History of Economic Recession in the United States: Economic Turbulence from 1893 to 2020

Since 1893, the United States has experienced 19 economic recessions, each bringing varying degrees of pain and challenges. These recurring economic cycles, while unpleasant, are also part of the functioning of the capitalist market. I have witnessed several recessions firsthand, and I must say that each one has its unique causes and characteristics.

The longest one, of course, was the infamous Great Depression, which lasted from 1929 to 1939, a full decade of economic disaster. The most recent one was the sharp recession triggered by the global pandemic in 2020.

Economic Crisis from the Late 19th Century to the Early 20th Century

The recession in 1893 was caused by the collapse of the Reading Railroad Company, which triggered a chain reaction leading to the downfall of other railroad companies and a stock market crash. At that time, banks stopped cash payments, people began hoarding cash, and banks also followed suit and went bankrupt.

The recession of 1873 was caused by excessive speculation during the construction of the national railway system, which ultimately led to the collapse of the largest bank in the United States, and this recession lasted until 1879.

In 1857, the embezzlement incident at the Ohio Life Insurance Trust Company’s New York branch triggered a panic. At that time, after a ship loaded with gold sank into the sea, investors completely lost confidence in paper currency. Businesses were unable to pay salaries, and commercial activities came to a standstill.

The Great Depression - The Darkest Chapter in American Economic History

The Great Depression from 1929 to 1938 was two closely related recessions. The first lasted from August 1929 to March 1933, with the economy astonishingly contracting by 12.9% in 1932! The second recession extended from May 1937 to June 1938. The unemployment rate reached a terrifying peak of 24.9% in 1933 and remained in double digits until the start of World War II.

The factors that caused the Great Depression are very complex. The Federal Reserve raised interest rates in the spring of 1928 and continued to raise them even when the economy was already in recession (what a ridiculous decision!). The stock market crash of 1929 destroyed the savings of businesses and individuals. A decade-long drought in the Midwest brought devastating dust storms, making life even more difficult for farmers.

President Roosevelt's New Deal ended the first recession and drove economic growth by 10.8%. The end of the drought and the government's increased spending for World War II finally ended the second recession.

Economic Fluctuations from the Post-War Period to the 1970s

The recession in 1945 lasted only 8 months, which was actually a natural adjustment after the end of World War II.

The recession in 1949 was caused by the Federal Reserve raising interest rates too quickly, resulting in an unemployment rate of 7.9%. It makes me wonder, why do central banks always make the same mistakes?

The recession of 1953 was due to the contractionary monetary policy following the Korean War, lasting for 10 months. GDP contracted by 5.9% in the fourth quarter of 1953.

The recession of 1957 lasted for 8 months, with GDP contracting sharply by 10.0% in the first quarter of 1958. This was also due to the Federal Reserve's overly tight monetary policy.

Economic Storms of the 70s and 80s

The recession of 1970 was relatively mild, lasting for 11 months. However, the recession from 1973 to 1975 lasted for 16 months, primarily due to the OPEC oil embargo, which doubled oil prices, along with a series of policy mistakes by Nixon, such as wage-price controls and abandonment of the gold standard. This resulted in stagflation and five consecutive quarters of negative GDP growth.

Between 1980 and 1982, the economy experienced two recessions, the second of which lasted for 16 months. This was a result of the Federal Reserve raising interest rates to combat inflation, coupled with the Iranian oil embargo that reduced oil supplies and drove up prices. The unemployment rate reached 10.8% in 1982, remaining above 10% for 10 consecutive months. I personally witnessed many people losing their jobs and struggling to make ends meet.

The recession of 1990-91 lasted for 9 months, primarily caused by the savings and loan crisis, high interest rates, and Iraq's invasion of Kuwait. This recession directly cost George H.W. Bush the opportunity for re-election.

Three Recessions in the 21st Century

The first decade of the 21st century experienced three recessions, each worse than the last, but for different reasons.

The recession in 2001 lasted for 8 months, stemming from the burst of the internet bubble and the 911 events.

The Great Recession of 2008-2009 lasted for 18 months, making it the longest since the Great Depression. The subprime mortgage crisis triggered a global banking credit crisis, which then spread throughout the entire economic system. In the fourth quarter of 2008, GDP fell by 8.5%, and the unemployment rate rose to 10% in October 2009. The actions of those giant investment banks at that time were truly infuriating, taking ordinary people's money to gamble and then making everyone pay for them!

The recession of 2020 was the most severe since the Great Depression. In the second quarter, GDP contracted by a record 31.2%, and in April, the U.S. economy lost 20.5 million jobs, with the unemployment rate soaring to 14.7%.

History tells us that economic recessions in the United States occur on average every 11 months. The Great Recession lasted for 18 months, while the recession in 2020 lasted only two months, making it the shortest on record.

These historical data should remind us that economic cycles are inevitable, but what truly matters is how we respond and recover from them. Those politicians who claim to be able to completely avoid economic downturns are either deceiving the public or fooling themselves.