Thank you to Home Title Lock
for sponsoring this video I’m Mr. Beat
And behind me is the Federal Reserve Bank of Kansas City
It’s one of 12 Federal Reserve Banks, and all of them are in charge of
monetary policy here in the United States These banks make up the Federal Reserve System, aka the Fed, or the central banking
system of the United States. Their purpose? Ok, well there are two main
objectives of the Federal Reserve System… Maximizing employment
Basically making sure as many people are earning money as possible
Keeping prices stable Basically making sure inflation doesn’t
get that out of control so that we can all afford to buy stuff.
Inflation is the general increase of prices across all markets
Now, the Fed has other goals. For example it has a goal of moderating long-term
interest rates. And it does other stuff, like regulate banks, and provide financial
services to banks that deposit money. The bottom line, though, is that the Fed wants
economic stability. It doesn’t want the economy to get too crazy. (turns) Because when that
happens, it leads to a recession. (thunder clap) A recession is a sustained period of an economy
shrinking. In a recession, economic activities stop happening as much. Less people spend money.
Less people hire others to do work for them. Now, keep in mind that different people have different
definitions of what a “recession” is. That all said, many economists say a recession
has officially happened if there’s at least two consecutive quarters of an economy
shrinking. (turn ) In other words, there’s a recession if the economy is NOT GROWING for
at least six straight months. Ok, ok?!? (turn) Now, what’s the difference between
a recession and a depression? Meh, a depression is just basically a
really bad recession. In particular, a recession that drags on and on and in
which unemployment is particularly high. Anyway, back to the Fed (pointing) and economic
stability. While the Fed has tried to help the economy become more stable, it’s rarely been
easy. (turn) And often, the Fed has failed. (turn) In fact, some economists even argue
that the Fed has played a significant role CAUSING recessions. Holy crap. However the
Federal Reserve System has only been around 109 years, (turn) so don’t worry, there were
others to blame before it existed. (turn) In this video, let’s take a look at
every recession and depression in American history. (awkward pause) (turn) It’s
gonna be so depressing...and recessioning…wait that’s not a word, is it. (turn) And I’ll go
through the causes and effects of every one. Ok, so here’s a new problem that I
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report to see if you’ve already a victim. Ok let’s do this! Woot woot! Come on! The Panic of 1785
This recession lasted from 1785 to 1788 actually, and it followed an economic boom caused by the
American War of Independence. After the war ended, there was dramatic deflation, meaning there was a
general decrease in prices of goods and services across most markets. Oh that sounds great,
since stuff was way cheaper, right? Right? Wrong. Deflation meant less investment since less
people were willing to spend their money because they were scared that if they spent it too soon,
they might miss out on lower prices. Therefore, Americans in the mid-1780s were making less money.
Meanwhile, it seemed that every government within the country was in debt and it became
harder to borrow money. Not only that, different states had different currencies
and trade went down with foreign countries. Americans became so desperate that it led
to political unrest, for crying out loud, as demonstrated by Shays’ Rebellion. One of the first videos I ever
made for this channel was about Shays Rebellion. It’s still up to
date, because, as it turns out, our interpretations of history
don’t change that quickly. I’d argue that, without the Panic of 1785, the Constitutional Convention
never would have happened. The Copper Panic of 1789
Caused by people circulating fake copper coins after the American War of Independence,
this one was much less severe and quicker. Still, these copper counterfeiters caused the
real value of copper to tank. In response, the Bank of Philadelphia saved the day by
creating paper money to replace the copper coins, thus creating what’s known as “fiat money,” or
money issued by a government not actually backed up by a physical commodity…ya know…like copper.
Oh, a commodity is just any resource markets treat equally no matter where they come from. The
copper could from my butt and it’d still be worth the same….well maybe not. Anyway, two years later,
the FEDERAL government created its first national bank, simply called the First Bank of the United
States. That’s a boring name. It was basically there to lend money to the federal government,
and folks like Alexander Hamilton called for it to create economic stability. Well that economic
stability lasted for…like….ya know…six years… The Panic of 1796-1797
Noticing a theme here? The word “panic” used to be the trendy
term historians called recessions. Anyway…. The Panic of 1796-1797
Another one caused by deflation, and the deflation this time came from the Bank
of England, actually. Long story very short, the Bank of England was struggling to
fund all the wars Britain was fighting against France. Due to this, it led to a
financial crisis not just across Britain, but all across Europe, and yep, the United
States. Real estate markets, in particular, struggled as many couldn’t pay off their
loans after an investment bubble burst. Oh, an economic bubble is a period when stuff is
WAYYYY overvalued aka inflated, thus leading to a price crash. (turns) And yes, all bubbles
burst. You don’t have no magical bubble on you. In fact, this economic crisis led to
Congress suspending its loan payments to France from what they owed from the
American War of Independence. In response, this led to France seizing American
ships trading with Britain and then what’s known as the Quasi-War, an
unofficial naval war with France. That all said, the American South
survived this recession quite well. The 1802-1804 Recession
Oh so now we’re calling them recessions? O-K This one, indeed, lasted from
1802 to 1804. And once again, it was Britain and France to blame. They stopped
going to war with each other! How dare they! Yep, the two countries temporarily
stopped fighting each other in 1802, which led to commodity
prices significantly falling. The Depression of 1807
Oh so now we’re depressed? Due mainly to the British Royal Navy kidnapping
American sailors and forcing them to serve on British ships, Congress passed and President
Thomas Jefferson signed the infamous Embargo Act of 1807, which stopped American ships from
trading in foreign ports. Well, the law led to a three year recession…well…right I guess it
was bad enough to call a depression. Anyway, as you might assume, the trade restrictions
hurt shipping-related industries the worst. With trading way down, hardly anyone
in New England was making money. The depression was so bad that it led to a bunch
of people turning on Jefferson, in particular. The 1812 Recession
This time caused by INTERNATIONAL trade restrictions, this one lasted
only about six months. Many historians say it ended so quickly due to production going way up
in response to the outbreak of the War of 1812. The 1815-1821 Depression
Well all good things come to an end. I mean…uh…BAD things.
After the War of 1812 ended, inflation skyrocketed, and this happened due to
a boom in the burgeoning textile industry in not just the United States but also in Britain. Wages
couldn’t keep up with prices, man. Not only that, Britain passed a tariff, or tax on imports, which
further increased prices. This went on for like, four years. And then, the (Panic of 1819), the
most devastating economic crisis in American history up to that point. So what caused
it? Well, mainly too much fiat money being created in response to too much speculation
on lands sold by the government. This created an economic bubble that burst in…you guessed
it…1819. This led to really high unemployment, although we don’t today exactly how bad
unemployment WAS back then. It also led to bank failures, which in turn led to bank runs
in which customers RAN to banks to withdraw all their money before the banks failed, which in
turn led to more bank failures! And finally, the Panic of 1819 led to widespread foreclosures,
or the process of a bank taking over a home because the homeowner isn’t paying back the
money they owed on the house TO that bank. After the 1815-1821 Depression, the
economy only barely survived before falling into three more smaller
recessions through the 1820s. The 1822-1823 Recession
Caused by commodity prices dropping once again, this one led to high
unemployment and screwed up the trade balance. The 1825-1826 Recession
This one was caused by the Panic of 1825, basically another bubble
bursting. That bubble? A bunch of speculative investments across Latin America, including
investments in an imaginary country called Poyais. A general and con artist named Gregor
MacGregor (what a name that is) tricked a bunch of British and French investors to buy up
land in Poyais, which…ya know…didn’t exist. The 1828-1829 Recession
Another one caused by a trade embargo. This time, England said its
colonies couldn’t trade with the United States, and the resulting decline of trade, combined with
it becoming much more difficult to borrow money, led to this recession lasting around one year. Boy the 1820s were not roaring. The 1833-1834 Recession This one was short and caused
by too much land speculation. The 1836-1838 Recession
After two years of dramatic economic growth, the federal government, under President Andrew
Jackson’s leadership, devalued the U.S. dollar. Then, a bunch of people sought after both gold
and silver. In response to this, banks printed even more fiat money. Between 1834 and 1836, the
money supply in the United States grew by 30%. Meanwhile, Jackson was determined
to defeat the national bank, which by this time was the SECOND Bank
of the United States. And it wasn’t just Jackson. A BUNCH of Americans by this time
were like “a central bank is not bussin’.” After the passage of the Deposit Act of
1836, Jackson forced the Second Bank of the United States to give up $10 million and
disperse all that money among state banks, yo. Not only that, he later
gave an executive order that said federal land had to be bought
with silver or gold…not fiat money. Based on those two actions, many historians have argued Jackson played a big freaking
role causing the 1836-1838 Recession. It was a tale as old as time. Before this
recession, banks lent money out like it wasn’t no thang, and it was all unregulated. New
banks opened. Times were good. But a new bubble formed around real estate…specifically
speculation on lands once again sold by the government. That bubble burst in 1837, in
what’s today known as [The Panic of 1837]. And thanks in part to Jackson dispersing the
national bank’s deposits among state banks, deposits fell in banks that needed those
deposits the most. More than 600 banks failed, and no part of the country did not
feel the effect of this. The Panic of 1837 also caused the cotton market
to collapse throughout the South. By the 1840s, the Second Bank of the United
States was “meh,” and the recessions continued. The Late 1839-Late 1843 Recession
Ok what kind of name is that? Caused by banks all of sudden now being TOO
conservative and not loaning out enough money, it led to some of the most severe deflation
in American history. Investors were simply too scared, and for four straight
years economic growth was stagnant. The 1847-1848 Recession
Caused by the end of the railroad industry boom which originated in…you guessed it…Great Britain,
this recession featured stock markets crashing, prices falling, and less money being loaned out.
That said, the California Gold Rush quickly ended this recession, ultimately adding more than $2
billion in gold to the American economy alone. The 1853-1854 Recession Meh, this one wasn’t nearly as bad as most
recessions in American history. Caused by banks raising interest rates, it did lead
to a big decrease in railroad investments. The next one was a much bigger deal, though. The Panic of 1857
And it was caused by TOO much investment in railroads. Huh. Go figure!
Specifically, the Panic of 1857 began when the Ohio Life Insurance and Trust Company failed.
This triggered lots of fear, and for the first time in history the fear spread quickly via a
new invention called the telegraph. Once again, even though it wasn’t rational, Americans
lost confidence in banks. They freaked out. And many American history dorks
like myself often forget that the Panic of 1857 was indeed a big
cause of the American Civil War. The 1860-1861 Recession
But THIS recession DOESN’T get blamed for the Civil War, likely
because it was only mild. The reason why? The 1860-1861 Recession saw the first time
clearing houses, or third parties stepping in to make sure deals go through, stepped
in to make sure banks honored trades. DURING the American Civil War, Congress passed
the National Banking Acts of 1863 and 1864, which returned a system of national banks
to the country with the U.S. National Banking System. This finally helped banking
become more consistent across the country. The 1865-1867 Recession
This was another one caused by a war ending. We really ought to think about keeping wars
going forever. Ya know, FOR THE ECONOMY. Anyway, bad deflation happened after the war,
and this deflation happened regularly for the next TWO DECADES. No big deal. The 1865-1867
Recession was caused by production difficulties after the war as so much needed to be rebuilt
and less resources were available. The American South was particularly hit hard. In response,
many white men began making deals with African American sharecroppers, effectively continuing
slave labor even though slavery was now illegal. The 1869-1870 Recession
This was a weird one. It happened during a particularly prosperous time in
the railroad industry and when farmers were mostly doing just fine. However, many economists say
what caused the 1869-1870 Recession was the same thing that caused the 1865-1867 Recession- it was
hard to produce stuff due to a lack of resources. And it’s now time for the ORIGINAL Great
Depression, man. Not that Great Depression of the 1930s that you’re all familiar with.
The Long Depression Yeah, it WAS originally called
the Great Depression before the, ya know, Great Depression happened. “Long
Depression” is a much more appropriate term, though, since it was technically the
LONGEST depression in American history, lasting from 1873 all the way to
1896. Goodness. That’s crazy time. It all started with the Panic of 1873, a huge
financial panic caused by a number of factors, including the largest bank in
the country, Jay Cooke & Company, failing after spending way more money
than it actually had building the Northern Pacific Railway. But it wasn’t
just Jay Cooke & Company…tons of banks overinvested, leading to more bank failures and
bank runs. Not only that, there were fires. Like, literal fires. Many economists argue that both
the Great Chicago Fire and Great Boston Fire played a role causing the panic. Not only
that, Germany stopped minting silver coins. For the next 23 years, any economic recovery was
short-lived. Deflation was consistently a problem and people generally didn’t trust banks. It was
capped by the Panic of 1893, caused by not only bank failures but crop failures and even President
Benjamin Harrison’s stubborn support for tariffs. The Long Depression was a major cause of first the
Populist Movement and then the entire Progressive Era, that period of widespread reform and
activism between the 1890s and 1920s. After this, the federal government would get more and
more and more involved with the economy, beginning with stuff like controlling
monopolies and passing laws to protect consumers. Oh, a monopoly is when
a single seller dominates a market. The 1902-1904 Recession
Caused by the Panic of 1901, which followed the first stock market crash ever on the New
York Stock Exchange, insecurity in the railroad industry, and even the assassination of William
McKinley, this recession lasted nearly two years. The Panic of 1907
This one was fairly mild. But hey look at this dramatic picture.
Once again, the New York Stock Exchange tanked. A bunch of banks failed and more bank
runs happened. Most economists say this one started when investors bought up too
many stocks of the United Copper Company. This one would have probably been MUCH
worse if not for the efforts of J.P. Morgan, a super rich dude who organized a bunch of
financiers like himself to literally bail out banks. In fact, Morgan famously pledged
quite a bit of his own money. The fact that a small number of really rich dudes had
to save the entire country’s economy was a wake up call, you could say, to the federal
government. (turns) After this there was much more of a national dialogue about having
just one central banking system. (ahem) The Panic of 1910-1911
Now that the Sherman Antitrust Act was being enforced by President
William Howard Taft’s administration, aimed at curbing monopolies, this actually
led to a market panic and stock markets tanked. This recession featured
a return to consistent deflation. Meanwhile, Congress had been attempting to create
a third central bank. Long story short, in 1910, six wealthy and powerful men secretly met on
a secluded island off the coast of Georgia to create the Federal Reserve System. Yeah, I
know it’s uh…I mean there’s an understandable reason why conspiracy theories are common
about the Fed. Rich and powerful people secretly meeting to create arguably the most
powerful institution in the world? Heh. (turn) But it’s important to note that many economists
were on board with it…heck many AMERICANS were on board with it. They were just tired of
financial panics. (turn) Speaking of which… The Recession of 1913-1914
Caused by World War One beginning….so I guess wars aren’t good for
the economy…this one lasted about two years. Congress passed and President Woodrow
Wilson signed into law the Federal Reserve Act on December 23, 1913, and
the Fed has prevented recessions and depressions ever since. Just kidding. Heck,
a recession happened just five years later. The Post-World War One Recession
This one was worldwide…quick but severe. Caused by overproduction throughout North America and
the Spanish flu pandemic, it led to hyperinflation and high unemployment in Europe, which
unfortunately led to a rise of fascism there. The Depression of 1920-1921
Yeah this one wasn’t a “depression” at all. It was a short recession, but 1920 was pretty
painful for a lot of Americans. In fact, that was the most deflationary year in American history.
Prices tanked and hardly anyone was making money. The next one WAS a Depression, though. In fact,
it was THE Great Depression. The real one. The Great Depression
Not only was the Great Depression the worst global economic crisis
in American history, it was the worst global economic crisis in modern world history. Lasting
from 1929 to around 1939 but maybe longer, it had devastating effects. International
trade declined by more than 65%. A third of all banks failed. Economic output went down
by 25%. Unemployment in the United States got as high as 25%, and even as high as 33%
in some other countries. Housing prices went down 67%. Tens of millions of people
lost all their wealth. Literally all of it. And what caused it? Well that answer
is extremely complicated. Here are all the causes. But here, watch
THIS video to get my TOP FIVE causes of the Great Depression.
Yeah it’s a depressing countdown. Most economists say it only truly ended because of all the production created during World
War Two, the deadliest war in history. And then, the war just HAD to end,
and causing yet ANOTHER recession. The Recession of 1945
Yeah, a decline in government spending at the end of the war mainly led to this one. Not
only that, there was just this huge transition with all these soldiers coming home that led
to production stalling for about eight months. The Recession of 1949
This was a mild recession actually mainly caused by the Federal Reserve deciding to
shrink the money supply. It ended when the federal government ramped up spending on…you guessed
it… war…again. The Korean War, to be specific. The Recession of 1953
And this one happened in part because the Korean War ended, but also because the Federal
Reserve decided to shrink the money supply…again. I should chime in here to say that, generally
speaking, the American economy DRAMATICALLY grew from 1945 all the way to the early 1970s, leading
to a standard of living DRAMATICALLY higher than at any point prior in American history. In fact,
it was during this time that the “middle class” even became a well-recognized thing. Still, mild
recessions continued to happen every few years. The Recession of 1958 Caused by a worldwide economic downturn,
this one only lasted about eight months. The Recession of 1960-1961
Caused by the Federal Reserve once again shrinking the money
supply, this one was also fairly quick. The Recession of 1969-1970
Caused by the Federal Reserve once again shrinking the money
supply, this one was also fairly quick. Ok, like I said before, things got
much more serious in the 1970s with this thing called stagflation, one of the
WORST things to ever happen to a society. The 1973-1975 Recession
Stagflation is a combination of a STAGNANT economy, marked by high
unemployment, and HIGH INFLATION, and that about summed up the 1973-1975 Recession. It was
caused by the 1973 oil crisis, when basically a bunch of Arab countries stopped selling oil
to the United States and other countries, leading not only to the price of oil skyrocketing
but also oil shortages. And at the time…uh…the United States and much of the world really,
REALLY depended on oil. This then led to a stock market crash, and the American economy
wouldn’t truly recover until the mid-1980s. The 1980 Recession
Caused by another oil shortage in 1979 but also because a
new Chairman of the Federal Reserve, a dude by the name of Paul Volcker, was like
“we’ve got to do whatever we can to get rid of inflation.” He dramatically raised interest rates,
which led to this recession but also led to… The 1981-1982 Recession
Yep, mainly caused by the Federal Reserve DRAMATICALLY shrinking
the money supply. But the good news for Volcker? It worked. Inflation finally
went way down in the coming years. Early 1990s Recession
This was another mild one, caused by stuff like the
when 32% of savings and loan associations failed in the late 1980s, and also a sharp
rise in oil prices after Iraq invaded Kuwait. And then, something almost unbelievable. The American economy consistently grew
for 10 years straight. (turn) It was the longest period of economic growth
in American history up to that point. Early 2000s Recession
The Dream of the 1990s came crashing down thanks to the collapse of the
speculative Dot-com Bubble, a stock market bubble caused by people investing way too much in a
bunch of internet stuff. The September 11 Attacks also played a role in this recession. Still, the
American economy recovered quite quickly from it. Well here’s one that many of you are probably
familiar with. I know I was deeply affected by it. The Great Recession
One of the worst recessions in American history. Heck, it was even one of the GREATEST
Recessions in American history. Sorry. I’m just trying to make this more engaging for you. You can
watch The Big Short to find out what caused it, but if you don’t feel like watching an AMAZING
film, basically the Subprime Mortgage Crisis that began in 2007 caused it. In the oughts, a bunch
of people bought houses who couldn’t afford them, and then speculative banks gambled the money
they got, and when people couldn’t pay back their mortgages, banks began failing. Some of the
biggest financial institutions in the country, as a matter of fact, failed. Big names like Bear
Stearns, Fannie Mae, Freddie Mac, Lehman Brothers, and AIG. Even the car industry tanked. And yes,
the stock market sank for years. For the first time in American history, the federal government
went crazy bailing everybody out. A $700 billion bank bailout. Hundreds of billions for
other industries and even regular citizens. Many economists say that if it
were not for these bailouts, the Great Recession could have been another
Great Depression. (turn) By late 2009, the economy was growing again. (turn) And uh…I’m
pretty sure you know about this next one, too. The COVID-19 Recession
The only recession in American history single-handedly caused by a pandemic. In
April 2020 alone, more than 24 million Americans lost their jobs, and the unemployment
rate got all the way up to almost 15%, the highest since the Great Depression. That
said, once again the federal government bailed everyone out…mostly large corporations, but
also ordinary Americans…and the economy quickly recovered. In fact, it recovered a bit TOO much,
leading to massive inflation beginning in 2021. So that’s it, that was every recession and
depression in American history. And you know what? That WAS depressing. Because the United
States has had the world’s biggest economy going back all the way arguably to the 1890s, that means
this video kind of also went over every recession and depression in WORLD history since then. “But
Mr. Beat, what about the Panic of 1792??” You know what, FORGET the Panic of 1792! (gasp!) And
forget Panic at the Disco! They were an overrated band anyway. But seriously, obviously historians
say there were more recessions than I mentioned. And I’ll end this video with these thoughts.
Recessions are pretty much inevitable. I don’t think we’ll ever be able to fully prevent them. In
fact, we may even be in one right now and not even realize it yet. At least, certain YouTube channels
have been telling us that for a while now. And recessions suck. Like, they
REALLY suck. For all of us. Recessions mean you and I maybe not being
able to afford to eat. Recessions mean more people desperate on the streets. Recessions
mean more political instability, which often means more chaos…more violence….more wars. And
depressions? Heck, depressions are so bad that it has historically led us to turn to FACISM
as a solution. Yep, if we’re desperate enough, we’ll often put up with a ruthless dictator as
long as we have access to clean drinking water. And by golly I hope this is obvious by
now. Learning about what caused past recessions is absolutely CRITICAL for not
PREVENTING future recessions (turn) because remember, recessions are pretty
much inevitable (turn) but learning about what caused past recessions is
critical for helping us DEAL WITH and RESPOND TO future recessions. For the love of
humanity, let’s stop making the same mistakes. One other thing I didn’t mention.
Because of how we gather economic data, we often are well into a recession before
we even realize we’re in one. What else did I forget to mention? Do you think we are in
a recession right now? I bet at least some of you do. Hey guess what? Thanks for watching,
ya filthy consumers and producers, you.
