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Finance Tid Bits

And History Does Repeat Itself

3rd June 2009

So you turn on the tv, radio, get on the net, read newspapers and magazines and what do you see splashed across the pages? Financial gloom, soaring inflation, currencies losing value, stock markets spiraling downward, companies downsizing and cutting jobs and so it goes. Now, folks, this is not the first economic recession to befall us. What's going on here?

 

Finance Tid Bits I decided to do a search on recessions from the past in U.S. history and I was amazed to find that most of them were caused by our banking and financial system in one way or another. Is it any wonder then that our latest crisis caused by the housing market crash better known as the subprime crisis, has led us into yet another historic recession? As the list goes on take note of the time between recessions. Below is a list I got from Wikipedia with the history of U.S. recessions.

List of Economic Recessions

Name

Dates

Duration

Time Since Start Of Previous Entry

Causes

Panic of 1797

1797–1800

3 years

-

The effects of the deflation of the Bank of England crossed the Atlantic Ocean to North America and disrupted commercial and real estate markets in the United States and the Caribbean. Britain's economy was greatly affected by developing disflationary repercussions because it was fighting France in the French Revolutionary Wars at the time.

Depression of 1807

1807–1814

7 years

10 years

The Embargo Act of 1807 was passed by the United States Congress under President Thomas Jefferson. It devastated shipping-related industries. The Federalists fought the embargo and allowed smuggling to take place in New England.

Panic of 1819

1819–1824

5 years

12 years

The first major financial crisis in the United States featured widespread foreclosures, bank failures, unemployment, and a slump in agriculture and manufacturing. It also marked the end of the economic expansion that followed the War of 1812.

Panic of 1837

1837–1843

6 years

18 years

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).

Panic of 1857

1857–1860

3 years

20 years

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.

Panic of 1873

1873–1879

6 years

16 years

Economic problems in Europe prompted the failure of the 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.

Long Depression

1873–1896

23 years

-

The collapse of the Vienna Stock Exchange caused a depression that spread throughout the world. It is important to note that during this period, the global industrial production greatly increased. In the United States, for example, industrial output increased fourfold.

Panic of 1893

1893–1896

3 years

20 years

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.

Panic of 1907

1907–1908

1 year

14 years

A run on Knickerbocker Trust Company deposits on October 22, 1907, set events in motion that would lead to a severe monetary contraction.

Post-World War I recession

1918–1921

3 years

11 years

Severe hyperinflation in Europe took place over production in North America. It 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.

Great Depression

1929–1933

43 months

21 months

Stock markets crashed worldwide, and a banking collapse took place in the United States. Although sometimes dated as lasting until the Second World War, the US economy was growing again by 1933, and technically the U.S. was not in recession from 1933 to 1937

Recession of 1937

1937–1938

13 months

50 months

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.

Recession of 1945

Feb-Oct 1945

8 months

80 months

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. The Post War years were unusual in a number of ways and this era has little in common with other recessions.

Recession of 1948

Nov 1948–Oct 1949

11 months

37 months

The 1948 recession was a relatively brief cyclical economic downturn, the mildness of which led to confidence in the notion that the Post War-era would be a period of stronger growth.

Recession of 1953

July 1953–May 1954

10 months

45 months

After a post-Korean War inflationary period, more funds were transferred into national security. The Federal Reserve changed monetary policy to be more restrictive in 1952 due to fears of further inflation.

Recession of 1958

Aug 1957–April 1958

8 months

39 months

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.

Recession of 1960-1

April 1960–Feb 1961

10 months

24 months

After President Kennedy's 30 January 1961 call for increased government spending to improve the Gross National Product and to reduce unemployment, the 1960-61 recession ended in February.

Recession of 1969-70

Dec 1969–Nov 1970

11 months

106 months

The relatively mild 1969 recession is thought to have been mostly caused by the Federal Reserve raising interest rates to hold down inflation.

1973 oil crisis

1973–1974 stock market crash

Nov. 1973– March 1975

16 months

36 months

A quadrupling of oil prices by OPEC coupled with high government spending due to the Vietnam War led to stagflation in the United States.

1980 recession

Jan-July 1980

6 months

58 months

The NBER considers a short recession to have occurred in 1980, followed by a short period of growth and then a deep recession. Unemployment remained relatively elevated inbetween recessions. The early '80s are sometimes referred to as a "double dip" or "w-shaped" recession.

Early 1980s recession

July 1981–Nov 1982

16 months

12 months

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 to go up. Tight monetary policy in the United States to control inflation led to another recession. The changes were made largely because of inflation that was carried over from the previous decade due to the 1973 oil crisis and the 1979 energy crisis.

Early 1990s recession

July 1990–March 1991

8 months

92 months

Industrial production and manufacturing-trade sales increased in early 1991.

Early 2000s recession

Mar-Nov 2001

8 months

120 months

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.

Late 2000s recession

Dec 2007-current

ongoing

73 months

The collapse of the housing market led to bank collapses in the US and Europe, causing the amount of available credit to be sharply curtailed, resulting in huge liquidity and solvency crises. In addition, record oil prices and food prices, stock markets crashed globally, and several high profile banking and manufacturing giants collapsed in the United States.

 

Interesting to see how history repeats itself although I haven't quite figured out a mathematical formula to the time between recessions but I do know now the economic factors to look out for that lead to a financial recession. Share your thoughts!

 

"Too much money is as demoralizing as too little, and there's no such thing as exactly enough. " - Mignon McLaughlin, The Second Neurotic's Notebook, 1966

 

Comments (8):

Tom Says: So what we are going through is a repeat of 1819 on a much larger scale | 06.03.2009 |

Courtney Says: Wow, interesting to know thanks Kev | 06.03.2009 |

Denson Says: I never thought about this thanks it really is food for thought | 06.03.2009 |

Kenneth Says: Looking at this my thoughts are the way the system works, recessions are inevitable then over some period of time. Meaning they will occur again and again so we just need to get smarter | 06.03.2009 |

Felix Says: Valid point Kenneth it seems to be built into the monetary system | 06.03.2009 |

Amber Says: Makes one's stomach turn to think recessions are built into our monetary system | 06.03.2009 |

Billy Says: Something too familiar about the current recession and that of 1819 looking at the table | 06.03.2009 |

Ralph Says: We should have known then when the oil prices soared that that was the beginning of trouble looking at the crisis of 1973, you're right Kevin history does repeat itself | 06.03.2009 |

 

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