1980's Economic Failure

Regardless of the current economic strength, the United States government has failed its citizens repeatedly, which has led to some major economic downfalls in the past. Some of these failures include The Great Depression, the 1981 Recession, and the Great Recession of 2007-2009. The Great Depression was a worldwide economic catastrophe that caused unemployment rates to surge and pushed economic production rates to fail. The early 1980s recession was marked by astronomical interest rates, accompanied by high unemployment and the rising cost of living. The sharp decline in the economy that was considered the most significant failure since the Great Depression came to be known as the Great Recession, also called the Recession of 2007-2009. The

three government failures that have led to major economic problems have been over-speculation, rising inflation, and overextended credit.
The Great Depression was the largest economic failure in American history. This tragedy lasted over ten years and was caused by over-speculation in the stock market, which ultimately led to the stock market crash in October 1929. Investors engaged in especially risky transactions that involved considerable risks, but offered the chance of large gains. These people held the hope of making large profits from changes in market price. This was not regulated and is ultimately the governmental failure that led to the Great Depression.
Moreover, after the six-years of a successful bull market on Wall Street, the stock market came to a grinding halt on a day that came to be known as Black Tuesday. Black Tuesday sent Wall Street into a panic and wiped out millions of investors. Consumer spending and investment dropped, causing steep declines in industrial output and employment as failing companies laid off employees. Unemployment surged to 25 percent; the highest it has been in history. By 1933, when the Great Depression reached its lowest point, around 15 million Americans were unemployed. The government's overall neglect and the increased tariffs on imported goods made this issue no better. The amount of imported goods was rapidly decreasing and a drought in the Midwest hurt economic production even further. Economic production flattened by a total of 50 percent during this time, the main cause being the Smoot-Hawley Tariff which raised tariffs on imported goods to record levels in 1930. Nearly half the country’s banks failed by 1939. The Great Depression eventually ended and due to the sharp reductions in spending, taxes, and regulation following World War II, prosperity was restored.
The recession of the early 1980’s was an economic downfall lasting approximately 1.5 years and was caused by remarkable inflation accompanied by rapid tightening of monetary policy.

Prior to the 2007-2009 recession, the 1981-82 recession was the worst economic downturn in the United States since the Great Depression. Rising inflation of the U.S. dollar of the 1970s resulted in the tightened monetary policy from the Federal Reserve, while regime change in Iran led to rising oil prices. By the early 1980s, the United States found itself with falling inflation from before, but still rising unemployment. Unemployment grew from 7.4 percent at the start of the recession to nearly 10 percent a year later. The unemployment rate reached nearly 11 percent late in 1982. This was the apex of the unemployment rate of the post-World War II era.

The commitment of Paul Volcker, an American economist, and his successors to aggressively targeting price stability helped ensure that the double-digit inflation of the 1980s would not happen again. By the end of 1982, inflation fell from 11 to 5 percent. Unemployment also declined from 11 to 8%. A gradual loosening of monetary policy as well as the tax cuts and defense spending increases promoted a sustained yet uneven

recovery.
The Great Recession of 2007-2009 was the largest economic failure since the Great Depression and was caused by overextended credit and astoundingly high mortgages. This recession began with the bursting of an 8 trillion dollar housing bubble. Home prices dropped approximately 30 percent. The net worth of US households and nonprofit organizations fell from a peak of approximately $69 trillion in 2007 to a trough of $55 trillion in 2009. The bursting of the housing bubble and the drop in the stock market meant that family wealth tumbled dramatically. Not only that, but poverty had risen, and adults as well as children lost health insurance.
In 2008 and 2009, the U.S. labor market lost 8.4 million jobs, or 6.1% of all payroll employment. This was the most dramatic employment contraction of any recession since the Great Depression. By comparison, the 1981 Recession job loss was 3.1%, or only about half as severe. Even after the economy stopped contracting in the summer of 2009, its growth had not been nearly strong enough to create the jobs needed simply to keep pace with normal population growth, let alone put back to work the backlog of workers who lost their jobs during the collapse. The unemployment rate, which was 5 percent in December 2007, rose to 9.5 percent in June 2009, and peaked at 10 percent in October 2009. In October 2010, 16 months after the official end of the recession, the economy still had 5.4% fewer jobs than it did before the recession started. Thus, the Great Recession had brought the worst of both worlds: extraordinarily severe job loss and an extremely drawn out recovery.
The three main government failures that have led to enormous economic problems have been over-speculation, rising inflation, and overextended credit. The three tragedies I covered were The Great Depression, the 1981 Recession, and the Great Recession of 2007-2009. The Great Depression was an economic disaster that caused worldwide panic, high unemployment rates, and extremely low economic production rates. The 1981 recession had booming interest rates, more unemployment, and an overall unattainably high cost of living. Now named the most significant economic downfall since the Great Depression, the Great Recession of 2007-2009 was an intense decline in the United States economy. Although the economy is much more stable today, learning about the governments past failures that have caused economy crashes is the key to preventing future downfalls.