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Prior to the 2007-09 recession, the 1981-82 recession was the worst economic downturn in the United States since the Great Depression.

--Nearly 11 percent unemployment rate reached late in 1982 remains the apex of the post-World War II era (Federal Reserve Bank of St. Louis).
--Although goods producers accounted for only 30 percent of total employment at the time, they suffered 90 percent of job losses in 1982.
--Residential construction industry and auto manufacturers ended the year with 22 percent and 24 percent unemployment, respectively

Between 1980 and 1981, inflation was at 14% and the Fed raised interest rates to 19%. This caused a severe recession.

"Both the 1980 and 1981-82 recessions were triggered by tight monetary policy in an effort to fight mounting inflation… In the 1970s, the Fed pursued what economists would call “stop-go” monetary policy… [which] proved unstable in the long-run, as inflation …increased … in the mid-1970s… reaching 11 percent in June 1979"

In 1982, as the recession grew worse, the Fed ignored strong public and congressional pressure to reduce the rate.

By October 1982, less than a year after the Fed increased the rate to 19%, inflation was back to 5% and unemployment reduced with reduced inflation, going back below 10% by 1983.

https://www.federalreservehistory.org/essays/recession-of-1981-82#:~:text=Prior%20to%20the%202007-09%20recession%2C%20the%201981-82%20recession,II%20era%20%28Federal%20Reserve%20Bank%20of%20St.%20Louis%29.

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Prior to the 2007-09 recession, the 1981-82 recession was the worst economic downturn in the United States since the Great Depression. Indeed, the nearly 11 percent unemployment rate reached late in 1982 remains the apex of the post-World War II era (Federal Reserve Bank of St. Louis). Unemployment during the 1981-82 recession was widespread, but manufacturing, construction, and the auto industries were particularly affected. Although goods producers accounted for only 30 percent of total employment at the time, they suffered 90 percent of job losses in 1982. Three-fourths of all job losses in the goods-producing sector were in manufacturing, and the residential construction industry and auto manufacturers ended the year with 22 percent and 24 percent unemployment, respectively (Urquhart and Hewson 1983, 4-7).

The economy was already in weak shape coming into the downturn, as a recession in 1980 had left unemployment at about 7.5 percent. Both the 1980 and 1981-82 recessions were triggered by tight monetary policy in an effort to fight mounting inflation. During the 1960s and 1970s, economists and policymakers believed that they could lower unemployment through higher inflation, a tradeoff known as the Phillips Curve. In the 1970s, the Fed pursued what economists would call "stop-go" monetary policy, which alternated between fighting high unemployment and high inflation. During the "go" periods, the Fed lowered interest rates to loosen the money supply and target lower unemployment. During the "stop" periods, when inflation mounted, the Fed would raise interest rates to reduce inflationary pressure. However, the Phillips Curve tradeoff proved unstable in the long-run, as inflation and unemployment increased together in the mid-1970s. While unemployment trended down slightly by the end of the decade, inflation continued to rise, reaching 11 percent in June 1979 (Federal Reserve Bank of St. Louis).

Paul Volcker was appointed chairman of the Fed in August 1979 in large part because of his anti-inflation views. He had previously served as president of the New York Fed and had dissented from Fed policies he regarded as contributing to inflation expectations. He felt strongly that mounting inflation should be the primary concern for the Fed: "In terms of economic stability in the future, [inflation] is what is likely to give us the most problems and create the biggest recession" (FOMC transcript 1979, 16). He also believed that the Fed faced a credibility problem when it came to keeping inflation in check. During the previous decade, the Fed had demonstrated that it did not place much emphasis on maintaining low inflation, and public expectation of such continued behavior would make it increasingly difficult for the Fed to bring inflation down. "[F]ailure to carry through now in the fight on inflation will only make any subsequent effort more difficult," he remarked (Volcker 1981b).

Chairman of the Federal Reserve Board of Governors Paul Volcker holds his head in his hand at a meeting in Washington, D.C.(Photo: Bettmann/Bettmann/Getty Images)

Volcker shifted Fed policy to aggressively target the money supply rather than interest rates. He took this approach for two reasons. First, mounting inflation made it difficult to know which interest rates targets were appropriately tight. While the nominal rates the Fed targeted could be quite high, the real interest rates (that is, the effective interest rates after adjusting for inflation) could still be quite low due to the expectation of inflation. Second, the new policy was meant to signal to the public that the Fed was serious about low inflation. The expectation of low inflation was important, as current inflation is driven in part by expectations of future inflation.

Volcker's first attempt to lower inflation and inflationary expectations proved insufficient. The credit-control program initiated in March 1980 by the Carter administration precipitated a sharp recession (Schreft 1990). As unemployment mounted, the Fed eased up, an action reminiscent of the "stop-go" policies the public had come to expect. In late 1980 and early 1981, the Fed once again tightened the money supply, allowing the federal funds rate to approach 20 percent. Despite this, long-run interest rates continued to rise. The ten-year Treasury bond rate increased from about 11 percent in October 1980 to more than 15 percent a year later, possibly because the market believed the Fed would back down from its tight policy when unemployment rose (Goodfriend and King 2005). This time, however, Volcker was adamant that the Fed not back down: "We have set our course to restrain growth in money and credit. We mean to stick with it" (Volcker 1981a).

The economy officially entered a recession in the third quarter of 1981, as high interest rates put pressure on sectors of the economy reliant on borrowing, like manufacturing and construction. Unemployment grew from 7.4 percent at the start of the recession to nearly 10 percent a year later. As the recession worsened, Volcker faced repeated calls from Congress to loosen monetary policy, but he maintained that failing to bring down long-run inflation expectations now would result in "more serious economic circumstances over a much longer period of time" (Monetary Policy Report 1982, 67).

Ultimately, this persistence paid off. By October 1982, inflation had fallen to 5 percent and long-run interest rates began to decline. The Fed allowed the federal funds rate to fall back to 9 percent, and unemployment declined quickly from the peak of nearly 11 percent at the end to 1982 to 8 percent one year later (Federal Reserve Bank of St. Louis; Goodfriend and King 2005). The threat of inflation was not completely gone, as the Fed would face a number of "inflation scares" throughout the 1980s. However, the commitment of Volcker and his successors to aggressively targeting price stability helped ensure that the double-digit inflation of the 1970s would not return.

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Prior to the 2007-09 recession, the 1981-82 recession was the worst economic downturn in the United States since the Great Depression. Indeed, the nearly 11 percent unemployment rate reached late in 1982 remains the apex of the post-World War II era (Federal Reserve Bank of St. Louis).

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•With low rates (1.25%) starting in 2002, adjustable-rate mortgage loans had very low rates

•Many homeowners took loans with rates matched to the Fed rate.

•When there was too much investment, the Fed raised the rate to 5.25% in 2006
•When the rate raised, many home-owners could not pay their mortgage.

•They also could not sell their houses to pay the loan because of low demand.

•Banks started losing a lot of money

Fed Response:
1. Rate reduced to 0.25%

2. Quantitative Easing: The Fed began buying $500 billion in mortgage-backed securities and $100 billion in other debt.

3. By June 2010, the Fed's portfolio had expanded to $2.1 trillion.

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•In 1907, one bad bet by 2 stock traders led to a few banks losing a lot of money

•Scared, people tried to take their money out of banks.

•The banks didn’t have enough money, and had to close.

•Millions of dollars disappeared when the banks closed.

•The government had no way to directly help so they called JP Morgan.

•JP Morgan used his own money to save the banks he wanted to save and let others die.

•The economy was fixed, and JP Morgan had direct or indirect control of 80% of the wealth on the New York Stock Exchange.

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a general increase in prices and fall in the purchasing value of money

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A situation in which some financial assets suddenly lose a large part of their nominal value.

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A situation in which many clients withdraw their money from a bank within a short period of time.

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Real paper money that must be kept by the bank in a vault on-site or held in its account at the central bank

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Interest On Reserve Balances (IORB) (Fed Interest Rate)

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Interest On Reserve Balances (IORB) (Fed Interest Rate)

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The rate of interest that is paid by the Federal Reserve on balances maintained by or on behalf of eligible institutions in master accounts at Federal Reserve Banks

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Pro: Without the Fed, the government had to rely on private interests to save the economy

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Pro: Without the Fed, the government had to rely on private interests to save the economy

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The Panic of 1907 was created by wealthy bankers, then solved by other wealthy bankers. When this happens, the government is at the mercy of the wealthy. Those people will care more about getting rich than helping the citizens of the country who are hurt by the economic crisis.

We saw that JP Morgan could have stopped the crisis at the start by backing the banks and trust companies that were run on, such as the Knickerbocker Trust. However, he chose not to because letting some banks fail helped him increase his own wealth through his preferred banks.

Now, the Fed can step in to stop these crises as quickly as possible and with the only goal being to help the economy of the whole country.

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Pro: Without the Fed, banks can take big risks without the knowledge of their clients, leading to increased instability in the system

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Pro: Without the Fed, banks can take big risks without the knowledge of their clients, leading to increased instability in the system

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The Panic of 1907 (and several financial crises in the 1800s) happened because banks did not keep enough money available for withdrawals. Also, people could not see banks' accounts so it was easy for rumors to spread that made people scared of what their bank was doing. Therefore trust was low in the system and bank runs were common.

The fed requires banks to keep a certain amount of money available in reserve to prevent runs. Also, if a run happens, the fed will support member banks so they do not fail. Finally, the fed requires member banks to make yearly reports on activities so that their activities are transparent. All of this increases stability and trust in the banking system.

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Con: Without the Fed, weak banks will fail, which makes the system healthier in the long term.

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Con: Without the Fed, weak banks will fail, which makes the system healthier in the long term.

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If a bank is not performing well, then private institutions like a charter house or private investors like JP Morgan will let the bank fail, leaving the system stronger in the long term. On the other hand, the Fed will try to save those banks, which leads to more serious problems later.

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Con: Without the Fed, there are alternatives that can do most of the work the Fed does. These private alternatives do not waste tax-payer money.

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Con: Without the Fed, there are alternatives that can do most of the work the Fed does. These private alternatives do not waste tax-payer money.

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Before the Fed, the New York Clearing House played the role of the Fed in requiring its members to have enough reserves. They encouraged good behavior from banks without wasting taxpayer dollars supporting wealthy banks.

The Panic of 1907 was caused by banks and trusts that were not members of the Clearing House,

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Pro: Before the Fed, there were 9 banking crises in 100 years, after the Fed, there were 2 banking crises in 100 years.

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Pro: Before the Fed, there were 9 banking crises in 100 years, after the Fed, there were 2 banking crises in 100 years.

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The role of the fed is to prevent financial crises. Although there were other factors, they definitely became less serious after the Fed was created.

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Pro: Before the Fed, economic crises routinely lasted over 1 year. After the Fed, economic crises usually lasted less than 1 year

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Pro: Before the Fed, economic crises routinely lasted over 1 year. After the Fed, economic crises usually lasted less than 1 year

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Policy in which a central bank, like the U.S. Federal Reserve, purchases securities from the open market to reduce interest rates and increase the money supply.

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The savings and loan crisis was the build-up and extended deflation of a real-estate lending bubble in the United States from the early 1980s to the early 1990s.

The S&L crisis culminated in the collapse of hundreds of savings & loan institutions and the insolvency of the Federal Savings and Loan Insurance Corporation, which cost taxpayers many billions of dollars and contributed to the recession of 1990–91.

The roots of the S&L crisis lay in excessive lending, speculation, and risk-taking driven by the moral hazard created by deregulation and taxpayer bailout guarantees.

Some S&Ls led to outright fraud among insiders and some of these S&Ls knew of—and allowed—such fraudulent transactions to happen.

As a result of the S&L crisis, Congress passed the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), which amounted to a vast revamp of S&L industry regulations.

https://www.investopedia.com/terms/s/sl-crisis.asp

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The Great Depression began in August 1929, when the economic expansion of the Roaring Twenties came to an end.

A series of financial crises punctuated the contraction. These crises included:
- a stock market crash in 1929
- a series of regional banking panics in 1930 and 1931
- a series of national and international financial crises from 1931 through 1933.

The downturn hit bottom in March 1933, when the commercial banking system collapsed and President Roosevelt declared a national banking holiday.

Sweeping reforms of the financial system accompanied the economic recovery, which was interrupted by a double-dip recession in 1937.

Return to full output and employment occurred during the Second World War.

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In the late 1960s, the US government spent a large amount of money on a social program called the War on Poverty and on the Vietnam War. At the same time, conflict in the Middle East led to Oil prices raising very quickly. To make the situation worse, at the start of the 1970s, the US removed the US Dollar from the gold standard, leaving it as a fiat currency.

Soaring energy prices fueled a wage-cost price spiral and widespread price hikes across the full spectrum of economic activity. Annual inflation as measured by change in the consumer price index (CPI) peaked at 13.5% in 1980.
2 Unemployment was also high by the standards of the two prior decades, and growth uneven; the economy was in recession from December 1969 to November 1970, and again from November 1973 to March 1975.

When not in a recession, the economy often grew at annual rates it has seldom mustered since, with real Gross Domestic Product (GDP) growth above 5% in 1972-73 and mostly above 5% in 1976-78, ahead of oil price shocks that would curb growth while fueling inflation.

High inflation and uneven economic performance still soured the national mood. In November 1979, only 19% of Americans were satisfied with the way things were going in the U.S.

https://www.investopedia.com/articles/economics/08/1970-stagflation.asp

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•In 1999-2000, internet companies and computer technology saw huge interest from investors

•In 2000, the Fed raised its rate to stop the economy from growing too fast, which was leading to inflation.

•Post-Y2K and post 9/11, investment slowed greatly, leading to a recession

•The Fed responded by cutting the rate to 1.25% by November 2002

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Great Depression Statistics and Fed Response

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Great Depression Statistics and Fed Response

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GDP: 45% drop
Unemployment 24.9% in 1933 (8x 1929 rate)
Dow Jones (Stock Market) 90% decline
Money Supply fell 30%

Fed Raised the rate in 1929, which deepened the depression, then raised rates again in 1932, which deepened the depression.

https://www.federalreservehistory.org/essays/great-depression

https://www.shmoop.com/great-depression/statistics.html.#:~:text=By%20the%20Numbers%201%20The%20Economy%20During%20the,7%20Family%20Life%20During%20the%20Great%20Depression%20

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The Economy During the Great Depression

U.S. Gross Domestic Product (current dollars) During the Great Crash, 1929-1933
1929: $103.6 billion
1930: $91.2 billion
1931: $76.5 billion
1932: $58.7 billion
1933: $56.4 billion

New Deal Recovery and Recession, 1934-1939
1934: $66.0 billion
1935: $73.3 billion
1936: $83.8 billion
1937: $91.9 billion
1938: $86.1 billion
1939: $92.2 billion

Mobilization for WWII, 1940-1945
1940: $101.4 billion
1941: $126.7 billion
1942: $161.9 billion
1943: $198.6 billion
1944: $219.8 billion
1945: $223.1 billion

The overall size of the American economy, measured by gross domestic product, sharply declined following the crash on Wall Street-from $103.6 billion in 1929 to $66 billion in 1934. The economic recovery of 1933 to 1937, among the most dramatic in U.S. history, saw double-digit annual gains, although a tax increase and cutback in government spending in 1937 threw the economy back into recession. Complete recovery from the economic misery of the Great Depression only arrived after 1940, when mobilization for World War II caused a huge increase in industrial production. Between 1940 and 1945, GDP more than doubled in current dollars.

Growth of Government During the Great Depression

Government Expenditures and Investments (current dollars) During the Hoover Administration, 1929-1939
1929: $9.4 billion
1930: $10.0 billion
1931: $9.9 billion
1932: $8.7 billion

Average government spending as percentage of GDP, 1929-1932: 12.0%

Roosevelt's New Deal
1933: $8.7 billion
1934: $10.5 billion
1935: $10.9 billion
1936: $13.1 billion
1937: $12.8 billion
1938: $13.8 billion
1939: $14.8 billion

Average government spending as percentage of GDP, 1933-1939: 15.4%

Mobilization for WWII
1940: $15.0 billion
1941: $26.5 billion
1942: $62.7 billion
1943: $94.8 billion
1944: $105.3 billion
1945: $93 billion

Average government spending as percentage of GDP, 1940-1945: 35.3%

Franklin Roosevelt's New Deal greatly increased the size and scope of government during the 1930s, then World War II increased government spending even more dramatically in the early 1940s, skyrocketing to consume nearly half the U.S. economy during World War II.

Unemployment During the Great Depression

Average Rate of Unemployment
1929: 3.2%
1930: 8.9%
1931: 16.3%
1932: 24.1%
1933: 24.9%
1934: 21.7%
1935: 20.1%
1936: 16.9%
1937: 14.3%
1938: 19.0%
1939: 17.2%

Full and healthy employment in 1929 at 3.2% abruptly shifted with the crash on Wall Street and ensuing global depression. Rising unemployment reached double-digits in late 1930, and the situation continued to deteriorate through the bleak winter of 1932 to 1933, when well over a quarter of all workers were unable to find jobs. The New Deal helped to reduce unemployment from 1933 through 1937, when another economic recession briefly caused a resurgence in joblessness. Full employment didn't return until the war years of the early 1940s.

To put Great Depression unemployment in context, consider that the highest annual unemployment rate ever recorded after 1940 was 9.7% in 1982. The average rate between 1998 to 2008 (including the 2002 recession) was 5%, and in December 2008 (during a time of serious economic turmoil), unemployment stood at 7.2% nationally.

The Great Crash on Wall Street

Dow Jones Industrial Average
Peak in September 1929: 381.17
Trough in July 1932: 41.22

The Great Crash of October 1929 was only the beginning of four years of steady decline in stock values on Wall Street. The Dow Jones Industrial Average, one measure of the health of the stock market as a whole, lost nearly 90% of its value between 1929 and 1932. Amazingly, the Dow wouldn't reach a value higher than its 1929 peak until November 23rd, 1954, a full quarter-century after the Great Crash.

Political Participation During the Great Depression

Civilian Population of Voting Age
1932: 75.7 million
1934: 77.9 million
1936: 80.1 million
1938: 82.2 million

Percentage of Eligible Voters Who Cast Ballots in General Elections
1920: 43.5%
1924: 43.9%
1928: 51.9%
1932: 52.5%
1936: 57.0%
1940: 59.2%
1944: 52.9%

Estimated audience for Father Charles Coughlin's weekly radio program by the end of 1932: 30-45 million
Estimated number of Americans who signed Townsend Plan petitions by 1935: 25 Million
Estimated number of Americans subscribed to the mailing list of Huey Long's Share Our Wealth clubs by 1935: 7.5 million
Estimated membership of Communist Party U.S.A. in 1934: 30,000
Estimated membership of German-American Bund (Nazi sympathizers) in 1938: 25,000

While fewer than half of all voters participated in general elections throughout much of the 1920s, a steady climb in voter participation occurred from 1928 through 1940, as more voters took the opportunity to cast votes for (or against) President Franklin D. Roosevelt. Participation in non-electoral political activities also increased during the Depression, as charismatic figures like Father Coughlin, Francis Townsend, and Huey Long developed enthusiastic followings. Revolutionary parties on the far left (communists) and far right (fascists) frightened many Americans, but never gained more than a fringe following.

Entertainment During the Great Depression

Average Weekly Movie Attendance
1927: 57 million
1930: 90 million
1931: 80 million
1932: 60 million
1933: 50 million

Contrary to some popular mythology, the film industry was not "Depression-Proof" and suffered a steep decline along with the fortunes of the nation as a whole. Cinema attendances soared after the 1927 introduction of "talkies" (movies with full sound). But weekly viewership peaked at 90 million tickets in 1930, then declined by more than a third by 1933.

Family Life During the Great Depression

Fertility Rates (per 100,000 Women Aged 15-44)
1928: 93.8
1929: 89.3
1930: 89.2
1931: 84.6
1932: 81.7
1933: 76.3
1934: 78.5
1935: 77.2
1936: 75.8
1937: 77.1
1938: 79.1
1939: 77.6
1940: 79.9
1941: 83.4
1942: 91.5
1943: 94.3
1944: 88.8
1945: 85.9

The widespread poverty of the Great Depression caused dramatic changes to family life as young couples, worried about their finances, put off having children. The U.S. fertility rate-the number of children born to women aged 15 to 44-declined by nearly 20% from 1928 1935. Fertility rates recovered somewhat during World War II, which brought renewed prosperity to America. However, the war created its own impediments to fertility, as millions of would-be American fathers were stationed overseas in the military. After 1945, Americans made up for 15 years of long-deferred babymaking by reproducing at record rates, creating the so-called Baby Boom. From 1946 to 1964, the average fertility rate was a sky-high 113.4 per 100,000.

Average Divorce Rate, (per 1,000 People)
1920-1929: 1.6
1930-33: 1.4
1934-39: 1.8
1940-46: 2.8
1947-64: 2.5

The economic hardship of the Depression made couples somewhat less likely to divorce, as individuals (especially women) stuck in unhappy marriages often decided to tough it out rather than risk financial ruin by leaving their spouses. The very different tensions caused by World War II, by contrast, brought a spike in the divorce rate, and divorce rates throughout the postwar period never fell back to levels as low as in the 1930s.

Average Rate of Death by Suicide (per 100,000 Population)
1920-1928: 12.1
1929: 18.1
1930-1940: 15.4

The Great Crash of 1929, which suddenly brought economic ruin to thousands of people accustomed to a decade of prosperity, caused an immediate and dramatic spike in suicides. Suicide rates, which averaged 12.1 per 100,000 people in the decade prior to the Depression, jumped to an alarming 18.9 in the year of Wall Street's crash. The suicide rate remained higher than normal throughout the remainder of the Great Depression, then fell sharply during World War II.

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U.S. Gross Domestic Product (current dollars) During the Great Crash, 1929-1933 1929: $103.6 billion1930: $91.2 billion1931: $76.5 billion1932: $58.7 billion1933: $56.4 billion New Deal Recovery and Recession, 1934-1939 1934: $66.0 billion1935: $73.3 billion 1936: $83.8 billion1937: $91.9 billion1938: $86.1 billion1939: $92.2 billion Mobilization for WWII, 1940-1945 1940: $101.4 billion1941: $126.7 billion 1942: $161.9 billion1943: $198.6 billion1944: $219.8 billion1945: $223.1 billion The overall size of the American economy, measured by gross domestic product, sharply declined following the crash on Wall Street-from $103.6 billion in 1929 to $66 billion in 1934.

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Con: In the 110 years before the Fed was created, there were 9 Economic Crises in the US. In the 110 years the Fed has been supposedly stabilizing the economy, there have been 17 economic crises, including the largest in history-- the great depression.

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Con: In the 110 years before the Fed was created, there were 9 Economic Crises in the US. In the 110 years the Fed has been supposedly stabilizing the economy, there have been 17 economic crises, including the largest in history-- the great depression.

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Con: The Fed was created in 1913 specifically to stabilize the US economy. However, their decisions in the 1920s, especially in 1929, directly caused and deepened the great depression. That led to all the negative impacts above. It was a long time ago, but this debate specifically asks us to think back to the creation of the federal reserve, so the millions of lives and billions of dollars lost at that time are all direct harm from the Fed.

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Con: The Fed was created in 1913 specifically to stabilize the US economy. However, their decisions in the 1920s, especially in 1929, directly caused and deepened the great depression. That led to all the negative impacts above. It was a long time ago, but this debate specifically asks us to think back to the creation of the federal reserve, so the millions of lives and billions of dollars lost at that time are all direct harm from the Fed.

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Pro: The Great Depression is a perfect example of why the Fed is necessary. The fact is that even though it was created in 1913, the Fed was not given very much direct control over the money supply until 1932, 2 years after the depression started. As soon as Congress gave the Fed real authority, they greatly increased the money supply, which helped ease the deflation, and by 1933, the US economy was on its way to recovery. The Fed helped reduce the damage of the Depression, so the US was not hit as hard as Europe or other countries.

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Pro: The Great Depression is a perfect example of why the Fed is necessary. The fact is that even though it was created in 1913, the Fed was not given very much direct control over the money supply until 1932, 2 years after the depression started. As soon as Congress gave the Fed real authority, they greatly increased the money supply, which helped ease the deflation, and by 1933, the US economy was on its way to recovery. The Fed helped reduce the damage of the Depression, so the US was not hit as hard as Europe or other countries.

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Con: During the 1970s, the Fed used a strategy of increasing inflation on purpose so GDP would grow, then raising rates for short periods of time to lower inflation before dropping rates again to cause more growth. This strategy was a complete failure because the Fed succeeded in increasing inflation but failed to grow the economy, resulting in rising prices without rising wages. Thus millions of Americans were hurt, leading to only 19% of Americans feeling the US was heading in the right direction by 1979.

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Con: During the 1970s, the Fed used a strategy of increasing inflation on purpose so GDP would grow, then raising rates for short periods of time to lower inflation before dropping rates again to cause more growth. This strategy was a complete failure because the Fed succeeded in increasing inflation but failed to grow the economy, resulting in rising prices without rising wages. Thus millions of Americans were hurt, leading to only 19% of Americans feeling the US was heading in the right direction by 1979.

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Pro: During the 1970s, the US faced many crises that should have ruined the economy, including losing the Vietnam War, struggling with huge Debt from 1960s welfare expansion, and an oil embargo from the major oil producing countries of the world that created an energy crisis. Despite this, the two externally caused recessions lasted less than a year, and the economy grew at an average rate of over 3% for the whole decade. 

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Pro: During the 1970s, the US faced many crises that should have ruined the economy, including losing the Vietnam War, struggling with huge Debt from 1960s welfare expansion, and an oil embargo from the major oil producing countries of the world that created an energy crisis. Despite this, the two externally caused recessions lasted less than a year, and the economy grew at an average rate of over 3% for the whole decade. 

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Pro: First, in 1982, as the recession grew worse, the Fed ignored strong public and congressional pressure to reduce the rate. This extends the contention about why it is important that the Fed is independent of direct control by elected officials since it lets the Fed focus on the long-term health of the economy. Second, by October 1982, less than a year after the Fed increased the rate to 19%, inflation was back to 5% and unemployment reduced with reduced inflation, going back below 10% by 1983. This extends the contention that the Fed’s ability to reduce inflation is important, as it helps greatly in the long-term and even lowers unemployment in the short term.

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Pro: First, in 1982, as the recession grew worse, the Fed ignored strong public and congressional pressure to reduce the rate. This extends the contention about why it is important that the Fed is independent of direct control by elected officials since it lets the Fed focus on the long-term health of the economy. Second, by October 1982, less than a year after the Fed increased the rate to 19%, inflation was back to 5% and unemployment reduced with reduced inflation, going back below 10% by 1983. This extends the contention that the Fed’s ability to reduce inflation is important, as it helps greatly in the long-term and even lowers unemployment in the short term.

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•“Between 1980 and 1981. Inflation was at 14% and the Fed raised interest rates to 19%. This caused a severe recession”

•That recession was the worst recession since the Great Depression.

•The nearly 11 percent unemployment rate reached late in 1982 remains the highest since the Great Depression. Unemployment during the 1981-82 recession was widespread, but manufacturing, construction, and the auto industries were particularly affected. 90 percent of job losses in 1982 were to those sectors and most never came back.

•Making this even worse, the Fed was the reason for the high inflation in 1980 that the Fed then triggered the recession to prevent. The Fed’s own website says, and I quote “Both the 1980 and 1981-82 recessions were triggered by tight monetary policy in an effort to fight mounting inflation… In the 1970s, the Fed pursued what economists would call “stop-go” monetary policy… [which] proved unstable in the long-run, as inflation …increased … in the mid-1970s… reaching 11 percent in June 1979”

•I’ll emphasize for the judge that manufacturing, construction, and the auto industries jobs used to be stable middle class jobs, and the 1982 recession, caused by the Fed, destroyed them.

•The impact of this is obvious: It increased inequality by harming the poor to protect the rich.

https://www.investopedia.com/articles/stocks/09/how-interest-rates-affect-markets.asp

https://www.federalreservehistory.org/essays/recession-of-1981-82#:~:text=Prior%20to%20the%202007-09%20recession%2C%20the%201981-82%20recession,II%20era%20%28Federal%20Reserve%20Bank%20of%20St.%20Louis%29.

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Pro: Despite turmoil in the banking industry, the overall economy was not heavily impacted because of the safety net that the fed provided that kept confidence in the overall financial system.

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Pro: Despite turmoil in the banking industry, the overall economy was not heavily impacted because of the safety net that the fed provided that kept confidence in the overall financial system.

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Con: The Fed created too much of a safety net for banks leading to the moral hazard that banks could take huge risks but know they'd be bailed out if they lost those bets, leading to overspeculation.

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Con: The Fed created too much of a safety net for banks leading to the moral hazard that banks could take huge risks but know they'd be bailed out if they lost those bets, leading to overspeculation.

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Pro: The Fed's quick response and creativity with Quantitative Easing saved the economy within 2 years. It led to one of the longest periods of continuous growth in US History.

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Pro: The Fed's quick response and creativity with Quantitative Easing saved the economy within 2 years. It led to one of the longest periods of continuous growth in US History.

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Con: The Fed caused the recession by having low rates that led to over-investment, then they compounded the error by dropping the rate in response to the crisis, but never raising it again, leaving no room for maneuvering when COVID hit, so the economy had no ability to adjust.

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Con: The Fed caused the recession by having low rates that led to over-investment, then they compounded the error by dropping the rate in response to the crisis, but never raising it again, leaving no room for maneuvering when COVID hit, so the economy had no ability to adjust.

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Before the Fed, after the panic of 1907, it took 5 years before the economy grew back to where it was in 1906. However, in crises after the Fed was created, the economy grew back quicker. For example, after the 2008 recession, it only took the economy 1 year to grow back to where it had been before 2008. https://www.macrotrends.net/countries/USA/united-states/gdp-gross-domestic-product

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GDP at purchaser's prices is the sum of gross value added by all resident producers in the economy plus any product taxes and minus any subsidies not included in the value of the products. It is calculated without making deductions for depreciation of fabricated assets or for depletion and degradation of natural resources. Data are in current U.S. dollars. Dollar figures for GDP are converted from domestic currencies using single year official exchange rates. For a few countries where the official exchange rate does not reflect the rate effectively applied to actual foreign exchange transactions, an alternative conversion factor is used.

U.S. gdp for 2021 was $22,996.10B, a 10.06% increase from 2020.

U.S. gdp for 2020 was $20,893.74B, a 2.24% decline from 2019.

U.S. gdp for 2019 was $21,372.57B, a 4.12% increase from 2018.

U.S. gdp for 2018 was $20,527.16B, a 5.38% increase from 2017.

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GDP at purchaser's prices is the sum of gross value added by all resident producers in the economy plus any product taxes and minus any subsidies not included in the value of the products. It is calculated without making deductions for depreciation of fabricated assets or for depletion and degradation of natural resources.

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https://www.mybudget360.com/federal-reserve-primary-tool-of-new-financial-oligarchy-banking-balance-sheet/

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Pro: The Fed response to the 2008 crises led to 127 months of consecutive economic growth with no downturns. The longest continuous monthly growth in US history

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Pro: The Fed response to the 2008 crises led to 127 months of consecutive economic growth with no downturns. The longest continuous monthly growth in US history

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https://www.forbes.com/sites/chuckjones/2020/02/17/obamas-2009-recovery-act-kicked-off-over-10-years-of-economic-growth/#:~:text=The%20recent%20growth%20period%20started%20in%20July%202009,the%20120%20month%20timeframe%3A%20December%202001%20to%20November%5D.

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Exactly 11 years ago today, February 17, 2009, President Obama signed the American Recovery and Reinvestment Act of 2009 or the Recovery Act into law. The $831 billion in spending kicked off the longest period of economic growth and job creation in American history.
Over a decade of economic growth
The National Bureau of Economic Research or NBER determines the length of economic expansions and recessions. The recent growth period started in July 2009 and has lasted for 127 months through January 2020. This surpasses the previous record of 120 months from March 1991 to March 2001, which then led into the Great Recession that Obama inherited. [Earlier version had the incorrect months for the 120 month timeframe: December 2001 to November].

Starting with the September 2009 quarter GDP growth has been positive every year since then. It ranged from 1.6% to 2.9% per year under Obama and from 2.3% to 2.9% under Trump.

The recent negative revisions to 2018's job growth numbers could lead to a lower reading on Trump's 2.9% GDP growth in 2018. The revised numbers should be out in July this year when the first estimate for June's GDP growth is released.

Each of the last three years of Obama's economy were stronger than Trump's 2019 when adjusted for trade, inventory impacts and government spending. To get an overall view of Trump's economy this article has 10 economic metrics of his three years in office.
Trump's job growth is a continuation of Obama's economy
The Bureau of Labor Statistics has data on the number of non-farm jobs in the economy going back to 1939. There have been two periods with 9 years of consecutive job growth; 1961 to 1969 and 1992 to 2000. As of December last year that record was broken with 10 years of consecutive job growth from 2010 to 2019.

It is harder for companies to find workers and it is later in the business cycle. However, Trump's boasts about how many jobs he has added don't include the fact that he has generated 6.5 million jobs under his Presidency vs. the 8.1 million, or 1.6 million fewer than Obama did during his last three years in office. In fact, Trump's best year of job growth (2018) doesn't even beat any of Obama's last three years.

The graph below displays the number of employees in the private sector of the economy, meaning it excludes government workers and farmers, over the past 15 years. It shows the 10 years of increased employment, seven under Obama and three under Trump. It turns out that in 2019 there were 1.927 million private sector jobs added, the fewest since 2010 as the economy was recovering from the Great Recession.

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Obama's 2009 Recovery Act Kicked Off Over 10 Years Of Economic Growth

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Exactly 11 years ago today, February 17, 2009, President Obama signed the American Recovery and Reinvestment Act of 2009 or the Recovery Act into law. The $831 billion in spending kicked off the longest period of economic growth and job creation in American history.

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In 2002, the Fed tried to increase growth by cutting the interest rate. This led to many people taking cheap loans from banks at those low rates to buy homes. For 4 years, the Fed kept the rate low, even as more cheap loans were happening, so more people took cheap loans. Then suddenly, in 2006, the Fed increased the rate by 400%, from 1.25% to 5.25%. This meant that a lot of people suddenly could not pay their loans to the banks. That caused people to lose their houses, banks to lose a lot of money, and then companies that relied on those banks lost their money, leaving the economy destroyed.