the tremendous amount of labor that was needed during the war gone, the false high that had been created during the war dwindled down, leaving thousands jobless and unemployed.

Coming out of a conflict like World War 1 was not something that any economy had experience with prior to the war, and the repercussions showed it.

Late 1940′s Recession

NOVEMBER 1948 – OCTOBER 1949 (11 months)

The late 40s recession might be what some would consider another routine cycle of the modern economic model. As it has been proven over and over again, when the Federal Reserve fails to maintain the delicate balance that exists between the money supply, the interest rates, and inflation, than what you get is recession.

The system automatically needs to purge itself of pressure, and that is what a recession does. During the late 40s recession, we saw unemployment rates go from around 4% to about 8%. It was really no more severe than any other recession in terms of businesses closing or jobs becoming scarce.

In fact, it was really less severe than most recessions the United States has lived through. The modern economic cycle continues, and brings with it its dry and rainy seasons. This is simply the nature of our modern economic structure.

Late 2000′s Recession

DECEMBER 2007 – PRESENT DAY (13+ months)
The late 2000s recession was started by the collapse of the housing market. Suddenly, it seemed like nobody could sell real estate. This put many real estate companies in jeopardy, and some even went out of business. Then, bank collapses caused a sort of public panic.

These occurred both in Europe and in the U.S. Also, the amount of available credit spiraled downward, making it almost impossible for anybody to get a loan. This recession was especially hard on auto-makers. Thousand upon thousands of workers from major automotive factories were laid off from decreased auto sales.

Mortgage firms were certainly not immune to huge disaster. In fact, many mortgage associates and lenders lost their jobs as well as the recession dragged on. As consumer confidence continues to plunge, things continue to get worse. Many have called this recession the worst since World War 2.

Early 1960′s Recession

APRIL 1960 – FEBRUARY 1961 (10 months)
The Early 1960s recession, also called the Recession of 1960, was yet another chapter in the modern economic cycle that has shown its ugly side so many times to the U.S., as well as to the world. This recession was characterized by, once again, astronomically high unemployment rates, incredibly high inflation, and a bad Gross National Product rating.

These all worked together to cause consumer confidence in the system to plummet, and caused a downward spiral to develop that swallowed many businesses. This in turn caused unemployment to rise, and so the cycle began again.

What ended the recession was the call President Kennedy made on January 30 of 1961 to increase government spending to improve the Gross National Product. This helped reduce unemployment, helped bring back confidence in the economy, helped out many businesses, and helped the recession to come to an end that very year.

Early 2000′s Recession

MARCH 2001 – NOVEMBER 2001 (8 Months)

The Early 2000s recession took place in the U.S. for a number of different reasons. One was the collapse of the dot.com bubble. A false high, created in the initial, money-making wave of the internet that swept the world, finally came crashing down to a realistic level.

Also, the September 11th attacks made against the Pentagon and the World Trade Center Towers caused a huge stir among Americans. Although Americans rallied and stayed positive through the whole thing, the economy took a hit as people stopped spending money.

A series of outrageous accounting scandals caused what was considered a huge uproar as well, and also caused a mild contraction on the North American economy. But, thankfully, the recession didn’t last long. And although it is probably still fresh on the minds of some Americans, most have probably moved on. The economy recovered, and things looked up.

The Early 2000s recession was felt in mostly Western countries and had been predicted by economists for years, since the boom of the 1990s, which was accompanied by both low inflation and low unemployment. The collapse of the dot-com bubble, the September 11th attacks, and accounting scandals contributed to a relatively mild contraction in the North American economy.

The bursting of the dot-com bubble
As consumers saw the value of their assets fall, they were less likely to purchase as many goods and services, choosing instead to save, possibly for fear of job losses. In addition, the Tech bubble saw the creation of many Web businesses with unsustainable business models that survived on high stock prices or venture capital.

As the stock bubble deflated, the cash for these companies dried up, and many failed or sharply downsized. In turn, this created a flood of server hardware on the secondary market, and hardware and telecom companies suffered as a result.

Corporate scandals
Scandals such as Enron and Worldcom. President Bush is often blamed for the flourishing of corporate scandals in 2001 however it must be remembered that these scandals began two years before he took office, furthermore, these scandals were revealed way into 2001, marking these scandals off as events that made the existing problems worse, rather than initial causes.

Deflation
There was a high deflationary impact as there were huge budget surpluses at the time ($236 billion in FY01). Keynesian economics suggests that this would slow the economy because the government is hoarding a substantial amount of money.

Y2K
Prior to 2000, vast amounts of money was spent trying to fix the Y2K bug. After the start of 2000, this spending dried up and many firms decided to cut down sharply on technological investment because they had most of the technology they needed for the meantime, this may have been a key factor in the decline in the stock market after March 2000, and this fall in investment was detrimental to the general performance of the economy.

9/11

The economic shock of the September 11th terror attacks, which resulted in a drastic fall in consumer confidence, huge insurance payouts and a fall in the demand for travel and tourism

President: William J. Clinton (D) [1993-2001]
President: George W. Bush (R) [2001-2009]

1970′s Oil Crisis

NOVEMBER 1973 – MARCH 1975 (16 months)

The 1970s oil crisis really began in 1973. What we see in this crisis is the fact that prices of commodities like oil play a much more vital role in our economy than most think. The world needs so much oil every day to run, and will literally need to pay whatever it costs, or it will cease to run.

What we saw as a major cause of the 1970s oil crisis was the fact that oil prices were quadrupled by OPEC. This, along with the increased government spending which came with the Vietnam War, led to severe stagflation in the United States. This “oil shock”, along with the accompanying stock market crash, were considered by many to be the first events to have a persistent affect on the United States.

This also goes to show how much of an effect the Middle East had on life in the United States, as it was Middle Eastern countries that raised the price of oil.

In October of 1973 OPEC stopped exports to the US and other western nations to punish the support of Israel, they realized the strong influence that they had on the world through oil. The immediate results of the Oil Crisis were dramatic. Prices of gasoline quadrupled, rising from just 25 cents to over a dollar in just a few months.

In October of 1973 Middles-eastern OPEC nations stopped exports to the US and other western nations. They meant to punish the western nations that supported Israel, their foe, in the Yom Kippur War, but they also realized the strong influence that they had on the world through oil. One of the many results of the embargo was higher oil prices all throughout the western world, particularly in America.

The embargo forced America to consider many things about energy, such as the cost and supply, which up to 1973 no one had worried about. In order to understand the main cause of the oil crisis one must first know the history of the region and the Arab-Israeli conflict. World War II a Zionist state, known as Israel, was created on 56% of the land that was formerly known as Palestine. This state served as a homeland for Jews. The local Arabs were enraged by the fact that the Palestinian land had been taken to create this state. They refused to acknowledge Israel as an independent state.

The Arabs began to launch efforts to recapture the land that they felt was rightfully theirs. This created the Suez-Sinai War. The British and the French sided with the Israelis in order to punish Nasser for nationalizing the Suez Canal. The strong Israeli military forces quickly defeated the Arabs. The Arabs responded to this defeat by uniting. In 1967 Israel launched the Six-Day War, claiming much land. In 1973 Arab forces retaliated. On Yom Kippur, the holiest Jewish holiday, Arab forces attacked, backed by Soviet technology. Saudi Arabia’s King Faisal swayed other oil supporting countries into placing an embargo on crude oil to Western nations, in late October. This was meant to punish the Western states that had supplies weapons and aid to Israel.

Arab oil-producing countries wished to pressure the Western countries, specifically America into demanding that Israel withdraw their troops from the Arab territories that they had occupied since 1967. This included the ones that the Israelis had recently conquered. They used the embargo in this way as a political tactic. They were also able to use the embargo for economic means. Once they had placed the embargo on the west, the world’s largest consumer of oil, the Arabs realized the power that they had over the world through oil. Once they had resumed shipments of oil they were able to keep the prices high and make a larger profit. Panicking investors and oil companies added to the surge in oil prices in the U.S. These causes plunged a nation where everything seemed to revolve around cars into desolation and insecurity. America found that it could no longer afford to thoughtlessly consume oil.

Philosopher E.F. Schumacher said of the crisis, “The party’s over.”
The immediate results of the Oil Crisis were dramatic. Prices of gasoline quadrupled, rising from just 25 cents to over a dollar in just a few months. The American Automobile Association recorded that up to twenty percent of the country’s gas stations had no fuel one week during the crisis. In some places drivers were forced to wait in line for two to three hours to get gas. The total consumption of oil in the U.S. dropped twenty percent. This was do to the effort of the public to conserve oil and money. There was an instant drop in the number of homes created with gas heat, because other forms of energy were more affordable at this time. The U.S. government went to desperate measures to improve the situation that America found itself in. Congress issued a 55mph speed limit on highways. This was a good thing. Not only did oil consumption go down, but fatalities decreased overnight. Today’s fuel economy stickers come from the effort to preserve oil in the 70′s. Daylight savings time was issued year round in an effort to reduce electrical use. These changes were made in hopes of preserving oil.

Tax credits were offered to those who developed and used alternative sources for energy.
These included solar and wind power. Nixon, who was president at that time, ordered the department of defense to create a stockpile of oil in case the country needed the military to carry it through a time of chaos. There was a large cutback in oil consumption. Emergency rationing books were printed although they were never necessary due to the end of the embargo. Nixon formed the Department and it became a cabinet office. It developed the national energy policy. They made plans to make the U.S. energy independent companies and stations also did all that they could to preserve oil. Nixon had issued a voluntary cutback on the consumption of gasoline. Gas stations would voluntarily close on Sundays. They refused to sell to customers who weren’t “regulars.” Gas stations also wouldn’t sell more than ten gallons of gasoline to a customer at a time. They felt that these efforts would help the public to become more fuel-efficient.

The public helped to retain energy as well. Families turned their thermostats down to sixty-five degrees. The rise in oil prices also caused the public to be more fuel-efficient. Companies and industries switched their energy source to coal. People searched for alternative energy sources. People traded their mammoth cars that had thoughtlessly been speeded down highways to over-heated homes in the suburbs for smaller more fuel-efficient models. The Arabs began to ship oil to Western nations again, but this time at inflated prices. One of the long-term effects of the embargo was a economic recession throughout the world. Inflation remained above ten percent and unemployment was at its record high. The era of economic growth which had been in effect since World War II had now ended. It also ended the common belief that economic prosperity reflected oil consumption statistics

The long-term effects still remain even today. Today’s appliances or the good ones at least, require less than half the energy that they required three decades ago. Speed limits and fuel economy stickers are a result of the government’s efforts to preserve oil. Exploration and development of resources within the U.S. increased dramatically. The government was very concerned about the dependency of the U.S. on foreign oil. The Corporate Average Fuel Economy (CAFE) eventually raised its standards up to 27.5 miles per gallon. Oil heat was slowly replaced by electric heat. The number of homes using oil heat fell about twenty-three percent. The decline would have been even more rapid were it not for the new homes with natural gas heat in northern regions. This was helped by a slight population growth in the south and west United States where electric heat is more popular.

Electric heat is also more readily available to the suburbs. Heating systems now are twenty percent more efficient than they were in 1973. One of the biggest long-term effects was the massive change in cars due to the oil embargo. In Detroit the production of giant, gas guzzling cars was halted. Cars with big engines and large heavy bodies were no longer made in order to preserve oil and boost the economy. Detroit was forced to increase the fuel efficiency of all its cars. Today’s models like the Geo Metro and the Ford Escort are modeled after the 1970′s Chevy Vega and Ford Pinto. The sale of Japanese cars increased, because they met the efficiency standards that American cars did not. The American Auto industry was forced to meet these standards and reformulate its cars.

Although the embargo ended only a year after it began in 1973, the OPEC nations had quadrupled the price of oil in the West. The embargo opened a new era in international relations. It was a political and economical achievement for the Middle East. Third World states discovered that their natural resources, on which they depended upon, specifically oil, could be used as a weapon in both political and economical situations. The Rising oil prices continued to be a threat to not only America’s economy, but also that of the world. President Jimmy Carter would later call the oil situation in the 70’s “the moral equivalent of war.”

Never had the price of an essential commodity risen so quickly and dramatically. The vulnerability of the Western world had truly been revealed.

1926 Recession

OCTOBER 1926 – NOVEMBER 1927 (13 months)

The recession of 1926 is one that few remember, as it came just a little ways before the Great Depression, and is often overshadowed by it. So, what do we know about the recession of 1926? Well, we know that British coal miners went on strike that year. The miners were then followed by a general strike, where three million workers strike to support miners.

Needless to say, Britain suffered from the strikes. Germany was also unanimously accepted into the League of Nations. Remember, what goes on overseas also affects the U.S., and it is doubtless that Britain’s strike affected the United States more than most people think.

While in the recession of 1926, nobody would have foreseen that an even worse recession loomed in the future. The longest recession in history, and it would come to be called the Great depression.