Recessions are not a new occurrence, nor are they at all limited to the well-known, and rare incidents such as the dot-com crash, and the Great Depression of 1929; in fact, in the United States, the National Bureau of Economic Research (the bureau is involved in a number of economic research areas, including: a. defining when a given recession starts and ends, and b. analysis and research upon economic factors, and indicators, may be indicative of a recession) identified 11 recessions between 1945 and 2007.

The National Bureau, despite the official sounding name, is a collection of leading economists who finance and manage research in to all kinds of economy-related questions. The National Bureau of Economic Research is the largest body of economic researchers in the United States, making it’s opinion one of the most respected recession indicators available. One of the important contributions by the N.B.E.R. to mainstream economics is the huge collection of economic indicators and data feeds indexed on their website - this index is used by economists and analysts for study and informative purposes.

The 2008 real estate boom/banking crash recession was termed by the N.B.E.R. to have started in December of 2007, citing declining jobs as being the primary indicator: “The committee views the payroll employment measure, which is based on a large survey of employers, as the most reliable comprehensive estimate of employment, this series reached a peak in December 2007 and has declined every month since then.” said the Bureau in December of 2008.

Economic recessions in any nation have historically been wide-reaching, effecting international economies and as such international recessions are just as common as nation-specific recessions, and furthermore, recessions may beget further recessions in other countries. As such, recessions are often grouped together despite occurring at slightly different times, or having differing effects between regions, generally, because they share a single event or stimulus which can be traced as the origin.

The history of economic statistics starts in the nineteenth century; prior to that, little in the way of employment metrics, wages, income, production, inflation, and other important economic indicators could be identified. As such, there’s little but subjective politicking in terms of determining when a recession started, or ended, and even if one ever occurred.

Note, that we don’t distinguish much here between depressions and recessions, the names, when available are the commonly accepted name among economists and/or historians.

Depression of 1807

In 1807, the United States Congress passed an act known as the Embargo Act, in what was a lead-up to the infamous War of 1812, in an attempt to punish Britain for its attack on a United States frigate off the coast of Virginia, killing three Americans. The Embargo Act prohibited trade between the countries, resulting in what Thomas Jefferson, in power at the time, clearly ignored - a complete failure of the American export economy, which was hugely dependent on Britain at the time. Jefferson, in the last 3 days of his second term, revoked the Embargo Act, which had then snowballed in to three distinct pieces of legislation, in March of 1809; allowing the economy to slowly recover.

Seven years after the marked beginning of this recession, in 1814 the economy was considered by most economic historians to be recovered, and back towards a growing trend.

The Panic of 1837

In June of 1836, the United States Congress passed an act, known as the Distribution Act, which would require the federal government to distribute treasury reserves in gold and silver to the states on January 1st of the following year. Shortly after, then-President Andrew Jackson, passed an order to ban government land sale in paper currency, citing that only gold and silver could be used to purchase land - designed to curb speculation in the real estate market. These acts, combined to hugely contract the money supply by reducing the value of paper currency - a large part of the total supply.

Finally, in the middle of 1837, a speculative bubble in land and property burst, resulting in New York banks stopping payment in gold and silver entirely; a huge banking panic ensued, causing a five year depression, ending in 1842.

The Long Depression

The Long Depression was a good example of a serious economic recession where the contraction in economic variables was felt internationally. Many economic historians have strong feelings about the Long Depression, often claiming that it was not a depression at all, due to the strict formal definition of a recession which requires distinctly shrinking gross domestic product, a factor missing for much of this period.

Historically, however, citizens of this time period certainly referred to the period as a depression. In fact, until the Great Depression in 1929 (coming up next!) took over, the Long Depression was referred to as the Great Depression.

As GDP was clearly growing during this period, this was not a recession or contraction of production; production was still growing. However, prices mark this as a clear contraction; a tight monetary policy in the United States (as part of the effort to return to the gold standard level maintained prior to the speculative economy that grew out of the Civil War (1861-1865)) and the collapse of the Austria-based Vienna Stock Exchange, the world’s oldest stock exchange, and at the time most important, caused a limited availability of funds to facilitate trade.

Rampant fraud and speculation growing in the railroad industry, particularly in the failed construction of the Union Pacific Railway caused a speculative bubble to pop in this market along side of the collapse of the Exchange, and all the other factors building up in 1873.

Editor’s note, prior to the comment below, this article did say “1837″ due to a typo in the draft that got carried forward to future revisions. Our sincerest apologies for this mistake.

The Great Depression

The most well-known, and likely the most studied economic contraction in history; started by the stock market crash on the infamous Black Tuesday, on October 29th, 1929, in the United States, the effects of this recession are vast and international. International trade of all sorts fell to less than 60 per cent of what it was in the decade prior, in an example of the largest trade contraction internationally in recorded economic history.

Cities dependent on the heavy industry market which arose after the Industrial Revolution were the hardest hit by the Depression. Construction, farming, mining, and other primary sector industries nearly collapsed, and the workers within these industries were overwhelmingly left unemployed.

Interestingly, however, by early 1930, stock prices were back to where they were before the bubble began; that is, they were at early 1929 levels - the mark of a market correction to irrational speculative behaviour. A fall in market interaction due to losses of speculative money, however, resulted in protectionist fiscal policy from the United States government which was encouraged to engage in tariffs and other factors which inhibit gains from trade and destroy international trade economies.

Structuralist economists, such as John Maynard Keynes, took hold of the world’s economic beliefs at this time; encouraging government investment in the facilitating structure and production type “make work” projects to gain American jobs. Much of the United States highway system was built this way - and likely to no avail within economic reconstruction; how recovery from this depression was achieved is unclear, but most believe that the onset of war, new banking regulation, and some level of structuralist deficit spending was involved.

Dot-Com Bubble Burst

The dot-com bubble refers to the speculative bubble that took place in Information Technology and communication type industries during the late 1990s, until it’s collapse in 2000/2001. Western nations saw an increase in their total value, and a very rapid growth of GDP resulting from technology companies growing at speculative rates.

“A combination of rapidly increasing stock prices, individual speculation in stocks, and widely available venture capital created an exuberant environment in which many of these businesses dismissed standard business models, focusing on increasing market share at the expense of the bottom line.” says Wikipedia, rather elegantly on the subject.

Many companies during this period were rated based on their churn rate; that is, how fast they were spending through their venture capital. Since few companies had reached profitability, or ever would reach profitability, they were dependent on the results of their IPOs and venture availability to keep afloat, and the rate at which they spent that money would determine how long they’d survive.

The NASDAQ, a technology stock index, reached a peak of over 5,000 points on March 10th of 2000, nearly 200% of what the same index sits at now, 9 years later, and over 500% of what it remained at after the bubble collapsed.

Much of the economy was restructured as a result of this bubble, the then new-age Internet company AOL, acquired old-world media conglomerate Time Warner, to form AOL Time Warner, before removing the “AOL” from their name after the collapse. Dozens of companies filed for bankruptcy, hundreds of dot-com companies simply disappeared, and widespread collapse in the communication industry, where funds were promised for massive growth projects, resulted in the collapse of Nortel, Worldcom, and a number of other major companies.

Financial Crisis of 2008

Oft referred to as a “credit crunch,” the financial crisis of 2008 refers to the so-called recession beginning with the collapse of subprime loans and a loss of confidence in available securitized mortgages and their ratings.

Whether the financial crisis and associated collapse is truly a recession or not is still in heated debate by economists, with many believing that a market correction cannot be considered contractionary in this context. That said, a clear reduction in consumer spending has been noted, and imports have fallen by over 4 per cent since 2007, down from a growth of 12 per cent between 2006 and 2007. Petroleum imports are by far the biggest loser, at nearly 30 per cent reduction; correlating with the automotive crisis, and increase in oil prices.

In September, when the stock market finally crashed, indicating the failure of these asset packages, and lack of available liquidity to American businesses, the government stepped in and increased the cash injection program. Internationally, stock prices began to collapse, possibly indicative of the rise of globalization in financial markets.

A number of large financial institutions - including Lehman Brothers, Merrill Lynch, Washington Mutual and Wachovia Inc. - found themselves insolvent due to the de-leveraging effect of the shrinking money supply, resulting in either government managed takeovers in the form of cash injections, or corporate buyouts.

An important result of the government intervention in protecting financial institutions was the provision of bailout money to firms such as A.I.G., where the liquidity crisis, combined with alleged poor management and irresponsible spending, resulted in downgrading of their debt ratings, and the risk of absolute insolvency in one of the largest insurers in the world. The Federal Reserve Bank provided a $85 billion dollar credit facility to A.I.G. in exchange for 79.9 per cent of the equity.

“We can’t keep doing this, both because we at the Fed don’t have the necessary resources and for reasons of democratic legitimacy, it’s important that the Congress come in and take control of the situation,” appealed current Chairman of the Federal Reserve, Ben Bernanke, at a Congress meeting; leading Congress to establish a bill to provide bailout funding to the banking industry, later to be somewhat redirected to the failing automotive industry.

1. Introduction to Recessions
2. Depression of 1807 (1807 - 1814)
3. Panic of 1837 (1837 - 1842)
4. Long Depression (1873 - 1897)
5. Great Depression (1929 - 1939)
6. Dot-Com Burst (2000 - 2001)
7. Financial Crisis of 2008 (2007 - 2009)
8. View all pages.

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