• 30%
  • 16.2%
  • 14.6%
  • 18.3%
  • 41%
  • 45%
  • 22%
  • 45.2%

What do you think these numbers represent?  As I’ve written them they’re just random numbers on the page, but they’re actually remarkable numbers.  They represent the % of time the American economy has been in recession according to the NBER since 1855 during specific periods throughout our history.  They’re in a random order so glancing that them is rather meaningless, but you might be surprised if I told you that this data set leads us to a remarkable conclusion – we live in rather tranquil times.

Since 1855 the US economy has been in recession a full 30% of the time.  In the post-war era since 1945 the US economy has been in recession 16.2% of the time.  Since 1980 we have been in recession 14.6% of the time.  Since the year 2000 we have been in recession 18.3% of the time.  The flip side of course is that the economy has been in expansion 83.8% of the time since 1945, 85.4% of the time since 1980 and 81.7% since 2000.  What this shows is that, despite incredible turmoil in the global economy currently, the US economy has undergone a remarkable transformation which has made it a rather tranquil place in which to reside.

We can put this in a bit better perspective if we break down the dates a bit more.  In the period between 1855 and 1900 the economy was in recession 45.2% of the time.  In the period between 1855 and 1945 the economy was in recession 41% of the time.  Between 1855 and 1913 (the creation of the Fed) the economy was in recession 45% of the time.  And in the period since 1913-2011 the economy was in recession 22% of the time.

Of course, we’re doing a bit of data mining here.  There are lot of moving parts and I could make all sorts of sweeping conclusions (not to mention I haven’t adjusted for magnitude of recession – although a glance doesn’t appear to show that it would add much value other than to conclude that the Great Depression was a really horrible time to live through), but one thing is undeniable – the US economy, despite recent turmoil and the largest credit crisis ever, has undergone a remarkable transformation from a high growth highly volatile economy into a steady growth low volatility economy.   And most interesting to me is that the period of the 1800’s (often cited by anti government groups as a period of economic prosperity despite SIX depressions) was actually a period of great turmoil.  Similarly, the periods before and after the creation of the Fed are near mirror images of one another.  The pre-Fed era showing great turmoil and the post-Fed era showing great stability (despite a Great Depression, two world wars and a Great Recession).  As readers know, I have my issues with the way the Fed operates, but generalized negative statements are a bit misleading….

I don’t mean to downplay the current turmoil, but I am a person who likes to take the 30,000 foot view of the macro landscape (and despite my negativity over the last 5 years I am a very optimistic person).  The story of the 235 year history of the USA is one of remarkable economic feats and the single greatest story of economic prosperity man has EVER seen.  Markets at present are pricing in another tough environment as we see a disconnect between earnings and the economy.  Of course, the stock market is not the economy as the market looks ahead in a complex psychological dance that creates a distinct separation between the current economic activity and current market prices.

With this in mind, it’s important, in my opinion, to keep this understanding in perspective as we navigate a difficult period for it is the optimist who is prepared for the good times who will reap the greatest rewards as human perseverance, diligence and innovation drive the economy to expand the majority of the time.  The blind optimist is likely to experience substantial setbacks, however, the measured optimist who manages risks along the way is likely to reach the top of the investment mountain first.

  • 1855-2011 (in recession): 30%
  • 1945-2011: 16.2%
  • 1980-2011: 14.6%
  • 2000-2011: 18.3%
  • 1855-1945: 41%
  • 1855-1913: 45%
  • 1913-2011: 22%
  • 1855-1900: 45.2%

Got a comment or question about this post? Feel free to use the Ask Cullen section, leave a comment in the forum or send me a message on Twitter.

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  1. Great data find ;) I’m actually very surprised about the pre-1945 numbers. You’d have thought, with all the population growth and technological innovation, recessions would have been quite uncommon. But I guess they were unstable times, with strong growth periods and deep draw-downs.

    Happy xmas and new year btw… I’m glad I’ve discovered your posts this year.

  2. 2000 – 2011 represents the greatest credit bubble in the history of the world, as well as the emergence of resource wars.

    If you think that there are no resource constraints on future growth and that we have fully addressed the credit collapse, then I guess we live in great times.

    But I tend to differ in opinion. The darkest periods of human history are always preceded by the best times; by peaks in civilization. The best times were peaks in technological advances, globalization, consumption, etc… such periods of history are also peaks in civilization’s complexity.

    Complexity however needs a constant and ever-growing stream of inputs to attain an expected level of growing outputs. In our time, the two greatest inputs were cheap credit growth and cheap energy. Take those two things away, and something else slowly emerges.

    We are in a period of papering over what has actually happened… we are in the eye of the storm. I am not a negative person. I am actually the happiest I have been in my personal life. But as a student of history and economics, I foresee a dark period emerging. Maybe the darkest.

    In my opinion, dark periods emerge through-out human history due to two things: 1) society reaches an unsustainable level of complexity and the system tries to simplify itself and 2) Just when things get good, humanity (policymakers) become arrogant and less vigilant to the actual dangers that exist. Furthermore, these same policymakers and influential interests are so vested in the way things are, however unsustainable, that they can not set aside their self interest and address the problems honestly. The system then collapses and overshoots to the downside.

    Joseph Tainter is good reading, IMHO.

    That’s my 100,000 foot macro view.

  3. what a load of rubbish

    you’ve created a society of oligarchs, which has left tens of millions of people in poverty.

    Nothing positive to be read in any of that.

  4. I so clearly remember third grade….

    When I learned that we WOULD be out of oil by 2010. Manhattan WOULD be underwater from global warming and japan WOULD eat our lunch by the time I was grad eee atin from college.

    I’d guess that was 1984. It wasn’t maybe, those things WERE going to happen.

    No job for me when I growed up. Winning!

    Worst short sale in history has been >America, followed by >humanity…. in the long run.

    That all noted and quotably pep rallyish … if Europe doesn’t act (behind the scenes or publicly) recession is a distinct possibility here and depression there. You can’t have a massively negative net savings +bribe nobly who can write an infinite check +bribe cumulative negative current account deficit and get mega happy fun times. It just won’t work. Its eternally raising leverage OR uber recession OR make new money.

  5. Lol. No one can deny where the concentration of wealth is at these days and where the concentration of debt is (that created that aforementioned wealth). Sure, it’s a “muddle” through when looking down from the 30,000 view. Quite comical, in fact:


    A somewhat outdated article, but the trend continues. If congress doesn’t pass the the continuation of the pathetic tax break for the working class, no judge or jury will convict me. In favor of Tiffany & Co. I’m tired of being made a fool of.

  6. You can’t give a date for the end of oil, or the end of an era for that matter. You can only watch for symptoms of a new process unfolding.

    Intensified resource wars fought by proxy. Currency wars to keep economies afloat. Constitutional rights being slashed. Greater and greater concentrations of wealth. Greater and greater energy and financial investments required for each additional unit of energy extracted. Greater and greater debt creation involved to create an additional unit of gdp.

    All these are processes that should be viewed over decades to understand where we are headed. There is no magic date I can give you. I can only point out trends. And these trends, I believe, are all related… connected to each other.

    When the wealth pie shrinks, the big players keep their slices, and the rest give up theirs. In a world of increasing scarcity, freedoms suffer as well. Just look at what is happening to the US Constitution. I graduated Law School in the mid 1990s, and I am amazed at how fast the Constitution has been rendered impotent over the past decade. Power and wealth are being concentrated. Historically, this occurs when the wealth pie shrinks as civilization’s level of complexity outgrows the available amount of inputs necessary to keep it at a static, let alone growing state.

    I’m not saying it’s the end of America, or humanity for that matter. America will likely come out on top – but that doesn’t mean it will be the America you and I grew up in. An honest macro view of the history of humanity tells us that there are bumps along the road. Big ones.

    Thus, the 2000-2011 “recession percentage” metric is worthless.

  7. An alternate interpretation of the series is that the statistic cited has turned around and may now be in an upward trend. At least that is what LA at ECRI has been preaching. More frequent recessions which apparently are getting longer….

  8. Cullen, it’s called a debt bubble! In case you haven’t noticed, the last 3 or 4 decades have seen the greatest expansion of debt (in a debt based money system) ever.

  9. Cullen overlay this data with US Federal budget surplus data. What I get is a picture where the FED can protect the payment system (when it uses its powers correctly – it didn’t do a very good job in 1931) from liquidity crises but it can’t stop run away credit expansion when bad fiscal policy is attempting to run unwise surpluses.

  10. commo…commo…commo…is the key, exploitation of third world country through corruption was a part of the last 50 years prosperity in developped country.

  11. And for all this you need an over-leverage of 30% and biggest credit expansion ever, diminishing returns much. Diminishing returns on complexity (which is a necessity to sustain the current civilization structure) and thermodynamic equilibria, diminishing returns on technological progress (the 1800’s and early 1900 did have an amount of extraordinary progress which hasn’t been repeated, just for the reason that it was ‘foundational’ and the mid 1900 to now has been ‘just’ deepening of the breakthroughs of these times, off course with honourable exceptions).

    Now, let me explain about Soviet Union… Actually if you know the history of Russia you may think than even with a corrupt and inefficient system Russia progressed quite a bit without any economic turmoil for decades with that system 8after all the initial turmoil and a brutal war like no other), but still the system collapsed. Why is this? Because you can’t postpone the inevitable forever and no amount of interventionism can’t stop the inevitable (in fact it can only distort these structural problems for longer). You need to understand that the primary nature of of interventionism is to keep the status quo (for the whole social fabric), this is a truth derived from the experience since the first human civilizations. But when disequilibrium appears it has its own reasons which we can barely grasp and the trends continue even if we try to avoid them by doing ‘more of the same’ (which is actually what most interventionism is actually about). So until the social fabric is ripped by reality institutional and policies don’t/won’t change and every sort of interventionism will increase the disequilibrium even more.

    There are secular cycles and trends that develop over decades or even centuries and then it happens. And no amount of ‘paper shifting’ and ‘financial shenanigans’ to maintain an unsustainable status quo can solve them.

    Yes, I’m bullish on humanity on the long term, but these things happens, and you are not expression a 30.000 ft. vision here IMO, more some sort of 15.000 ft. with narrow scope centred around only some minor (yes, minor) stuff (aggregate GDP growth). For a true examination of the current shape of humanity (please spare me the ‘USA decouples from the world’ impossible scenario, the whole USA depends on external inputs to keep running, it’s very easy to totally disrupt the whole civilization within a matter of hours with a supply shock) you need a much deeper vision around demographic, technological and resource trends (including waste, efficiency, natural capital destruction, etc.). Otherwise is just a matter of ‘ivory tower’ vision (a disease too common amongst financial types and economists).

  12. how strange – under the gold standard (and consequent forced deflationary adjustments after economic booms) recessions were more prevalent than under fiat currency and the fed. who could have thought…

  13. Cullen is for sure an optimistic person and a big reason I visit here daily since Finding out a bit about MMT. Those saying interest rates were going up year after year caused me to look for why they were so mistaken despite their confidence.
    Solution will come from optimistic people that know how the system works so I want to stay around until TPC gets bored trying to teach . As trying as it must get, be sure that your message is making a difference at least to this student. Now we will see if this investor can apply a bit of the class work to results in 2012.
    Season’s good wishes.

  14. Mauldin’s latest (is he on the short-squeeze business on the side?:-)


    He has a positive mention for BTX. If he is doing his homework right, and there is some meat to the story, a hell of a short squeeze on the stock may be coming (it started yesterday when It went up over 20%, before Mauldin’s letter went out). BTX short interest is very high at over 30 trading days:


    Disclosure: I took a small long position after hours (today at around 8AM EST) at $5.89, after fully knowing US futures had turned negative. I don’t have the slightest idea about what this puppy will do today or in the future. Perhaps it will decline today but the odds, IMO, indicate otherwise. THIS IS NOT FINANCIAL ADVICE JUST SOME FREE ADVICE POSSIBLE WORHTED LESS THAN THAT.

  15. The mid to late 1800’s seemed to me a disaster. Look at what we would call CPI. Absolutely all over the place, highly positive, then highly negative. Yes, it netted pretty much to zero, but a lot of pain along the way.

    Whenever I read something about the pre-1930’s and see the phrase “the banks started calling in loans” you knew what’s going to happen next.

  16. Interessting data, but in recent years, recessions have gradually changed. Recessions used to be business cycle contractions yielding reduced investment spending, lower business profits, reduced inflation, increased bankruptcies, and increased unemployment. Reconveries were the reverse. The cycle corrected malinvestment and removed inefficient businesses.

    Now the federal government does not allow inefficient businesses to fail nor malinvestment to disappear. During recessions now, the federal government steps in with increased spending to keep the economy moving.

    So now, just three years after the last recession, the economy appears headed for a new recession which the federal government can’t prevent. This last recession brought very little correction of malinvestment or inefficient businesses. The next recession will occur even with a zero interest rate policy and maximum fiscal stimulation.

    This next recession is different.

  17. How can one look and the crisis in the EMU and conclude that the Gold Standard is the best thing ever?

  18. “The story of the 235 year history of the USA is one of remarkable economic feats and the single greatest story of economic prosperity man has EVER seen.”

    That’s sort of a no-brainer, maybe even a tautology, when we consider that this is the first country to be built on both the industrial revolution and market capitalism. That’s at least a bit of an accident of timing. It is, after all, the NEW World. Not that Argentina couldn’t/shouldn’t have done it, too. But it’s largely a question of circumstance and definition. What I think is dangerous about this statement is that it lulls some folks (I’m not including you, Cullen) into believing in American exceptionalism. If you want an economic miracle, take the last 60 years as a baseline and look at Japan, Germany, and Israel (and now more recently the BRICs). Or in the pre-industrialized world, look at the Roman Empire, 100 BCE to 200 CE. But let’s be careful and avoid thinking the past is prologue.

  19. Yes, it is not my intent to show that America is “exceptional”, but rather to show that when placed in the right environment, humans will endure, persevere, innovate and progress. Being a pessimist your whole life is blindly ignoring this reality.

  20. it would be nice to know the depth of the recessions. gold standard people claim that recessions used to be more shallow/shorter, not less frequent. The reasoning being that it is harder to create credit expansion cycles under hard currency. Two GREAT recessions definitely happened under the watchful FED. would be nice to understand if their statement is true. a recassion every three years with -1% drop is less desruptive than the one every 15 years with a -15% drop in output

  21. Well, that’s bullshit, XIX century had some very nasty long depressions.

    Take in mind what happened in Europe, where there wasn’t much gold to be mined (expanding net financial assets). This is when anarchist, socialism and all revolutionary movements appeared, or reactionary jingoism and other nationalist movements appeared because ugly depressions. And this was happening even under industrial expansion and technological development without precedents.

    Still was better than Renaissance, and that better than Middle Ages.