The Recession of 1969- 1970

The Recession of 1969 and 1970 was a relatively mild recession. The recession lasted 11 months with Gross Domestic Product falling 0.6% and inflation rising to as high as 5.9% at the peak. The recession is believed to have been caused by increasing inflation and the employment of a very restrictive monetary policy by the federal government.

The 1960s saw major growth in the United States economy, to which inflation was as high as 5% by 1969. As a result of increasing inflation, the Federal Reserve tightened its monetary policy increasing interest rates. Interest rates were also increased to help pay back deficit spending on the war in Vietnam. The Nixon administration cut government spending in an attempt to resolve the problem as well. Due to increased interest rates, fewer people were borrowing money causing the economy to plummet. As a result of a falling economy, people started to save their money in order to save and feel financially stable. As fewer people started to spend money, businesses couldn’t afford to keep workers being forced to lay people off. Although unemployment wasn’t terrible it still had a large impact on the economy leading the economy to be stuck in an unemployment cycle. Government policies did little to help ease the recession and instead made it worse. Increasing interest rates only led the economy to become stagnant and made people less inclined to borrow money. Decreasing government spending was slightly beneficial in decreasing the deficit but did not help too much.