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Joseph Kaminski

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June 29, 2017

America’s Recession Problem: 1945 – 2016

It’s hard to ignore the statistical data when it comes to our economic recessions. Since the end of the Second World War, America has managed to find itself in an economic downfall – whether it be slight or large – about every five to ten years. Recession literally is part of the American way of life, and here’s a list of each economic “catastrophe” we have faced since 1945.

As World War II came to an end, the government dropped spending severely. As war ended, there was no need to support a massive military and the creation of tanks and weaponry. This decline in federal spending led to an enormous drop in gross domestic product (GDP), creating the first economic recession after World War II. This can be seen as somewhat ironic — as the Second World War was used as the ointment to the bandage when it comes to fixing the Great Depression.

Demobilization was perhaps the worst possible thing for American economic expansion. A shift from wartime to peacetime interaction brought an unusual amount of stress to the economy back on the home front. The post-war years led to a bubble within the American economy, with the height seen during the 1950s. But in 1945, with around -12.7% in GDP declination, the future looked strange in terms of numbers.

We couldn’t even hit the 1950s without another economic downturn, however brief it may be, with the 1948 decline in the economy. With apocalypse on the mind with impending hatred between the United States of America and the Soviet Union, forecasters expected a major fall — projecting a much lower drop than what actually occurred.

People saved up, waiting for a “Second Great Depression” that the experts prophesied. In a society that had just gotten out of the worst economic depression in history, any recession that could have had the possibility of bringing them back to the Poor Man’s doorstep seemed dangerous. However, at only a -1.7% drop in GDP, it seemed pale in comparison than what was witnessed immediately after the war.

Just as what occurred after World War II, the end of the Korean War led to a bit of a dip in the economy as well. Once the “era of prosperity” was brought into the limelight, the end of the Korean War brought a -2.6% inflationary period within the American economic foundations.

In 1951, the Federal Reserve separated itself from the US Treasury, reassuring independence and changing monetary policies within the year. In 1952, in fear of an economic bubble, the Federal Reserve set more restrictive characteristics within the monetary system. From July of 1952 to May of 1954, the government worked incredibly hard to stop the economy from tanking.

Monetary policies were once again tightened afterwards, and after a couple of years the government changed and the policies were eased back. This instant change in economic policy led to a budget balance that created a budget surplus of 0.8% GDP in 1957 to a budget deficit of 0.6% GDP in 1958 to an increase of 2.6% in 1959. The Recession of 1958 was just a period of sinkage between two years of relative growth.

To get out of the slight recession that had just occurred, the Federal Reserve raised interest rates in 1959. The government switched from a deficit to surplus within the year, emerging from a short recession to see the light of day in the second-longest growth in NBER history. The DOW reached its lowest point on February 20th, 1961, about a month after Kennedy was inaugurated. This happens to be common with the stock market — it fluctuates after election seasons.

But America couldn’t go a decade without economic recession. By 1969, recession was part of daily life. At the end of the expansion seen after the low points mentioned previously, inflation rises exponentially. Deficits injured the American aspects of economic ingenuity, creating a mild recession that was meant to initially close the fiscal tightening of the Vietnam War.

Then we hit stagflation — a very interesting and somewhat confusing part of our economic history. High unemployment and high inflation came together after oil prices were quadrupled. OPEC created a bit of a high-stakes embargo after America’s involvement with Israel’s quest for independence. This, coupled with the high government spending in the Vietnam War, led to said stagflation.

The 1973 oil crisis and the stock market crash between 1973 and 1974 created a bit of a problem in the economy. Rising unemployment clashed with rising inflation, leading to a tragic yet remarkable change in our government’s stance in the economy. Insert the Nixon Shock and the removal of the gold standard, and we have our modern conception of the American dollar.

After the Iranian Revolution caused a sharp increase in global oil, the 1979 energy crisis led to a drop in monetary across the world. As Iran exported oil inconsistently, higher prices led to tighter policies and changes in American economics. The changes caused inflation, creating a repeat of the 1973 energy crisis.

The early 1980s are oftentimes referred to as a “double-dip” or “W-shaped” recession, because the economy fell into recession, recovered with a rather short period of growth, then fell right back into recession before finally recovering and remaining stable.

The early 1990s were marked by an eight month period of inflation as well, as the Federal Reserved rates from 1986 to 1989, affecting the new decade’s rates. This did not stop growth, but it sure as Hell weakened it. Debt accumulated throughout the 1980s, and consumers became rather pessimistic in terms of American goods — producing an incredibly short recession.

The 1990s would later become a period of economic stability and growth due to a competent government and a wave of successful acts. The collapse of the bubble alongside a new conservative government brought us into a fall of investments as the new millennium replaced the old. The September 11th attacks on the World Trade Center brought a decade of growth to an immediate end. Despite major shocks, the recession was insignificant in terms of previous ones, ranking up at only around -3.2%.

Then America hit the 2008 recession. While the 1930s are labeled as The Great Depression, 2007-2009 has the label as The Great Recession. A year and a half of nonstop news propaganda and falling stock prices led us to believe that the Great Depression was finally back for round two. The building industry crashed, leading construction companies to bankruptcy.

The United States housing bubble, mostly caused by falling housing assets and conservative business strategies, contributed to a global financial crisis. Oil and food prices soared, but the American economic platform sank heavily — peaking at a drop in GDP at around -4.9% and a 10% unemployment rating.

This crisis led to the collapse of some of the largest financial institutions within the United States, including Freddie Mac and Citi Bank. It also contributed to the complete collapse of the automobile industry in Michigan. In an attempt to respond to the “meltdown” of the economy, the government responded with a $700 billion bank bailout, following it up with a $787 billion fiscal stimulus package. History will look back at the recession and end it at around June, 2009. After the Dow Jones reached its lowest point on March 9th, 2009, it was all uphill from there.

We are due for another recession. We really are. Based on the statistics on American depressions and recessions since the end of World War II, it’s more likely than ever that we’re staring down at the face of economic collapse. With big bank bailouts and a progressive movement sweeping over the economic realization of millennials, our policies are going to witness severe change and difference than what it’s been used to for several decades.

We are literally facing an economic recession – whether it be a small blip in an otherwise increasing bubble or a complete flatline of all GDP and other economic factors. Whether it be a Democrat or a Republican in office these next four years, it’ll be one Hell of an issue for them.

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