The Recession of 1970 vs The Recession of 1953

A lot like The Recession of 1970, The Recession of 1953 was a brief and mild recession. Both recessions lasted under a year with unemployment staying relatively low.

Causes

Both recessions were marked by a period of prosperity and increasing inflation. The Recession of 1953 being in the middle of a period of major economic growth (1950’s), and the Recession of 1970 being at the end of a period of major economic growth (1960’s).

Similar to the Recession of 1970, The Recession of 1953 can be attributed to a conflict or war. The Recession of 1970 being amidst the Vietnam War, and the Recession of 1953 being in the middle of the Korean War. Both conflicts led to an increase in government spending, which in turn increased the national deficit.

In an attempt to resolve the issue, both governments attempted to solve the issue in a different way. The Nixon administration by raising interest rates, and the Eisenhower administration by lowering interest rates. In the case of the Recession of 1970, raising interest rates led to a decrease in people borrowing money, which in turn led the economy to plummet. In 1953, the lowering of interest rates caused the demand of bonds to plummet.

And so the increasing inflation due to conflicts taking place, and the dropping demand for bonds and investments inevitably caused the Recession of 1953 and the Recession of 1970.

Effects

Both recessions led to an increase in unemployment and a drop in Gross Domestic Product. Rising interest rates in 1970 led to fewer people borrowing money causing the economy to become stagnant. Lowering interest rates in 1953, led to fewer bonds being issued or purchased which also led to less activity in the economy. Both recessions and were short, in the case that both economies were able to recover shortly after. By 1955 and 1971 both economies had made a full recovery and returned mostly back to normal