Various economies are on the threshold of the worst financial disasters in recent times as prices all over the globe continue to ascend. However, this isn’t the first time the world has been on the cusp of a disaster. All throughout history, we have confronted multiple economic downturns, and although we resiliently made it out of these problems, they indeed have left big scars.
And today, we will be sharing with you the 7 biggest recessions in modern human history.
1. The 1772 Credit Crisis
The credit crisis of 1772-1772 is a vaguely known financial crisis of the eighteenth century. After yielding speculative stock in East India Trading Company (EIC), the London Bank of Neil James was busted in June 1772, losing 300,000 pounds. Today, this money’s value amounts to 64 million dollars or 48.8 million pounds.
This financial crisis took place between notorious events: the economic turbulence brought by the American Revolutionary War and the banking catastrophe of 1763.
In accord with global history, panic transpired as bankruptcies increased across London, and every private bank within Scotland went insolvent.
Liberty Street Economics had stated that the crisis rapidly expanded to myriad Dutch banks before the markets finally stabilized. Nevertheless, since the crisis hit the EIC the worst, the corporation suffered a severe monetary shortfall.
As per The Boston Tea Party Museum, the British government consented to the Tea Act in 1773 to deter the EIC from failing. This Tea Act gifted the firm a monopoly on North American tea sales, making American patriots barf 342 chests of tea into the harbor. This protest is also known as the Boston Tea Party.
2. The Long Depression 1873
The 1873 Long Depression was a traumatic event that began with the descent of the Vienna stock exchange. The market collapse had been fueled by a wave of speculative money then rapidly outstretched across the world, which lasted from 1873 to 1896.
Some of the often expressed grounds for the tragedy include:
- Ascending speculative investment.
- Demonetization of silver in the United States and in Germany.
High inflation and lower profitability had moved Germany’s manufacturing with cast iron prices climbing by 27%.
Some experts also suggest that the slump was brought by the arrival of new technologies, debt build-up, and continental power that was overwhelming the world with cheap goods.
Jay Cooke & Co, a United States bond, has generated a massive amount of funds by issuing bonds associated with railways. According to The Liberty Congress, the latter mentioned bank and other banking institutions fell as building expenditures climbed. Hence, the New York Stock Exchange was compelled to suspend trade for the very first time.
During these times, unemployment in the United Kingdom doubled, while exports dropped by 25%.
3. Oil Crisis of the 1970s
In the late 1960s, severe inflation became widespread all over the globe, especially in the United Kingdom and the United States. The financial crisis began with the Yom Kippur War between the coalition of Arab Governments and Israel on the 6th of October 1973, which resulted in an oil price increase.
The oil crisis has contributed to the stock market meltdown, affecting the global economy. Price hike in the United Kingdom reached 20% before peaking at more than 24%. This was brought by a combination of factors, including inflating salaries, consumer spending raise, and substantial tax cuts that were featured in the 1972 budget.
The British government sought to foist a pay ceiling to battle inflation. However, this was followed by a coal miners’ strike, compelling prime minister Edward Heath to launch a three-day week with the nation’s electrical supply rationed in 1974.
In the summer of 1975, the cost of living in Britain had skyrocketed by 26%, resulting in unemployment ballooning and inflation growth. This occurrence was called “stagflation,” a term stamped by Ian McLeod.
4. The Recession of 1981–1982
Since the great depression, the recession that took place from 1981 to 1982 was the worst in the United States. The post-war era’s pinnacle brought over an 11% unemployment rate acquired in late 1982. Unemployment was so across-the-board, but construction, auto industries, and manufacturing especially suffered the most.
During the 1981-1982 recession, the good makers saw job loss of about 90%, although the overall employment by that time was at 30%. The manufacturing industry accounted for three-quarters of all job losses in the goods-producing sector, with 22% and 24% respective unemployment rates in the car manufacturing and home building industries.
Ballooning interest rates places pressure on sectors of the economy that depends on borrowings, such as construction and manufacturing. In the third quarter of 1981, the United States officially entered a recession.
Unemployment has risen from 7.4% in the early phase of the crisis to more than 10% after a year. As the recession deteriorated, Volker faced repeated requests from Congress to facilitate monetary policy. However, Volker insisted that failing to lower long-run inflation expectations now would develop in a quote— hence bringing more catastrophic economic consequences for a more extended period of time.
5. Recession in the early 1990s
As a result of tight money policies implemented by the Federal Reserve, the economy weakened throughout 1989 and 1990. The Fed’s professed objective at the time was to decline inflation which stymied economic expansion.
What happened during these times is a cautionary tale for today’s economy.
The recession that took place in 1990 was triggered by a loss of corporate and consumer confidence in the economy. This resulted from the 1990 oil price shock, which was made worse by the already poor economy. Due to the reduced investment incentives brought by the Tax Reform Act of 1986, the real estate value bubble in the early to mid-1980s ended, which may have contributed to the economy’s weakness.
Before the 1990 crisis, the United States had seen a low unemployment rate and strong job growth. As per the Labor Department, the recession cost the United States economy 1,623 million jobs or 1.3 of non-farm payrolls. Similar to the 1981 recession, the manufacturing and construction industries suffered the most losses.
6. Asian Financial Crisis 1997
In July 1997, the Thai government ran out of foreign reserves, compelling the float of the Thai Baht, which was once linked to the United States dollars, since it could not sustain its exchange rate any longer. For that reason, the Baht’s exchange rate plummeted, making the Indonesian Rupiah and Philippine Peso devalued after two weeks.
The GDP of the mentioned countries dropped by double digits, and the Asian financial crisis had political aftermath in addition to its economic turbulence— Indonesia’s president and Thailand’s prime minister both resigned from their position.
7. The Recession of 2001
The 2001 recession was brought on by the “.com” boom and its succeeding burst. The YK2 Panic contributed to the crash in 2000. However, this didn’t last for a year.
Various companies have spent billions of dollars on new software since they were concerned that their existing systems weren’t able to accommodate the shift from the 1990s to the 2000s. Quite a lot of “.com” firms were extremely overpriced, leading to their failure. The recession was also heightened by the 9/11 attacks.
The GDP sank in two quarters and negative 1.6% in quarter 3. Unemployment persisted until June 2003 until it peaked at 6.3%.
