The Own Goal Recession (1 magg 1937 anni – 1 giug 1938 anni)

Descrizione:

Duration: 13 months
GDP decline: 10%
Peak unemployment rate: 20%
Reasons and causes:

Expansionary monetary and fiscal policies had secured a recovery from the Great Depression after 1933, albeit an uneven and incomplete one. In 1936-1937 policymakers changed course, more preoccupied with cutting budget deficits and heading off inflation than with the dangers of a depressive relapse. Following a tax increase in 1935 and Social Security payroll deductions starting in 1937, the budget deficit shrank from 5.4% of GDP in 1936 to 0.1% of GDP by 1938.67 Meanwhile, the Federal Reserve in 1936 doubled the reserve requirement ratios for banks, thus curbing lending with the stated aim of preventing "an injurious credit expansion." Perhaps most damagingly of all, the U.S. Treasury began the same year to sterilize gold inflows, ending brisk money supply growth that had supported the expansion. Industrial production began falling in September; it would decline 32% in the course of the recession. The stock market crashed in October. The recession ended after policymakers rolled back the increase in reserve requirements and gold sterilization as well as fiscal austerity.

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