ppbob wrote: ↑Mon Aug 16, 2021 9:27 pm
D1984
We experienced few if any significant financial crashes/panics between the 1940s and, say, 1980. There were stock market declines, consumption and production slumps, falloffs in consumer sentiment, garden-variety recessions, etc during this time period to be sure..
Off the top of my head, what about: the inflation of the late 1940s, the 1974 stock market crash, the inflation of the 1970s?
1946-47 inflationary period
Inflation: circa 8.6% inflation in 1946 and 14.3% inflation in 1947 is hardly a hyperinflationary economic crisis a la Weimar/Zimbabwe/Venezuela. We increased the US money supply and monetary base a bit over 3X from 1938 to 1945 and yet prices (even including the increase in 1941-45 on top of the increase from 1946-47) didn't even come close to doubling, much less tripling....for the whole period from 1941 to 1947 they increased by around 65%. Did the inflation of 1946-47 (which was less per year on average than that from 1794-95, 1813-14, 1862-65, 1916-1920, and 1978-1981) cause any kind of serious financial crisis or shocks? There was (strictly by real GDP measures) a "recession" of sorts in late 1945 and 1946 but this was mostly driven by two things: One, an economy that had been operating above normal full capacity (in order to produce enough war material to beat the Axis) going back to running at only normal full capacity (i.e. factory workers going from working, say, 55 or 60 hours a week to 40 hours a week) and having to retool and reallocate labor and capital from war production to civilian needs (i.e. factories having to convert back from producing guns/tanks/planes/to making cars/washing machines/refrigerators.....and Rosie the Riveter becoming Rosie the Housewife again); and two, the economy having to find jobs for now-discharged returning GIs. Unemployment increased from around 1.05% in late April/early May 1945 to around 4.3% in May/June 1946 which is hardly another Great Depression (note that 4.3% is lower than unemployment ever was from mid-1970 to the spring of 1998).
Recession: See above; unemployment only reached 4.3% in 1946 and stayed at between 3.1 and 4.7% for 1947 and 1948. Total industrial production indices (even at their lowest in mid-1946 which was as above caused by what might be referred to as a "recession sui generis" or perhaps as a "recession in name only" ) were above their 1929 peak, their early 1937 peak, and their early-mid 1941 reading which was the last mostly peacetime reading as by that time the US had begin converting to war production (first for its allies and by late 1941 for itself).
Financial crisis/credit crunch/market crash leading into/feeding/exacerbating economic recession: Nope, we did have stock market declines through June-November of 1946 but this was (mostly) a grind downward with only a few sharp falls and it was nothing like 1929, early 1930-March 1933, 2008-09, or even early 1937-mid 1938. As for the financial markets in 1946-47 besides stocks, there was little or no disruption in either the Treasury market, commercial paper/money market, or corporate bond markets during these years. Rates did rise a bit but it wasn't due to any kind of credit crunch or credit crisis like happened regularly in the 19th century through 1933 or in 2008 when the commercial paper markets and corporate credit markets nearly froze up.
In short, the inflation of the immediate postwar era in the mid-late 1940s was not an example of a financial panic of any kind.
1974 stock market crash
Oct-Nov 1973 to late 1974 did have some days or weeks with sudden market breaks down but it was also largely an example of a bear market that consisted mostly of a "my God will this ever end" slow grind downwards. IIRC none of the top 25 or 30 days in percentage term declines happened in 1974. There was a bit of market turbulence in late Oct to Nov 1973 (oil embargo) and again at the very end of Sep 1974 to early Oct 1974 (collapse of Franklin National Bank....which was a bank that--in addition to making some garden-variety bad loans--was owned by a Mafioso and had violated several Federal laws in making risky investments, speculating in forex, and in fact said Mafioso had defrauded the bank on top of all this and then got the bank's president and senior VP to falsify records to try ad cover things up) but by and large the 1973-74 "crash" was more of a steady decline than a sudden sharp crash.
I should also note that the stocks that suffered the worst in 1973-1974 decline were the high-multiple large-cap growth "Nifty Fifty"; small and mid-cap stocks that weren't inflated as much to begin with didn't fall quite as much and value stocks didn't nearly do as badly either (in fact, if you had invested in either the "Small Dogs of the Dow" or "Dogs of the Dow" strategies on 1-1-73 and sold on 12-31-74 you'd have--counting reinvested dividends--been at basically breakeven in nominal terms...and this was at the market's near nadir and doesn't count the 1975-76 bull market at all).
There was a recession from late 1973 through 1974 but that was (mostly) caused by an exogenous external shock (the oil crisis and embargo) and not due to any financial panic or market crash a la 1929 or 2008; rates did rise with inflation (and tighter money and higher short-term rates by the Fed) but there was never any lock-up/freeze up of any financial market during this time.
Inflation/stagflation of the mid to late 1970s into 1980
There was never even an actual recession (much less a bad recession or a depression) from early 1975 to year-end 1979. There
was slow average real GDP growth (well, slow at least compared to the 1947-73 postwar boom period) but much of this was likely due to the productivity growth slowdown that started in mid-1976 and continued until 1982 or early 1983; in fact, productivity growth (in terms of output per hour per person worked) would remain somewhat sluggish until the 1996-2004 computer/internet/technology boom again brought robust productivity gains). There was a recession in 1980 and then one in mid-1981 through late 1982 but this was due to the Volcker fed hiking rates to 20% plus to stop inflation; it was not due to any financial crisis that caused a market crash and financial markets freeze-up/credit crunch, which led to decreases in business spending, consumer spending, consumer confidence, production, and employment, which in turn helped lead to further declines in these indicators, and so on, as happened in 1819, 1837, 1857, 1873, 1893, several times in various waves between 1929 and 1933, and the late summer of 2008 to early 2009.
The recessions from 1947 to 1990 were mostly garden-variety recessions caused by the Fed raising rates to cool an overheated economy rather than by any kind of self-reinforcing feedback loop that involved a financial crisis. We kept the financial markets heavily regulated during most of this time (1990 and 2001 were kind of unique cases; while each did have some elements of a market decline or crash associated with them it wasn't nearly to the degree that, say, the Panic of 1893, the Great Depression, or 2008-09 did) and as a result tended not to suffer recessions caused by financial panics/crashes like we had in the "good old days" of hard money and the gold standard (or for that matter during the 2008-09 crash capping the era of deregulated finance that was allowed to run wild).