During the late 2000s, the Great Recession was characterized by a dramatic drop in economic activity. It is often regarded as the worst downturn since the Great Depression. The term “Great Recession” refers to both the United States’ recession, which lasted from December 2007 to June 2009, and the worldwide recession that followed in 2009. When the housing market in the United States transitioned from boom to bust, large sums of mortgage-backed securities (MBS) and derivatives lost significant value, the economic depression began.
How long did the Great Depression of 1929 last?
The Great Depression was a global economic depression that began in 1929 and ended around 1939. It was the longest and most severe downturn the industrialized Western world had ever known, resulting in major shifts in economic institutions, macroeconomic policy, and economic theory.
What was the cause of the Great Recession’s length?
Some of it is due to the labor market’s long-term sluggishness. During this recession, the percentage of unemployed people who have been out of work for more than six months rose to 45 percent, up from a postwar high of 25 percent.
What happened at the end of the Great Recession?
Congress passed the Struggling Asset Relief Scheme (TARP) to empower the US Treasury to implement a major rescue program for troubled banks. The goal was to avoid a national and global economic meltdown. To end the recession, ARRA and the Economic Stimulus Plan were passed in 2009.
How long did the financial crisis of 2008 last?
From an intraday high of 11,483 on October 19, 2008 to an intraday low of 7,882 on October 10, 2008. The following is a rundown of the significant events in the United States throughout the course of this momentous three-week period.
How long did the economy take to recover after the financial crisis of 2008?
Only in the calendar year 2009 did the Great Recession meet the IMF’s criteria for being a worldwide recession. According to the IMF, a decrease in yearly real world GDP per capita is required. Despite the fact that all G20 countries, accounting for 85 percent of global GDP, utilize quarterly GDP data to define recessions, the International Monetary Fund (IMF) has chosen not to declare or quantify global recessions based on quarterly GDP data in the absence of a complete data set. The seasonally adjusted PPPweighted real GDP for the G20zone, on the other hand, is a good predictor of global GDP, and it was measured to have declined directly quarter on quarter over the three quarters from Q3 2008 to Q1 2009, which more properly marks when the global recession began.
The recession began in December 2007 and ended in June 2009, according to the National Bureau of Economic Research (the official judge of US recessions). It lasted eighteen months.
What caused the Great Depression to end?
With the stock market crash in October 1929 and the ensuing Great Depression, the 1920s’ widespread affluence came to an abrupt end. People’s jobs, savings, and even their houses and farms were all threatened by the Great Depression. Over a quarter of the American workforce was unemployed during the Great Depression. These were trying days for many Americans.
The first two terms of Franklin Delano Roosevelt’s administration, known as the New Deal, were a moment of hope and optimism. Despite the fact that the Great Depression persisted throughout the New Deal period, the darkest days of misery appeared to have passed. This was partly due to FDR’s own actions. FDR stated his “strong confidence that the only thing we have to dread is fear itselfnameless, unreasoning, unjustified horror” in his first inaugural address. FDR was regarded as a strong leader by the majority of Americans.
The economic problems of the 1930s had a global extent and impact. In many places of the world, economic instability has resulted in political instability. As a result of the political chaos, dictatorial regimes such as Adolf Hitler’s in Germany and the military’s in Japan arose. (The Soviet Union and Italy had totalitarian regimes prior to the Great Depression.) In the 1930s, these regimes drew the world closer to war. When World War I eventually broke out in Europe and Asia, the United States wanted to stay out of the battle. But a country as powerful and influential as the United States could hardly stay out of it for long.
When Japan attacked the US Naval station at Pearl Harbor, Hawaii, on December 7, 1941, the US was thrust into a conflict it had hoped to avoid for more than two years. The depression was finally healed by mobilizing the economy for World War I. Millions of men and women enlisted in the military, and countless more went to work in well-paying defense positions. World War II had a major impact on the world and the United States, and it continues to do so now.
Is it possible for another Great Depression to occur?
The 12-year Great Depression in America began with a crash 72 years ago. On October 24, 1929, the stock market bottomed out, indicating the start of the country’s longest and severe economic downturn. Everyone wants to know if a crash may happen again given that we are in an economic downturn.
Many industries in Washington state were shaken on October 24, dubbed “Black Thursday.” Although the disaster did not have the same impact on Washington as it did on other states, the consequences of the downturn and various government actions hurt certain sectors substantially.
After the 1929 Federal Reserve-industry catastrophe, unemployment in the United States skyrocketed. In the 1930s, the government’s ballooning taxes and regulations left the country entrenched in economic hardship.
Wheat prices in Washington had decreased to.38 cents per bushel by 1932, from $1.83 in the early 1920s. By 1935, the value of Washington farmland and buildings had decreased from $920 million to $551 million, despite a 300 percent increase in county debt statewide and a 36 percent drop in payrolls.
The state’s lumber industry was particularly heavily damaged by the economic downturn. Between 1929 and 1932, per capita lumber consumption in the United States fell by two-thirds. Washington’s annual lumber production fell from 7.3 billion feet to 2.2 billion feet during the same time period. By the end of 1931, at least half of mill workers had lost their jobs.
The Roosevelt administration’s measures accomplished little to boost the lumber business. Individual industries were subjected to tight production limitations and price controls under the National Industrial Recovery Act (NIRA) of 1933. Before the Act was declared unlawful in 1935, it barred the construction of new sawmills and limited individual operators to a set quota of production. More sawmills were erected as a result of failed federal monitoring, and total production per firm declined.
One part of the NIRA significantly increased big labor’s organizing strength and required managers to bargain with unions. Historians now consider the implementation of New Deal measures in the Pacific Northwest as a direct result of the solidification of Washington’s labor movement.
Is it possible for another Great Depression to occur? Perhaps, but it would require a recurrence of the bipartisan and disastrously dumb policies of the 1920s and 1930s.
Economists now know, for the most part, that the stock market did not trigger the 1929 crisis. It was a symptom of the country’s money supply’s extraordinarily unpredictable changes. The Federal Reserve System was the main culprit, having sparked a boom in the early 1920s with ultra-low interest rates and easy money. By 1929, the central bank had raised rates so high that the boom had been choked off, and the money supply had been reduced by one-third between 1929 and 1933.
A recession was turned into a Great Depression by Congress in 1930. It slashed tariffs to the point where imports and exports were effectively shut down. In 1932, it quadrupled income tax rates. Franklin D. Roosevelt, who ran on a platform of less government, gave America far more than he promised. His “New Deal” increased taxes (he once proposed a tax rate of 99.5 percent on incomes above $100,000), penalized investment, and suffocated business with regulations and red tape.
Washington, like all states, is subject to the whims of federal policymakers. And the recipe for economic depression remains the same: suffocating market freedom, crushing incentives with high tax rates, and overwhelming firms with suffocating regulations.
The 1929 stock market crash and the accompanying Great Depression are worth remembering not just because they caused so much suffering in Washington and abroad, but also because, as philosopher George Santayana warned, “Those who cannot recall history are destined to repeat it.”
Lawrence W. Reed is the director of Michigan’s Mackinac Center for Public Policy and an adjunct scholar at Seattle’s Washington Policy Center. Jason Smosna, a WPC researcher, contributed to this commentary.
Was the 2008 recession ever fully recovered?
Although the recession ended in the second quarter of 2009, the economy of the United States remained in “economic malaise” in the second quarter of 2011. The post-recession years have been dubbed the “weakest recovery” since the Great Depression and World War II, according to some experts. One analyst dubbed the sluggish recovery a “Zombie Economy,” because it was neither dead nor living. Household incomes continued to decline after the recession ended in August 2012, falling 7.2 percent below the December 2007 level. Furthermore, long-term unemployment reached its highest level since World War II in September 2012, while the unemployment rate peaked many months after the crisis ended (10.1 percent in October 2009) and remained above 8% until September 2012. (7.8 percent ). From December 2008 to December 2015, the Federal Reserve kept interest rates at a historically low 0.25 percent, before starting to raise them again.
The Great Recession, however, was distinct from all previous recessions in that it included a banking crisis and the de-leveraging (debt reduction) of highly indebted people. According to research, recovery from financial crises can take a long time, with long periods of high unemployment and poor economic development. In August 2011, economist Carmen Reinhart stated: “It takes around seven years to deleverage your debt… And you tend to expand by 1 to 1.5 percentage points less in the decade after a catastrophic financial crisis, since the previous decade was powered by a boom in private borrowing, and not all of that growth was real. After a dip, the unemployment figures in advanced economies are likewise pretty bleak. Unemployment is still around five percentage points higher than it was a decade ago.”
Several of the economic headwinds that hindered the recovery were explained by then-Fed Chair Ben Bernanke in November 2012:
- Because the housing sector was seriously harmed during the crisis, it did not recover as it had in previous recessions. Due to a huge number of foreclosures, there was a large excess of properties, and consumers preferred to pay down their loans rather than buy homes.
- As banks paid down their obligations, credit for borrowing and spending by individuals (or investing by firms) was scarce.
- Following initial stimulus attempts, government expenditure restraint (i.e. austerity) was unable to counteract private sector shortcomings.
For example, federal expenditure in the United States increased from 19.1 percent of GDP in fiscal year (FY) 2007 to 24.4 percent in FY2009 (President Bush’s final budget year), before declining to 20.4 percent GDP in 2014, closer to the historical average. Despite a historical trend of an approximately 5% annual increase, government spending was significantly higher in 2009 than it was in 2014. Between Q3 2010 and Q2 2014, this slowed real GDP growth by about 0.5 percent per quarter on average. It was a recipe for a delayed recovery if both people and the government practiced austerity at the same time.
Several key economic variables (e.g., job level, real GDP per capita, stock market, and household net worth) reached their lowest point (trough) in 2009 or 2010, after which they began to rise, recovering to pre-recession (2007) levels between late 2012 and May 2014 (close to Reinhart’s prediction), indicating that all jobs lost during the recession were recovered. In 2012, real median household income hit a low of $53,331 before rising to an all-time high of $59,039 by 2016. The gains made during the recovery, on the other hand, were extremely unequally distributed. According to economist Emmanuel Saez, from 2009 to 2015, the top 1% of families accounted for 52% of total real income (GDP) increase per family. Following the tax increases on higher-income individuals in 2013, the gains were more fairly divided. According to the Federal Reserve, median household net worth peaked around $140,000 in 2007, dropped to $84,000 in 2013, and only partially recovered to $97,000 in 2016. When the housing bubble burst, middle-class families lost a large portion of their wealth, contributing to most of the downturn.
In the years following the Great Recession (20082012), the growth of healthcare costs in the United States declined. At this time, the rate of rise in aggregate hospital costs was slowed due to lower inflation and fewer hospital stays per population. Surgical stays slowed the most, whereas maternal and neonatal stays slowed the least.
As of December 2014, President Obama pronounced the rescue actions that began under the Bush Administration and continued under his Administration to be completed and generally beneficial. When interest on loans is taken into account, the government had fully recovered bailout monies as of January 2018. Various rescue initiatives resulted in a total of $626 billion being invested, borrowed, or awarded, with $390 billion being repaid to the Treasury. The Treasury has made a profit of $87 billion by earning another $323 billion in interest on rescue loans.
Who is responsible for the 2008 Great Recession?
The Lenders are the main perpetrators. The mortgage originators and lenders bear the brunt of the blame. That’s because they’re the ones that started the difficulties in the first place. After all, it was the lenders who made loans to persons with bad credit and a high chance of default. 7 This is why it happened.