A Series Of Unfortunate Recessions

Planet Money


This is we want to call the scariest economist we could find we found professor todd new of Cornell College hello can you hear me yeah I can hear you professor do you enter into that music down real quick okay yell at my teenager elva professor new is the perfect Halloween guest because he as an expert on real life monsters the kind that can take away your money your job your future he wrote the book recessions and in depressions the strange thing about a recession or a depression new P- says is that not only is it the boogeyman something we fear but you can make an argument that recessions are in fact created by that very same fear the fear that something bad could be lurking around the corner and we don't know what it is for the be safe I stopped spending I stopped lending and without that consumption and investment in the economy demand starts the fall production overall starts to fall in many times what we see especially that they are in a sense fulfilling the fear of a recession can is actually enough to cause a recession and like anything that is truly scary sessions are almost impossible to predict you can have short ones long ones you can have deepened debilitating ones where the economy shrinks Allott and millions of people lose jobs porp- their recessions that you barely notice you can go ten years without a recession like right now but in the nineteen eighties we had two different recessions a year apart double D and for a long time economists had a hard time explaining why recessions even happen inefficient economy traditional thought should be an equilibrium and if something changes for good or for bad then eventually the economy will adapt there was nothing in the equations about everyone freaking out at the same time and yet the economy doesn't travel in a nice straight line at it veers drunkenly from overconfidence and boom to collective fear and bust there is clearly glitch in the system a monster in the basement and in order to see it professor Todd Nuke says you have to go back in time and you have to look at each different recession and so we decided to do some virtual time travel but going over to the New York public library right across the street from our studios yeah this is good we're in the giant rose reading room it's so quiet how you we walk over to the dusty financial book section nobody comes here and yet on the shelves one Hundred Years Worth of recession bank runs yep bank panics eighteen eighty to nineteen the postwar economic slowdown. This one is a classic this because this Harry Potter Looking Book the sort of founded Unicorn Haider's Alan Velez not you get the book is called Percep- Theo recesses federal Latin Latin recession rules of recession look this is it says the word recession is like a curse Kinda like if you just repeat it out loud enough times that you'll like send your economy tumbling backwards in time like beetlejuice beetlejuice beetlejuice yeah recession recession recession initial estimates estimates on this it I will not take grabbing the harassment from these customers now let him police it stop selling gas it is October thirty first Halloween nineteen seventy four the country is angry and stuck in an endless line at the gas pump this is planet money nine thousand nine hundred seventy four we put a man on the freaking moon today on the show why can't we figure out the rules of recession support for NPR this message comes from the ABC original movie kill Dozer Watch an unmanned bulldozer continuous rampage killed dozen of will movie about a big bulldozer that kills people support for NPR and the following message come from transfer is a smart new way to send spend and save money abroad transfer wise gives you a great exchange rate on every international transaction and you can even get an account that holds forty currencies at once and a debit card to save when you're overseas joined six million people in over seventy countries who are already saving test them out for free at transfer wise dot com slash NPR or download the APP up should I call you Zack you Cowabunga for one zero it's much better you wrote on Reddit that planet newsletter is like meeting a noir detect active in the parking garage for evidence exchange and incriminating photos can you confirm yeah let's incriminating about the newsletter feels like you guys have found some deep dark secret that once the Internet how people sign up in pure dot org slash planning my newsletter you nailed it all right and Rebecca understanding at a gas station in New York City looking at an endless line of people trying to get gasoline I'm GonNa live two hours in can't get gas Robert Smith how did we get to this moment you know Kenny I think here in nineteen seventy four were starting to learn important rule about recessions anything can send an efficient economy into a spiral is an outside shock we can't control that is a less fancy way of saying and exhaustiveness shock which is more than See Way of saying something outside the normal happens that suddenly makes everything more expensive a hundred years ago the best theory about recessions was that they were caused by sunspot what's literal spots and flares on the sun that would randomly send waves of radiation towards the earth leading to sick crops and then businesses is failing and then banks closing I know it sounds ridiculous and of course it is scientifically wrong and yet that is basically what happened this year but instead of the sun it's OPEC the Organization of Petroleum Exporting Countries yes last year nineteen seventy-three OPEC declared an oil embargo against nations that supported Israel that included the United States so the price of gasoline shot up in this country then came the rationing then came the endless lines at the pump then eventually came this very angry man in Queens we call up a young professor who was working on his first book about Recessions Professors Todd New of Cornell College Hello Todd everything in this country that touches gasoline has gotten more expensive which is everything and as a result these shocks have greatly increased the cost the production that greatly increase the cost of doing business and so it's not the fact that people aren't willing to buy it's fact that firms aren't producing like they used to particularly they're not willing to produce at the same prices that they were producing before now as we twist this actual fast Ah American gas tank and it my friends is it's awesome we don't try that ahead hello and welcome to NPR's planet money I'm Adam Davidson Robert Smith and I'm Kenny Malone it is October thirty first two thousand and eight it's about one fifty five in the afternoon as we're recording this it's Halloween we have some of our co workers dressed as trees and arenas said someone wearing roof shingles and bubble wrap housing housing bubble the housing that's fine well look we're a brand new show and we're probably going to spend the next I don't know nine hundred forty eight episodes explaining the housing bubble the mortgage crisis the financial crisis but if we could say something right now Robert Kennedy I think here in two thousand eight we're stunning to learn an important rule about recessions sometimes the shock to the system is not something from the outside but something from the inside that we can't see nobody knew housing prices all across the country could fall at once no one knew how interconnect did the financial system was including apparently our president at this moment George W Bush over the past few weeks many Americans have felt anxiety about the Finances and their future I understand just last month President Bush interrupted Primetime Television to address this financial crisis and as is the tradition of this moment let us you might in banishing fear together we cannot fail ladies and gentlemen the President of the United States has spoken to

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