The Roosevelt Recession of 1937-38 was a significant economic downturn during the recovery from the Great Depression, caused by monetary and fiscal policies. Key factors included the Federal Reserve's increased reserve requirements, the Treasury's gold sterilization policy, and a shift towards fiscal austerity with the introduction of the Social Security tax. These policies, along with external pressures, led to a sharp decline in GDP and a rise in unemployment, teaching valuable lessons for economic policy.
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The well-intentioned policies of the federal government to sustain the recovery and control inflation inadvertently suppressed economic growth
Gold Sterilization
The Treasury Department's policy of gold sterilization, aimed at controlling inflation, contributed to a reduction in the money supply and worsened the recession
Increase in Reserve Requirements for Banks
The Federal Reserve's decision to increase reserve requirements for banks led to a reduction in the money supply and mirrored the conditions of the Great Depression
The shift towards fiscal austerity, including a reduction in deficit spending and the introduction of the Social Security tax, further exacerbated the recession
The Roosevelt Recession reversed many of the economic improvements achieved during the recovery from the Great Depression, leading to a decline in real GDP, high unemployment rates, and a sharp decrease in industrial production
Reversal of Restrictive Monetary Policies
The government's response to the Roosevelt Recession included a reversal of the restrictive monetary policies, which helped reignite economic growth
Resumption of Deficit Spending
The resumption of deficit spending was essential in pulling the economy out of the recession and setting the stage for a significant expansion in the years leading up to World War II
The Roosevelt Recession serves as a historical example of the dangers of prematurely withdrawing economic support measures and highlights the need for ongoing vigilance and flexibility in economic policymaking
The lessons from the Roosevelt Recession emphasize the importance of measured and well-coordinated economic interventions to foster growth and control inflation
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The economic downturn from 1937 to 1938, known as the ______ Recession, disrupted the United States' rebound from the Great Depression.
Roosevelt
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Key policies of the New Deal
New Deal included public work programs, financial reforms, and regulations to stimulate economic recovery.
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Roosevelt's economic projections in early 1937
President Roosevelt was optimistic, expecting continued growth and recovery.
