America’s Economic History
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America’s Economic History
The American’s Economy has gone through many changes over the years. These changes have been recognized by privatized organizations and economists, who are tasked with the responsibility of studying and commenting on the rise and fall of the economy. The commentary is focused on the periods following World War 2. The period from the world war to the present time has been divided in to five parts with each playing a specific role in the shaping of the economy.
1973 PERIOD
Vatter & Walker argue the economy during this period was just from experiencing the mild recession that had occurred for a short while in the year 1971. According to the authors, the mild recession was followed by expansion that was maintained considerably and the economy began to stabilize. However, in the beginning of this period, the economy showed signs of raising inflation (Vatter & Walker, 1996). The suggested cause was the budget deficits used to finance the Vietnam War. This situation prompted the nation’s finance system to implement a strategy of increasing rates on the products and loans processed in order to control the situation. With that in mind, the 1973 period illustrates the effect of the money tightening scheme had after it had been implemented (Vatter & Walker, 1996). The economy faced three obstacles that greatly crippled it.
1. Stagflation
The authors state that prior to the 1973 crisis, there had been implementation of different policies that eventually led to stagflation. The first enactment was the wage and price controls in 1971 by Richard Nixon (Vatter & Walker, 1996). These policies created a shock in the economy that led to the stagflation of 1973. As discussed further by the authors, some of these events were the Peruvian Fishing Envoy failure in 1972 that negatively influenced the agricultural sector. The next impact caused by the stagflation was the 1973 oil crisis when the OPEC nation strictly regulated global oil. The mentioned factors contributed immensely to low energy reserves during this period (Vatter & Walker, 1996).
2. 1973 Oil Crisis
The crisis started when the Arab oil corporations declared an embargo meaning they had prohibited their trade and commercial system with the other nations. This situation was seen as an economic sanction legally barring the countries from trading with others (Vatter & Walker, 1996).
3.1973-74 Stock Market Crash
America was greatly affected by the economic crash that occurred during this one-year period (Vatter & Walker, 1996).The stock market crash affected the global market that was mainly focused in the United Kingdom. This was the worst market stock situation in history. The factors that facilitated this situation included the Bretton Woods System, which lasted for two years. Another contributing factor was the policies implemented by Nixon leading to the drop in value of the American dollar (Vatter & Walker, 1996).
1974-1982 PERIOD
After the events that occurred in 1974, this period was marked the recession in 1980. According to Seavoy, this phase in the American economy faced a brief moment of growth, followed by an intense recession. He reiterates that policies enacted during this period played a crucial role in escalating the recession. Under the management of Paul Volcker, the Federal Reserve made critical decisions concerning the interest rates (Seavoy, 2006). The collapse of the economies such as the Soviet Union and Eastern European Communism facilitated the rise of American economy. This made the nation the only stabilized economy in the United States (Seavoy, 2006).
1983- 1990 PERIOD
This period was marked by a productive economy (Agnew, 1988). The positive impact of this productivity was more focused on the military sector. Agnew supports that the nation became the undisputed power in the banking and trading sectors. He expounds that this had major influence on the global market and economy. The contributing factors were increase in the oil prices, globalization, and decrease in the interest rates, technological advancement, and global expansion in trade, entertainment and finance (Agnew, 1988). Despite the fact, America experienced a productive economy; the rest of the world was under crisis. However, it became severe in the United States after 1981 but it exited soon enough in 1982. According to the author, the reason for this briefly experience encounter was due to contractionary monetary policy. This was implemented by the Federal Reserve System in its attempt to regulate inflation that was escalating drastically.
1990-2001 PERIOD
As the globe welcome the 1990’s, there were impending major event in the economy that would worsen it global state. Two major events threatened to collapse the economy (Engerman& Gallman, 1998).
- The Collapse of Dot.Com Bubble
This crisis occurred between 1997 and 2000. Engerman & Gallman support that the Dot-Com bubble was seen a positive aspect in the economy that had resulted from the expansion of the internet services and technologies globally (Engerman& Gallman1998). The shares on the stock market had increased as documented by NASDAQ. The authors illustrate that the advancement promised a new dawn for the global economy as industries thrived under its boom. The internet industries under this era were referred to as the dotcoms owing to the fact that their stock shares were rising significantly. The collapse of this bubble saw the dissolution of some of the major dot.com companies, which had greatly invested in the stock market.
2. September 11 attacks
The terrorist attacks affected the economy negatively. There was a sharp drop in the stock market trading (Engerman& Gallman1998). The insurance companies incurred great losses that were approximated at $41 billion. This event costs the government more than the famous hurricane named Hurricane Andrew. Various insurance firms incurred the losses including Swiss Re. This caused the shares of such firms to drop placing them and the economy in a critical position.
2002-NOW PERIOD
Since 2002 until the recent day, four events have affected the economy of America.
- The Great Recession
The book written by Lind, M, goes to great lengths to expound on the recent economic state of the American nation. The details focus on the great recession. The recession occurred in the late 2000s and has had negative influence on the economy (Lind, 2014). It was caused severe shortage of liquidity. According the author, the economic crisis was created by the inability of the central bank to grant loans in this context referred as liquidity, to the lending markets.
2. United States Housing Bubble
The
book also attributes the struggling condition of the economy to the housing
bubble. The great recession eventually, lead to the U.S housing bubble where
the sale rates of the houses began to decrease significantly. The housing
bubble took place in 2006 where the rates experienced both a peak and decline
within the same year (Lind, 2014). r. The greatest lows experienced were in
2012. As the author suggest in his book, the economy is recovering but the
effects are still recognizable. The book is detailed and forwards the author’s
view on the recent economic times.
References
Agnew, J. A. (1988). The United States in the world-economy: A regional geography. Cambridge [etc.: Cambridge University Press.
Engerman, S. L., & Gallman, R. E. (1996). The Cambridge economic history of the United States. Cambridge [England: Cambridge University Press.
Lind, M. (2014). Land of promise: An economic history of the united states. S.l.: Harper.
Seavoy, R. E. (2006). An economic history of the United States: From 1607 to the present. New York: Routledge.
Vatter, H. G., & Walker, J. F. (1996). History of the U.S. economy since world War II. Armonk: Sharpe.