1980’s Double Dip Recession Overview
The 1980-1982 Double Dip recession brings up the curiosity of how the stagflation of the seventy’s affected the early eighty’s in which it caused the Fed and the USA congress to be switching back and forth from stimulus and restraints causing us to fall to our first recession. Then not till later we will see that Paul Voucher Chairman of the Board of Governors use heavy monetary restraints to control the inflation and ending the first recession only to ending up pushing us back into the second recession of our Double Dip.
II. Cause of the Recession The high inflation rates that started climbing since the year of 1976 was one of the underlying components of the first recession in 1980
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Like the laws that passed to help reduce Tax Cuts were Economic Recovery Tax Act in 1981 which reduced tax on incomes of individuals with a tax rate of above 33% and faster depreciation of write-offs for business equipment and property so that investments could buy up new capital to increase our GDP and possibly increase our potential GDP with these stimulus packages (Recession Prevention Handbook Eleven Case Studies, 1948-2007 Page 224). To help achieve this asset the United States of America borrowed tons of money that increased our debt from 40 billion in 1981 to 180 billion in 1984 thus showing the force that the recession had on the economy driving down demand as the United States still tried to smooth it out by using the fiscal stimulus which creates deficit to make the recession end faster and lower unemployment (http://www.federalreserve.gov/pubs/ifdp/1985/272/ifdp272.pdf). IV. Monetary Policy The Fed’s Started Using monetary restraints by increasing first the Federal Funds Rate to combat the Inflation problems it started in the year of 1978 when Paul Voucher started to raise interest rates at a consistent and fast pace trying to bring down our volatile inflation. As a result the inflation rate started to become a problem in 1978 when it reached 9% inflation rate to finally its peak at a staggering 13.3% in 1979 this resulted in really high FFR rates to go up to historic highs of 20% by the year of 1981