The Great Recession
. Types of Recessions         
II. Was The Great Recession a Balance Sheet Recession?
III. Conditions Associated With Balance Sheet Recession  
IV. Causes of the Great Recession from Quick Notes

V. Financial Bailout and Recovery
VI. Legacy of the Great Recession Chart Book 4/5/16
VII. Extensive study from Wiki   
VIII. Most Severe US Recessions 2p 
IX. Wiki List of U.S. Recessions     
X. Financial Crisis Course Materials    
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I. Types of Recessions
A. Inventory Recession Excessive optimism causes inventories
         to over expand and eventually they must be worked down causing
         a recession. Computers have made easier to track inventory and
         made this type of recessions less likely. 
Endogenous Shock is not foreseen by economic models.
         1. Politics of oil caused recent recessions.
             a. 1973
Arab-Israeli war lead to Oil Embargo causing recession.
             b. 1979
 Iranian revolution lead to second oil embargo causing
                  early 1980's recession.

1990 Iraqi invasion of Kuwait led to high oil prices which was
                  a factor.
             d. 2002 American invasion of Iraq lead to high oil prices but
                 no recession.
        2. See
Whose Afraid of Big Bad Oil
    C. Rolling Recession Downturn is limited to areas or sectors of
         the economy. 
         a. Economic activity eventually increases but by then other areas
             and sectors are in recession. 
         b. International competition has increased the occurrence of this
             type of recession as sectors such as steel, autos, and recently
             computers have been affected.
     D. Balance sheet recession
         1. Characteristics
              a. "A balance sheet recession is a particular type of
                   driven by the high levels of private sector debt (i.e., the
                   credit cycle) rather than fluctuations in the business
                   [inventory] cycle."
              b. "Private sector behavior towards saving (i.e., paying down
                    debt) rather lowering demand and consumer consumption
                    and business investment and slowing the economy"
         2. The term
balance sheet derives from an accounting equation that
              holds assets must always equal the sum of liabilities plus equity.
              If asset prices fall below the value of the debt incurred to
              purchase them, then the equity must be negative, meaning the
              consumer or business is insolvent. Until it regains solvency, the
              entity will focus on debt repayment."
         3. Examples
             a. US 1837
             b. US 1873 first great
             c. US 1890
             d. US 1930-33
             e. Japan's 1990 decade of recession
                  See The Holy Grail Recession
List of U.S. Recessions
     F. Most Severe US Recessions


  II Was The Great Recession a Balance Sheet Recession?

   A. Why this is important
          1. Balance sheet recessions are infrequent, severe, long-lasting
          2. Last in U.S. was The Great Depression
          3. Judging society's attempts to end them requires this
              determination just as judging the success of a doctor
              recommended medication to cure a headache requires
              knowing it was the difficult to cure Migraine Headache.

Economist Paul Krugman feels the financial crisis ..."was
          one manifestation of a broader problem... associated with
           a "balance sheet recession." [4]

    C. A second example is provided by Economist Richard Koo
           who wrote that Japan's "Great Recession" that began in
          1990 was a "balance sheet recession."  

    D. Readings   
         1. Richard Koo thoughts on a Balance Sheet Recession
Koo’s wrongheaded views on the Great Depression ..








Top 10 Financial Crises lead to often lead to local recessions
 and sometimes roll around the world.

10. The Panic of 1907: The fourth so-called ”panic”  in 34 years.
9. The Mexican Peso Crisis 1994 aka “The December Mistake” Punta !
8. Argentine economic crisis - 1999 If you have no money, is it a good idea to print  more?
7. German hyperinflation - 1918-24 If you have to print a 1,000-billion
     Mark note, there is probably too much inflation.
6. Souk Al-Manakh - 1982 Try not to use post dated to buy stocks
5. Black Monday - 1987 Can we call a 23% drop in a single day a black swan?
4. Russian financial crisis - 1998 devaluation of the ruble and cancellation of
    debt is never good for a local stock market.
3. East Asian financial crisis - 1997 aka the Asian Contagion
2. Black Tuesday - 1929 — Really? One day, and not the entire Great  Depression?
1. 1973 Oil Crisis — Big energy increases cause recessions
Source Top 10 Financial Crises | The Big Picture

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Thomas Jefferson The Art of Power, 2012 Jon Meacham

Second Chance Three Presidents and the Crisis of America Superpower by Zbigniew Brzezinski,

American Dynasty Aristocracy, Fortune, and the Politics of Deceit in the House of Bush, by Kevin Phillips
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How the West Was Lost Fifty Years of Economic Folly--and the Stark Choices Ahead by Dambisa Moyo
8 Minute Video   and  
43 Minute Vide


III. Conditions Associated With Balance Sheet Recession
     A. Over Supply of Investable Funds Finances Asset Bubbles
          1. 19th century England grew rich with much going to the upper class
              who invested it locally, in empire and in the U.S. (land railroads, western
          2. Easy money policies by governments
              a. Federal Reserve created funds beginning in 2002 and 2013 were borrowed
                   by the wealth to invest in many asset markets.
              b. A problem arose when tightening in 2004 didn't work as foreign investors
                   were eager to use savings to invest in the U.S.
              c. Ben B. did successfully sell FED's toxic assets bought with created  money
                  to provide liquidity to  panicked financial markets treeing to survive The Great
                  Recession to avoid the Great Recession from turning into Great Depression III.
    B. Government Mistakes
         1) Market Fundamentalism and laissez-faire/free market lowered regulation policies
              beginning in 1980 and continuing cause serious problems.
         2) Financial Product Innovation
made asset purchases easier and fostered the belief
              that risk avoidance was possible. Examples: Collateralized Debt Obligations,
              Asset Backed Securities, Commercial Mortgaged Securities, Residential
             Mortgaged Backed Securities   

C. Innovation Cycle begins excessive growth that crashes (RR, computers, bio-technology?)
    D. Greed
    E. See Causes of the Great Recession,
An Historical Perspective on the Crisis of 07-08


IV. The Great Recession from Quick Notes
Great Moderation of the mid 1980's to mid 2000's preceded the Great Recession
           1. It enhanced psychology effect.
           2. 9/11 got the century off to a terrible start.
           3. It fostered 1. Structured Investments Vehicles remove risk and create an unstable
               financial/credits system with  extreme optimism then and panic in bad times.
               Think derivatives, securitization, credit default  swaps managed by banks and
               hedge funds with no skin in the game. U.S. Economic Normality 1945 -2015

      B. A change in philosophy

          1. In 1980's U.S. and England return to conservative government
       business deregulation
was in response to the liberal induced safety-
              net expansion which had upset many voters.  This change was the most
              recent of many such
US political cycle changes which began with the
              1800 presidential election. It signified a change from a strong federal
              government advocated by Federalists Washington, Adams and
              Hamilton lost out to the limited central government state's right politics
              of Hamiltonian Republicans. Think Great Society and lax
          2. In 1980's major investments banks went public created the need
              to balance client funds with investor's funds.
          3 .1980's accounting standard began to decline as accountancy
               firms struggled to balance their commitment to high audit standards
               against the desire to grow their burgeoning consultancy practices.
               Think off balance items allowed and Arthur Anderson scandal.

           4. Home Equity Loans mean less savings they replace many home
               improvement loans as may use their equity to enhance current
               consumer spending rather than as retirement savings.
Think many
               not prepared for retirement.

           5. Reverse mortgages lowers savings of the elderly. Think less
               inheritance for their children,

Glass-Steagall Great Depression Act increased systemic financial risk.
               Imitated and passed by a majority of Republicans it was signed by President Clinton.
See Five Bad Bush/Clinton Policies enhanced the Great Recession.
           7. In 2006, FASB required housing assets be mark-to-market by financial institution.
               This action resulted from a 1991Government
               Accounting Office (GAO) caused by a recent Savings and Loan Crisis.
      C. From Financial Crisis to Recession to Great Recession
          1. Financial crisis of 2007-9 was tamed by the Federal Reserve.
          2. The 2008-9 recession was tamed by monetary and fiscal policy.
          3. European financial and economic instability plus austerity measures
              slowed not only her own recovery but also the world recovery and
              added to a developing long-term secular slow down in wage growth
              for all but the very, very, very wealthy.
          4. The Great Recession Recovery Has Varied Around The World
    D. Major Causes of the Great Recession
         1. A global savings glut and associated global imbalances.
         2. Expansionary monetary policy that ignored asset prices and extensive credit.
         3. Unstable financial system
         4. Inadequate government regulation

Image result for Great Recession GDP recovery


     E. Seven Stages of Great Recession from The Shifts and the Shocks by Martin Wolf
          1. Unstable ever more complex credits system evolved. It creates extreme optimism in good
               times and panic in bad times. Think derivatives. securitization, credit default swaps managed
           &n; hedge funds.
           2. Emerging countries substantial decrease borrowing. Their high foreign currency dominate
               debt build ended with 1990's debt crisis when they were unable to carry high US dollar
               denominated dent. Instead they built foreign currency reserves by expanded foreign trade
               and borrowed much less to finance growth. High income countries with sophisticated
               banking systems and their own currency could and did handle more debt.
           3. Current Account Imbalances Widened exploded for some countries. Emerging countries
               like China built up a large trade surplus . High income countries like Germany also ran trades
               surpluses. Japan's private sector saved much more after their 1990's credit bubble explosion.
               Commodity exporters, especially oil exporter, also increased their trade surplus. In the US the
               nonfinancial sectored awashed with profits and the expected weak demand, al saved. Factor
               income changed as wages lost out to profits and in the wage distribution the top received most
               of the available wage increases caused by globalization, technology, financial liberalization
               and changes in social norms like corporate governance. With propensity to save up and
               propensities to invest down, low long-term real interest rates resulted.  As expected long-
               lived asset prices increased, especially real-estate. The savings glut also leads to secular
               stagnation and negative long term real interest rates.
           4. Current Accounts Deficit in wealthy countries took up the excesses as central banks
               fulfilled their mandate to maximize employment within reasonable inflation targets. This meant
               easy money, low interest rates and debt,  carloads of debt. This task was made more difficult
               as more corporate savings was needed to solidify pension funds and the a dreary investment
               outlook. Investment in housing and increased consumer spending and in the US, UK and
               Southern Europe spending socked up the trade surplus and balancing world monetary flows.
           5. Bank deregulation provided an easy conduit to soak up the easy credit provided by
               central banks. Households borrowed the funds, investors ate-up the securities created and
               insured by creative financial instruments which few understood. Fraud, near fraud and data
               manipulation exploded. Leverage rose dramatically as modern economic and financial theory
               created regulators and politicians who were complacent and often captured by those they
           6. Poor pre-crisis management as politicians and their economic advisors were unprepared,
               lacked understanding especially as to the extent of possible  contagion. Political, intellectual
               and bureaucratic resistance to act quickly especially in areas requiring cooperation. While a
               depression was avoided in all but southern Europe, economic growth slow for too many years.
           7.Post crisis management relied to heavily on monetary policy as fiscal austerity to control
               government debt  flourished everywhere though less in the US than in Southern Europe.

V. Financial Bailout and Recovery
    A. Government Approaches Varied

  Economic Policy Policy Result



Federal Fiscal

Federal Austerity

Bank Stress Test Unemployment % 2009 - 14 Jobs created GDP Growth
 from Trough
US Yes, Quickly Expansionary Little Some Creditable 10 5.7 10.7 m 8%+
England Yes Quickly Expansionary Some Late 10 6.2 2.0 m 3%+
Europe Zone Very Late (2015) Contractionary Much Little Creditable 7 11.42 -3.5 m -1.5%

1Cost of Great Recession were much higher. US FED Profit of 100 billion in 2014 were up from 47 in 2009 with and 420 billion 2010-14.
2High among young some of who are moving north out of Southern Europe
Treasury financial analysis of Great Recession in Charts

    B. U.S. Federal Government Financial Bailout Costs Were Minimal              



C. Fear Reigned as Government Expansionary Fiscal Policy Lagged  Business and Consumers Continued Trend of
Being More Cautious after Recessions

Real Personal Consumption Expenditures/Person

Real personal consumption expenditures per person

Impact of Great Recession from SF FED

Real Household Net Worth/person

Real household net worth per person


Personal consumption expenditures
 Lost and Expected

Personal consumption expenditures


Employment to population ratio

Employment to population ratio (seasonally adjusted)

   E. Financial Credit Cycle Worsens vs. Business Cycle

Editors Note: As of 10/20/15 much has been done to prevent future financial crisis but these efforts will fail because greed and politics change very slowly. Thankfully for many, Western civilization has progressed to the point where even during poor times well-being is maintained at a reasonable level.

See Will Stagnate Median Income Hurt Our Children?



   VI. Legacy of the Great-Recession Chart Book updated 8/16

  VII. Extensive study from Wiki
A. Introduction

          1. Overview

          2. Narratives

     B. Housing market  found itself in a

         1.bursting bubble causing foreclosures

         2, Causes of bubble due to Subprime lending

Mortgage underwriting with Mortgage fraud

         4. Down payments created negative equity

         5. Predatory lending







  C. Risk-taking behavior increased encouraging by

        1.  Consumer excessive borrowing causing

             a. excessive private debt levels

             b. home equity extraction

             c. housing speculation enhance

             d. pro-cyclical human nature

        2. Corporate risk-taking and leverage
            a. Net capital rule change increased lending &
b. Perverse incentives encouraged participant
            c. See K and M
    D. Financial market factors

        1. Financial product innovation

        2. Inaccurate credit ratings

        3. Lack of transparency and
            independent modeling

        4. Off-balance-sheet financing

        5. Regulatory avoidance 

        6. Financial sector concentration

    E. Governmental policies

         1. Failure to regulate non-depository banking

         2. Affordable housing policies

         3. Government deregulation

         4. See L and M


   F. Macroeconomic conditions

         1. Interest rates

         2. Globalization and Trade deficits

         3. Chinese mercantilism

         4. End of a long wave

         5. Paradoxes of thrift and deleveraging

Capital market pressures caused affected
         private capital and the search for yield

   H. Collapse of the shadow banking system because of
        significance for this parallel banking system  and there
       was a run on the shadow banking system

    I. Mortgage compensation model, executive pay/bonuses

    J. Regulation and deregulation

    K. Conflicts of interest and lobbying of business leaders


    L. Other factors

        1. Commodity price volatility

        2. Inaccurate economic forecasting

        3. Monetary expansion and uncertainty

        4. Over-leveraging innovative financial products

        5. Credit creation as a cause

        6. Oil prices

        7. Emigration

        8. Overproduction

        9. Insufficient Demand Due To Declining Birth Rates

 M. References

        1. Books

        2. External links

Last Chapter  Visit Business Education Bookstore
Class Discussion Questions Table of Contents
Homework Questions Economics Free Stuff

 VIII. Wiki List of U.S. Recessions

Name Dates[nb 2] Duration Time since previous recession Characteristics
Panic of 1785 1785–1788 36~4 years 72 The panic of 1785, which lasted until 1788, ended the business boom that followed the American Revolution. The causes of the crisis lay in the overexpansion and debts incurred after the victory at Yorktown, a postwar deflation, competition in the manufacturing sector from Britain, and lack of adequate credit and a sound currency. The downturn was exacerbated by the absence of any significant interstate trade. Other factors were the British refusal to conclude a commercial treaty, and actual and pending defaults among debtor groups. The panic among business and propertied groups led to the demand for a stronger federal government.
Copper Panic of 1789 17961789–1793 36~4 years 72~0 years Loss of confidence in copper coins due to debasement and counterfeiting led to commercial freeze up that halted the economy of several northern States and was not alleviated until the introduction of new paper money to restore confidence.
Panic of 1797 17961796–1799 36~3 years 72~4 years Just as a land speculation bubble was bursting, deflation from the Bank of England (which was facing insolvency because of the cost of Great Britain's involvement in the French Revolutionary Wars) crossed to North America and disrupted commercial and real estate markets in the United States and the Caribbean, and caused a major financial panic.[10] Prosperity continued in the south, but economic activity was stagnant in the north for three years. The young United States engaged in the Quasi-War with France.[8]
1802–1804 recession 18021802–1804 24~2 years 36~3 years A boom of war-time activity led to a decline after the Peace of Amiens ended the war between the United Kingdom and France. Commodity prices fell dramatically. Trade was disrupted by pirates, leading to the First Barbary War.[8]
Depression of 1807 18071807–1810 36~3 years 36~3 years The Embargo Act of 1807 was passed by the United States Congress under President Thomas Jefferson as tensions increased with the United Kingdom. Along with trade restrictions imposed by the British, shipping-related industries were hard hit. The Federalists fought the embargo and allowed smuggling to take place in New England. Trade volumes, commodity prices and securities prices all began to fall. Macon's Bill Number 2 ended the embargoes in May 1810, and a recovery started.[8]
1812 recession 18121812 06~6 months 18~18 months The United States entered a brief recession at the beginning of 1812. The decline was brief primarily because the United States soon increased production to fight the War of 1812, which began June 18, 1812.[11]
1815–21 depression 18151815–1821 72~6 years 36~3 years Shortly after the war ended on March 23, 1815, the United States entered a period of financial panic as bank notes rapidly depreciated because of inflation following the war. The 1815 panic was followed by several years of mild depression, and then a major financial crisis – the Panic of 1819, which featured widespread foreclosures, bank failures, unemployment, a collapse in real estate prices, and a slump in agriculture and manufacturing.[8]
1822–1823 recession 18221822–1823 12~1 year 12~1 year After only a mild recovery following the lengthy 1815–21 depression, commodity prices hit a peak in March 1822 and began to fall. Many businesses failed, unemployment rose and an increase in imports worsened the trade balance.[8]
1825–1826 recession 18251825–1826 12~1 year 24~2 years The Panic of 1825, a stock crash following a bubble of speculative investments in Latin America led to a decline in business activity in the United States and England. The recession coincided with a major panic, the date of which may be more easily determined than general cycle changes associated with other recessions.[7]
1828–1829 recession 18281828–1829 12~1 year 24~2 years In 1826, England forbade the United States to trade with English colonies, and in 1827, the United States adopted a counter-prohibition. Trade declined, just as credit became tight for manufacturers in New England.[8]
1833–34 recession 18331833–1834 12~1 year 48~4 years The United States' economy declined moderately in 1833–34. News accounts of the time confirm the slowdown. The subsequent expansion was driven by land speculation.[12]
US recessions, Free Banking Era to the Great Depression
Name Dates[nb 2] Duration Time since previous recession Business activity [nb 3] Trade & industrial activity[nb 3] Characteristics
1836–1838 recession ~2 years ~2 years -32.8% A sharp downturn in the American economy was caused by bank failures and lack of confidence in the paper currency. Speculation markets were greatly affected when American banks stopped payment in specie (gold and silver coinage).[3][13] Over 600 banks failed in this period. In the South, the cotton market completely collapsed.[8] See: Panic of 1837
late 1839–late 1843 recession ~4 years ~1 year -34.3% This was one of the longest and deepest depressions. It was a period of pronounced deflation and massive default on debt. The Cleveland Trust Company Index showed the economy spent 68 months below its trend and only 9 months above it. The Index declined 34.3% during this depression.[14]
1845–late 1846 recession ~1 year ~2 years −5.9% This recession was mild enough that it may have only been a slowdown in the growth cycle. One theory holds that this would have been a recession, except the United States began to gear up for the Mexican–American War, which began April 25, 1846.[15]
1847–48 recession late 1847–late 1848 ~1 year ~1 year −19.7% The Cleveland Trust Company Index declined 19.7% during 1847 and 1848. It is associated with a financial crisis in Great Britain.[14][16]
1853–54 recession 1853 –Dec 1854 ~1 year ~5 years −18.4% Interest rates rose in this period, contributing to a decrease in railroad investment. Security prices fell during this period. With the exception of falling business investment there is little evidence of contraction in this period.[3]
Panic of 1857 June 1857–Dec 1858 1 year
6 months
2 years
6 months
−23.1% Failure of the Ohio Life Insurance and Trust Company burst a European speculative bubble in United States' railroads and caused a loss of confidence in American banks. Over 5,000 businesses failed within the first year of the Panic, and unemployment was accompanied by protest meetings in urban areas. This is the earliest recession to which the NBER assigns specific months (rather than years) for the peak and trough.[5][7][17]
1860–61 recession Oct 1860–June 1861 8 months 1 year
10 months
−14.5% There was a recession before the American Civil War, which began April 12, 1861. Zarnowitz says the data generally show a contraction occurred in this period, but it was quite mild.[14] A financial panic was narrowly averted in 1860 by the first use of clearing house certificates between banks.[8]
1865–67 recession April 1865–Dec 1867 2 years
8 months
3 years
10 months
−23.8% The American Civil War ended in April 1865, and the country entered a lengthy period of general deflation that lasted until 1896. The United States occasionally experienced periods of recession during the Reconstruction era. Production increased in the years following the Civil War, but the country still had financial difficulties.[14] The post-war period coincided with a period of some international financial instability.
1869–70 recession June 1869–Dec 1870 1 year
6 months
1 year
6 months
−9.7% A few years after the Civil War, a short recession occurred. It was unusual since it came amid a period when railroad investment was greatly accelerating, even producing the First Transcontinental Railroad. The railroads built in this period opened up the interior of the country, giving birth to the Farmers' movement. The recession may be explained partly by ongoing financial difficulties following the war, which discouraged businesses from building up inventories.[14] Several months into the recession, there was a major financial panic.
Panic of 1873 and the Long Depression Oct 1873 –
Mar 1879
5 years
5 months
2 years
10 months
−33.6% (−27.3%) [nb 3] Economic problems in Europe prompted the failure of Jay Cooke & Company, the largest bank in the United States, which burst the post-Civil War speculative bubble. The Coinage Act of 1873 also contributed by immediately depressing the price of silver, which hurt North American mining interests.[18] The deflation and wage cuts of the era led to labor turmoil, such as the Great Railroad Strike of 1877. In 1879, the United States returned to the gold standard with the Specie Payment Resumption Act. This is the longest period of economic contraction recognized by the NBER. The Long Depression is sometimes held to be the entire period from 1873–96.[19][20]
1882–85 recession Mar 1882 –
May 1885
3 years
2 months
3 years −32.8% −24.6% Like the Long Depression that preceded it, the recession of 1882–85 was more of a price depression than a production depression. From 1879 to 1882, there had been a boom in railroad construction which came to an end, resulting in a decline in both railroad construction and in related industries, particularly iron and steel.[21] A major economic event during the recession was the Panic of 1884.
1887–88 recession Mar 1887 –
April 1888
1 year
1 month
1 year
10 months
−14.6% −8.2% Investments in railroads and buildings weakened during this period. This slowdown was so mild that it is not always considered a recession. Contemporary accounts apparently indicate it was considered a slight recession.[22]
1890–91 recession July 1890 –
May 1891
10 months 1 year
5 months
−22.1% −11.7% Although shorter than the recession in 1887–88 and still modest, a slowdown in 1890–91 was somewhat more pronounced than the preceding recession. International monetary disturbances are blamed for this recession, such as the Panic of 1890 in the United Kingdom.[22]
Panic of 1893 Jan 1893 –
June 1894
1 year
5 months
1 year
8 months
−37.3% −29.7% Failure of the United States Reading Railroad and withdrawal of European investment led to a stock market and banking collapse. This Panic was also precipitated in part by a run on the gold supply. The Treasury had to issue bonds to purchase enough gold. Profits, investment and income all fell, leading to political instability, the height of the U.S. populist movement and the Free Silver movement.[23]
Panic of 1896 Dec 1895 –
June 1897
1 year
6 months
1 year
6 months
−25.2% −20.8% The period of 1893–97 is seen as a generally depressed cycle that had a short spurt of growth in the middle, following the Panic of 1893. Production shrank and deflation reigned.[22]
1899–1900 recession June 1899 –
Dec 1900
1 year
6 months
2 years −15.5% −8.8% This was a mild recession in the period of general growth beginning after 1897. Evidence for a recession in this period does not show up in some annual data series.[22]
1902–04 recession Sep 1902 –Aug 1904 1 year
11 months
1 year
9 months
−16.2% −17.1% Though not severe, this downturn lasted for nearly two years and saw a distinct decline in the national product. Industrial and commercial production both declined, albeit fairly modestly.[22] The recession came about a year after a 1901 stock crash.
Panic of 1907 May 1907 –
June 1908
1 year
1 month
2 years
9 months
−29.2% −31.0% A run on Knickerbocker Trust Company deposits on October 22, 1907, set events in motion that would lead to a severe monetary contraction. The fallout from the panic led to Congress creating the Federal Reserve System.[24]
Panic of 1910–1911 Jan 1910 –
Jan 1912
2 years 1 year
7 months
−14.7% −10.6% This was a mild but lengthy recession. The national product grew by less than 1%, and commercial activity and industrial activity declined. The period was also marked by deflation.[22]
Recession of 1913–1914 Jan 1913–Dec 1914 1 year
11 months
1 year −25.9% −19.8% Productions and real income declined during this period and were not offset until the start of World War I increased demand.[22] Incidentally, the Federal Reserve Act was signed during this recession, creating the Federal Reserve System, the culmination of a sequence of events following the Panic of 1907.[24]
Post-World War I recession Aug 1918 –
March 1919
7 months 3 years
8 months
−24.5% −14.1% Severe hyperinflation in Europe took place over production in North America. This was a brief but very sharp recession and was caused by the end of wartime production, along with an influx of labor from returning troops. This, in turn, caused high unemployment.[25]
Depression of 1920–21 Jan 1920 –
July 1921
1 year
6 months
10 months −38.1% −32.7% The 1921 recession began a mere 10 months after the post-World War I recession, as the economy continued working through the shift to a peacetime economy. The recession was short, but extremely painful. The year 1920 was the single most deflationary year in American history; production, however, did not fall as much as might be expected from the deflation. GNP may have declined between 2.5 and 7 percent, even as wholesale prices declined by 36.8%.[26] The economy had a strong recovery following the recession.[27]
1923–24 recession May 1923 –
June 1924
1 year
2 months
2 years −25.4% −22.7% From the depression of 1920–21 until the Great Depression, an era dubbed the Roaring Twenties, the economy was generally expanding. Industrial production declined in 1923–24, but on the whole this was a mild recession.[22]
1926–27 recession Oct 1926 –
Nov 1927
1 year
1 month
2 years
3 months
−12.2% −10.0% This was an unusual and mild recession, thought to be caused largely because Henry Ford closed production in his factories for six months to switch from production of the Model T to the Model A. Charles P. Kindleberger says the period from 1925 to the start of the Great Depression is best thought of as a boom, and this minor recession just proof that the boom "was not general, uninterrupted or extensive".[28]
  Dates Duration (months) Time since previous recession (months) Peak unemploy­ment GDP decline (peak to trough) Characteristics
Great Depression 1929Aug 1929 –
Mar 1933
433 years
7 months
0211 year
9 months
26.7−26.7% Stock markets crashed worldwide. A banking collapse took place in the United States. Extensive new tariffs and other factors contributed to an extremely deep depression. The United States did remain in a depression until World War II. In 1936, unemployment fell to 16.9%, but later returned to 19% in 1938 (near 1933 levels).
Recession of 1937–1938 1937May 1937 –
June 1938
131 year
1 month
0504 years
2 months
03.4−18.2% The Recession of 1937 is only considered minor when compared to the Great Depression, but is otherwise among the worst recessions of the 20th century. Three explanations are offered for the recession: that tight fiscal policy from an attempt to balance the budget after the expansion of the New Deal caused recession, that tight monetary policy from the Federal Reserve caused the recession, or that declining profits for businesses led to a reduction in investment.[34]
Recession of 1945 1945Feb–Oct 1945 088 months 0806 years
8 months
12.7−12.7% The decline in government spending at the end of World War II led to an enormous drop in gross domestic product, making this technically a recession. This was the result of demobilization and the shift from a wartime to peacetime economy. The post-war years were unusual in a number of ways (unemployment was never high) and this era may be considered a "sui generis end-of-the-war recession".[35]
Recession of 1949 1948Nov 1948 –
Oct 1949
1111 months 0373 years
1 month
(Oct 1949)
01.7−1.7% The 1948 recession was a brief economic downturn; forecasters of the time expected much worse, perhaps influenced by the poor economy in their recent lifetimes.[36] The recession also followed a period of monetary tightening.[30]
Recession of 1953 1953July 1953 –
May 1954
1010 months 0453 years
9 months
(Sep 1954)
02.6−2.6% After a post-Korean War inflationary period, more funds were transferred to national security. In 1951, the Federal Reserve reasserted its independence from the U.S. Treasury and in 1952, the Federal Reserve changed monetary policy to be more restrictive because of fears of further inflation or of a bubble forming.[30][37][38]
Recession of 1958 1957Aug 1957 –
April 1958
088 months 0393 years
3 months
(July 1958)
03.1−3.7% Monetary policy was tightened during the two years preceding 1957, followed by an easing of policy at the end of 1957. The budget balance resulted in a change in budget surplus of 0.8% of GDP in 1957 to a budget deficit of 0.6% of GDP in 1958, and then to 2.6% of GDP in 1959.[30]
Recession of 1960–61 1960Apr 1960 –
Feb 1961
1010 months 0242 years 07.17.1%
(May 1961)
01.6−1.6% Another primarily monetary recession occurred after the Federal Reserve began raising interest rates in 1959. The government switched from deficit (or 2.6% in 1959) to surplus (of 0.1% in 1960). When the economy emerged from this short recession, it began the second-longest period of growth in NBER history.[30] The Dow Jones Industrial Average (Dow) finally reached its lowest point on Feb. 20, 1961, about 4 weeks after President Kennedy was inaugurated.
Recession of 1969–70 1969Dec 1969 –
Nov 1970
1111 months 1068 years
10 months
06.1 6.1%
(Dec 1970)
00.6−0.6% The relatively mild 1969 recession followed a lengthy expansion. At the end of the expansion, inflation was rising, possibly a result of increased deficits. This relatively mild recession coincided with an attempt to start closing the budget deficits of the Vietnam War (fiscal tightening) and the Federal Reserve raising interest rates (monetary tightening).[30]
1973–75 recession 1973Nov 1973 –
Mar 1975
161 year
4 months
0363 years 09.0 9.0%
(May 1975)
03.2−3.2% A quadrupling of oil prices by OPEC coupled with high government spending because of the Vietnam War led to stagflation in the United States.[39] The period was also marked by the 1973 oil crisis and the 1973–1974 stock market crash. The period is remarkable for rising unemployment coinciding with rising inflation.[40]
1980 recession 1980Jan–July 1980 066 months 0584 years
10 months
07.8 7.8%
(July 1980)
02.2−2.2% The NBER considers a very short recession to have occurred in 1980, followed by a short period of growth and then a deep recession. Unemployment remained relatively elevated in between recessions. The recession began as the Federal Reserve, under Paul Volcker, raised interest rates dramatically to fight the inflation of the 1970s. The early '80s are sometimes referred to as a "double-dip" or "W-shaped" recession.[30][41]
Early 1980s recession 1981July 1981 –
Nov 1982
161 year
4 months
0121 year 10.8 10.8%
(Nov 1982)
02.7−2.7% The Iranian Revolution sharply increased the price of oil around the world in 1979, causing the 1979 energy crisis. This was caused by the new regime in power in Iran, which exported oil at inconsistent intervals and at a lower volume, forcing prices up. Tight monetary policy in the United States to control inflation led to another recession. The changes were made largely because of inflation carried over from the previous decade because of the 1973 oil crisis and the 1979 energy crisis.[42][43]
Early 1990s recession 1990July 1990 –
Mar 1991
088 months 0927 years
8 months
07.8 7.8%
(June 1992)
01.4−1.4% After the lengthy peacetime expansion of the 1980s, inflation began to increase and the Federal Reserve responded by raising interest rates from 1986 to 1989. This weakened but did not stop growth, but some combination of the subsequent 1990 oil price shock, the debt accumulation of the 1980s, and growing consumer pessimism combined with the weakened economy to produce a brief recession.[44][45][46]
Early 2000s recession 2001March 2001–Nov 2001 088 months 12010 years 06.3 6.3%
(June 2003)
00.3−0.3% The 1990s were the longest period of growth in American history. The collapse of the speculative dot-com bubble, a fall in business outlays and investments, and the September 11th attacks,[47] brought the decade of growth to an end. Despite these major shocks, the recession was brief and shallow.[48] Without the September 11th attacks, the economy might have avoided recession altogether.[47]
Great Recession 2007Dec 2007 – June 2009[49][50] 181 year
6 months
0736 years
1 month
(October 2009)[51]
03.9−4.3% The subprime mortgage crisis led to the collapse of the United States housing bubble. Falling housing-related assets contributed to a global financial crisis, even as oil and food prices soared. The crisis led to the failure or collapse of many of the United States' largest financial institutions: Bear Stearns, Fannie Mae, Freddie Mac, Lehman Brothers, Citi Bank and AIG, as well as a crisis in the automobile industry. The government responded with an unprecedented $700 billion bank bailout and $787 billion fiscal stimulus package. The National Bureau of Economic Research declared the end of this recession over a year after the end date.[52] The Dow Jones Industrial Average (Dow) finally reached its lowest point on March 9, 2009.[