The economic history of the United States has been marked by a series of booms, inevitably followed by corrections called recessions. The most serious recesssions are called depressions. The earliest recessions are not well documented. The Government at the time did not keep detailed ecomomic records such as unemployment and gross national production. And of course employment in the largely rural economy of the early-19th century had less meaning than employment today. The terms recession and depression were mot yet used and thus contemprary accounts often did discuss the events in a way that makes it easy for historians and econmists to sketch out the events. Many early recessions resulted from financial and banling panics. As a result, historians disagree as to the number and details (duration and extent) of the recessions that have taken place. There have been roughly 45-50 recessioins and depressions since the ratificatioin of the Federal Constitution (1789). These economic events are caused by fluctuations in business and agricultural cycles, wars, governent policy (regulatory, fiscal, trade and monetary), and the banking industry. President Jackson's desecision to destroy the Bank of the United States resulted in one of the most serious financial crisis of the 19th century. The Panic of 1837 caused a sharp economic decline resulting in wide spread bank failures. Econiomic tranactions were frozen because of lack of faith in paper currency. Bnks stopped payment in specie (gold and silver coinage). Ecomists estimate that iover 600 banks failed. The cotton marke imploded in the South. The result was the Depression of 1839–43. The Panic of 1893 led to another Depression which affected the economy throughout much of the 1890s. American recessions during the 19th century were primarily local matters of national interest. With the growth of the American economy during the 19th century, American fluctuations could have serious consequences in trading partners. The early 20th century was an era of tremendous economic growth. A serious contraction followed World War I, but except in rural areas was of short duration. The Wall Street Crash of 1929 not only led to the Great Depression--a world-wide depression and the greatest economic crisis in history. Many Americans by the 21st century had come to the conclusion that depressions were an phenomenon of the past and that government and industry had the academic and financial ability to prevent anoyther great depression. The 2007-09 financial crisis has proven to be the most severe economic crisis since the Great Depression.
We do not have information on the colonial period. The Revolutionary War (1775-83) caised considerable disruption and destruction, advesely affecting economic activity. The questionable fiscal policies of Congress and the different state governments and the paper currency they issued also affected economic activity. The new Federal Constitution created a Federal Government with the authority to regulate and promote economic activity. Congress chartered the First Bank of the United States to privide some stability to national finances (1791). The Bank was in some sence a central bank, although a weak one. It was responsible for only 20 percent circulating in the 1790s.
The Bubble of 1792 was the first financial crisis of the American Republic. It resulted from speculation in bank stocks. At the time individuals could found banks without any government regulation. As a result many banks were founded without real assetts or proper management. Banks did have to be chartered by Congress or state legislatures, but this did not mean that they were regulated by eith Federal or state authirities. One of Treasury Secretary Hamilton's friends, William Dewer, was deeply involved. After heated speculation the bubble burst. Secretary Hamilton's response was to buy bank stock with Frderal money, in effect to inject liquidity into the system. This may sound suspicioually like TARP and Secretary Paulson's resonse to the 2008 financial crisis and it indeed was. Secretary Hamilton did not bail out individuals, even his friend Dewer. He did, however, act to save the financial system, The developing political partisans had very different views of the crisis. Hamilton saw speculation as an inescapable, price for a dynamic economic system. The Republicans like Jefferson and Madison saw it as the trapongs of an evil system. As a result of Hamilton's actionss, there was no large scale finncial collapse.
The Panic of 1797 had two divergent causes. First land speculators drove up prices. Just as this bubble began to burst economic problems in England began to affect the United States, especially the more commercially oriented northern states. The French Revolution (1789) led to war in Europe which Britain with brief exceptions would persue until Waterloo. The costs of the wars was enormous. The Bank of England felt the impact early on as was close to insolvency because of the cost of the wars (1797). Despite the Revolution, the Bank of England still had enormous influence on the Amnerican economy. And its financial pronlems affected the business climate in the Unites States as well as British colonies, including the Caribbean colonies which also did business with the United States. As a result, commercial and real estate markets in the United States were disrupted. The result was a major financial panic, mych larger than the Buble of 1792, largely because of the importance of the Bank of England. The northern states were affected for 3 years. The southern states were less affected because as a result of the Napoleonic Wars, the demand for agricultural products remained strong. At the same time, the Quasi Naval War broke out with France.
Most of the population in the 19th century lived in rural areas on largely self-sufficent farms, recesions were thus of only limited impact. This gradually changed as the ecomomy became more urbanized and industrialized. The Napoleonic Wars raged in Europe at the time the young American Republic entered the 19th century. This created both opportunities and problems for the new American Republic. America remained neutral, but there were still enormous economic consequences. One American policy response was to prohibit trade with the European beligerants which caused a depression, especially in New England. The charter of the First Bank of the United States expired (1811). Congress chartered the Second Bank of the United states (1816). President Jackson's decision to destroy the Bank resulted in one of the most serious financial crisis of the 19th century. The Panic of 1837 caused a sharp economic decline resulting in wide spread bank failures. Econiomic tranactions were frozen because of lack of faith in paper currency, at the time issued by banks. Banks stopped payment in specie (gold and silver coinage). Ecomists estimate that over 600 banks failed. The cotton market imploded in the South. The result was the Depression of 1839–43. There was a serious post-Civil War financial panic (The Panic of 1893 led to another Depression which affected the economy throughout much of the 1890s. America ended the 19th century with a very sophisticated, industrial economy, but still without a central babk.
American recessions during the 19th century were primarily local matters of national interest. With the growth of the American economy during the 19th century, American economic fluctuations could have serious consequences in trading partners. The early 20th century was an era of tremendous economic growth. A serious contraction followed World War I, but except in rural areas was of short duration. The Wall Street Crash of 1929 not only led to the Great Depression--a world-wide depression and the greatest economic crisis in history. The Depression lasted 10 years in America. President Roosevelt's New Deal attempted Kensean stimulus to no avail. President Roosevelt's actions to save the banks abd take the United States off the gold standard prevented any further economic decline. Economic recovery, however, proved elusive. Economists debate whether the New Deal helped end or prolonged the Depression. Some economists believe that stimulus was ended too soon even though it had been 5 years (1937). Other economiosts maintain that the Government spending and tax ibcreased prolonged the Depression. Finally arms orders from Europe helped end the Depression (1939-40). A series of recessions occurred after World War II of varying intensity, most relatively short lasting.
Many Americans by the 21st century had come to the conclusion that depressions were an phenomenon of the past and that government and industry had the academic and financial ability to prevent anoyther great depression. The 2007-09 financial crisis has proven to be the most severe economic crisis since the Great Depression. Tragically for Americams too many politicans wanto use ideology for policy perscriptions rather honestly trying to assessing the actual cause of the economic down turns.
The world economy experienced a mild ecinomic downturn after the rurn-of-the 20th cebtury. This varoes widely from country to country ans with different time lines. This was was aownturn felt primarily in the developing countris in sharp contrast to the 1997 Asian finncial crisis. Europe was the region most affected (2000-01). The United States followed with a milder down turn (2002-03). One of the most notable event was the dot-com bubble bursting. Britain managed to avoid the donturn. So did Canada and Australia, primarily because commodity markets were so strong. Australia benefitted from string demand for raw materials in China. Canada bebfited from strong oil prives. Russi also benefitted from international demand for oil. Russia experienced finncil priblems adjusting to the fall of Communism (1990s) began to recover on the back raw matrial exports, especilly oil and gas. Japan's which experinced a recession througout the 1990s was still unavle to recive its economy. The early-2000s recession was one tht was predictd by economists in part because the 90s had been an era of strong economic growth, along with low inflation and low unemployment. The Early-2000s recession wasn't as sharp as either of the two previous worldwide recessions. Some American economists even refused to characterize it as a recession because there were not the needed two consecutive quarters of negative economic growth.
One of the most evere recesion in moder times was the American down turn (2007-08). Europe experienced a similar diwn turn. Emerging markets were not as affected, in parr because of policies put in place as a result of the 1997 Financial Crisis. In addition, the demand for raw materials remained strong becase of China's booming economy. The diwnturn in America was caused by a series of earlier policy shifts. Democratic liberals complained that poor people did not have access to home loans and pressured banls to make more loans to poor people. This process was begun by President Carter.
Congress passed the Community Reinvestment Act (CRA) (1977). The purpose was encourage banks to halt was describd as lending discrimination. This was a problem, but over time the program evolved into loans to people with marginal finances. The Clinton Administration issued regulations that established numerical guidelines (995), puting more pressure on banks. Congress passed the related Housing and Community Development Act (1992). We begin to see sub-prime mortgages becomong a standard mecganism for financing home purchases. This established, for the first time, an affordable housing loan purchase mandate for Fannie Mae and Freddie Mac. The policy of making loans with limited or no documentation was promoted by the Department of Housing and Urban Development (HUD). The Republicans also promoyed unwise steps. The Finamcial Services Modernization Act (1999) ended the separation of banking and onvestment. The Commoidity Futures Modernizationn Act (2000) made what proved to be risky derivitives possible. hi included the packaging of sund-prime loans that proved to be be worthless. The problem spread to Europe where the strains of over-spending and regulation was increasingly desstablizing national economies. High oil prices and large trade defects with China were also factors in the United States and Europe.
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