A Series Of Unfortunate Recessions : Planet Money A Halloween journey into the economists' worst nightmare, an endless time loop of recession after recession after... | Subscribe to our weekly newsletter here.

A Series Of Unfortunate Recessions

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Hello, and welcome to PLANET MONEY.


It is October 31, 2019 - Halloween.

SMITH: And to celebrate, we wanted to call the scariest economist we could find.


MALONE: We found professor Todd Knoop of Cornell College.


SMITH: Todd, can you hear me?

KNOOP: Yeah, I can hear you.

MALONE: Professor, is it - do you mind turning that music down real quick?

KNOOP: OK. Let me yell at my teenager. Hold on. Turn it down.

SMITH: Professor Knoop is the perfect Halloween guest because he is an expert on real life monsters, the kind that can take away your money, your job, your future. He wrote the book "Recessions And Depressions."

MALONE: The strange thing about a recession or a depression, Knoop 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.

KNOOP: It's the fear that something bad could be lurking around the corner, and we don't know what it is. So to be safe, I stopped spending. I stopped lending. And without that consumption and investment in the economy, demand starts to fall, production overall starts to fall. And many times, what we see with recessions - that they are, in a sense, self-fulfilling. The fear of a recession is actually enough to cause a recession.

SMITH: And like anything that is truly scary, recessions are almost impossible to predict. You can have short ones, long ones.

MALONE: You can have deep and debilitating ones, where the economy shrinks a lot and millions of people lose jobs, or there are recessions that you barely notice.

SMITH: You can go 10 years without a recession, like right now. But in the 1980s, we had two different recessions a year apart.

MALONE: Double dip.

SMITH: And for a long time, economists had a hard time explaining why recessions even happen. An efficient economy, traditionalists thought, should be in 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.

MALONE: And yet, the economy doesn't travel in a nice straight line. It veers drunkenly from overconfidence and boom to collective fear and bust. There is clearly a glitch in the system.

SMITH: A monster in the basement. And in order to see it, professor Todd Knoop says, you have to go back in time and you have to look at each different recession.

MALONE: And so we decided to do some virtual time travel by going over to the New York Public Library right across the street from our studios.

Yeah, this is good.

We are in the giant Rose Reading Room. It is so quiet.

SMITH: Hello.


SMITH: You have books.

MALONE: We walk over to the dusty financial books section.

SMITH: Nobody comes here. And yet, on these shelves - 100 years' worth of recession.

MALONE: Bank runs.

SMITH: Yeah, bank panics - 1880 to 1910. That's a good one...

MALONE: There's a lot of those...

SMITH: Oh, postwar economic slowdowns. This one's a classic.

MALONE: Robert, look at this one. Look at this Harry Potter-looking book.

SMITH: Oh, it's those sort of...

MALONE: Bound in unicorn hide or something.

SMITH: Vellum. Vellum is not unicorn skin.

MALONE: (Laughter).

SMITH: The book is called perceptia - Latin...

MALONE: It's Latin. Latin - recession...

SMITH: Rules of recession.


SMITH: Look at this. Look at this. Look at this. It says the word recession is like a curse. Kind of like if you just repeat it out loud enough times, that you'll, like, send your economy tumbling backwards in time.

MALONE: Like, Beetlejuice, Beetlejuice, Beetlejuice?

SMITH: Yeah.

MALONE: Recession, recession, recession.


MALONE: Uh-oh.

(Voice warping) Noissecer (ph), noissecer, noissecer.

UNIDENTIFIED PERSON #1: (Voice warping) This is PLANET MONEY from NPR.


UNIDENTIFIED PERSON #2: I will not take the crap and the harassment from these customers. Now, let him police it or stop selling gas.

SMITH: It is October 31, Halloween, 1974. The country is angry and stuck in an endless line at the gas pump.



SMITH: 1974.

MALONE: We just put a man on the freaking moon. Today on the show, why can't we figure out the rules of a recession?


SMITH: And we're back.

MALONE: We're standing at a gas station in New York City looking at an endless line of people trying to get gasoline.


UNIDENTIFIED PERSON #2: I'm in a line, two hours in, and I can't get gas. This is bologna.

MALONE: Robert Smith, how did we get to this moment?

SMITH: You know, Kenny, I think here, in 1974, we're starting to learn an important rule about recessions. One thing that can send an efficient economy into a spiral is an outside shock we can't control.

MALONE: That is a less fancy way of saying an exogenous shock.

SMITH: Which is a more fancy way of saying something outside the normal happens that suddenly makes everything more expensive.

MALONE: A hundred years ago, the best theory about recessions was that they were caused by sunspots - literal spots and flares on the sun that would randomly send waves of radiation towards the earth, leading to sick crops and then businesses failing and then banks closing.

SMITH: 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.

MALONE: Yes. Last year, 1973, 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.


UNIDENTIFIED PERSON #2: This is bologna.

SMITH: We called up a young professor who was working on his first book about recessions. Professor Todd Knoop of Cornell College.


KNOOP: Hello.

SMITH: Todd, can you hear me?

KNOOP: Yeah, I can hear you.

MALONE: Professor, is it - do you mind turning that music down real quick?

KNOOP: OK. Let me yell at my teenager. Hold on.


KNOOP: Turn it down.

MALONE: Knoop says that everything in this country that touches gasoline has gotten more expensive, which is everything.

KNOOP: And as a result, these shocks have greatly increased the costs of 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 the 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.

SMITH: And now, as we twist this actual gas cap, we peer into the proverbial American gas tank - and it, my friends, is empty.

MALONE: That's awesome. Wait. I want to try that. Recessions. Recessions. Recessions.

UNIDENTIFIED PERSON #3: (Voice warping) This is PLANET MONEY from NPR.

ADAM DAVIDSON, BYLINE: Hello, and welcome to NPR's PLANET MONEY. I'm Adam Davidson.

SMITH: I'm Robert Smith.

MALONE: And I'm Kenny Malone. It is October 31, 2008.

SMITH: It's about 1:55 in the afternoon as we're recording this.

DAVIDSON: It's Halloween. We have some of our co-workers dressed as trees and ballerinas.

SMITH: I saw someone wearing roof shingles and Bubble Wrap.

MALONE: Housing bubble.

SMITH: Wait. It's the housing bubble. That's great.

MALONE: It's fine. Well, look. We're a brand-new show, and we're probably going to spend the next, I don't know, 948 episodes explaining the housing bubble, the mortgage crisis, the financial crisis. But if we could say something right now, Robert...

SMITH: You know, Kenny, I think here in 2008, we're starting to learn an important rule about recessions.

MALONE: Mmm hmm.

SMITH: 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 interconnected the financial system was.

MALONE: Including, apparently, our president at this moment, George W. Bush.


PRESIDENT GEORGE W BUSH: Over the past few weeks, many Americans have felt anxiety about their finances and their future. I understand...

MALONE: Just last month, President Bush interrupted primetime television to address this financial crisis. And as is the tradition of this moment, I have auto-tuned the news. Here is his speech as a song.


BUSH: And ultimately, our country - country - country could experience a long and painful recession - recession - recession.


PRESIDENT FRANKLIN D ROOSEVELT: Fear - fear - fear - more important than currency, more important than gold. And that is the confidence of the people themselves. Let us unite in banishing fear. Together, we cannot fail.

UNIDENTIFIED PERSON #4: Ladies and gentlemen, the president of the United States has spoken to you from the White House in Washington, D.C.

MALONE: You're listening to the Radio Corporation of America, trademark 1933. This is Money World.

SMITH: Greetings and salutations. As you just heard, the president has ordered all the banks closed.

MALONE: This is Roosevelt's second act as president - a temporary lockdown of all banks. He is calling it a national bank holiday.

SMITH: He also ruined the fun notion of a holiday. If you're listening to this broadcast, you cannot take your money to a bank.

MALONE: Or more to the point, you can't get your money out of the bank. For more insight...


SMITH: Operator, get me Cornell 4-7752.

MALONE: ...We rang a very young professor of political economy.

UNIDENTIFIED PERSON #5: Do you accept their call?

KNOOP: I do accept the call.

SMITH: Professor Knoop.

KNOOP: Hello.

MALONE: Professor, is it - do you mind turning that music down real quick?

KNOOP: Let me yell at my teenager.


KNOOP: Turn it down.

MALONE: To recapitulate the past few weeks' events that led to this momentous decision, it began when Americans grew fearful that their banks would go out of business, leaving them kettle and fettle.

SMITH: Atop the feather duster, if you will.

MALONE: Indeed. Americans rushed in terror to their banks to withdraw their funds and the banks, of course, collapsed.

SMITH: People were scared of the banks collapsing, which caused them to withdraw their money, which caused the banks to collapse.

MALONE: Which led to President Roosevelt announcing this bank holiday.

MALONE: Professor Knoop, can you explain for the audience the meaning of this bank holiday?

KNOOP: I do know that FDR called for the close of the banks during the worst of the banking crisis, I think, in an effort to kind of calm the panic. It's not quite clear that closing banks is a good way of calming panic.

MALONE: Will Roosevelt's plan to close the banks backfire?

SMITH: Will he be another Herbie one-term?

MALONE: Only time will tell.

SMITH: You know, Kenny, I think here, in 1933, we are starting to learn an important rule - no matter what kind of shock you're dealing with, a problem with the banks can make it worse. They become a way for the fear to spread faster and further.

MALONE: As our program draws to a close, we leave you in this dark time with a moment of levity from professor Todd A. Knoop.

KNOOP: The old joke is that a recession is when your neighbor loses their job, a depression is when you lose your job.

MALONE: Depression.

SMITH: Depression.

KNOOP: Depression.



SMITH: Hello, and welcome to PLANET MONEY. It is October 31, 2001.

MALONE: We are technically in the midst of what economists are calling a recession.

SMITH: It is a light recession. It is a minor work in the recession oeuvre (ph).

MALONE: It's hard to really see much that has changed, though. Like, unemployment is up to 5.7%, which, you know, is not the worst, actually.

SMITH: And the economy - the economy did shrink a wee bit, a fraction of a percent over 2001, which technically gets us the recession stamp. But people are wondering, are we in an age where all recessions now are minor? Maybe we shouldn't worry about them anymore.

MALONE: Seems right. We called up an economist.


KNOOP: Hello.

SMITH: Is this professor Time Loop?

MALONE: It's Todd Knoop.

KNOOP: Knoop - yes.

MALONE: Is that music on behind you?

KNOOP: Yeah, my teenager's playing loud music.

MALONE: Yeah. Could you turn it up for a second?



ENRIQUE IGLESIAS: (Singing) I can be your hero, baby...

MALONE: Enrique Iglesias, "Hero." All right. That's fine. Turn it down.

KNOOP: All right. Hold on.

MALONE: Thanks.

KNOOP: Turn it down.

SMITH: Look. It is not easy to take this recession seriously, but there have been dramatic things that have been happening. I'm referring, of course, to the busting of the dot-com bubble.

KNOOP: The 1990 bubble destroyed a lot of wealth. A lot of people were holding a lot of their retirement funds in pets.com, and almost all of that is gone.

SMITH: But, Professor, I didn't own any pets.com or any dot-com stocks. Most Americans did not own these stocks. How can something like the dot-com crash cause all of us to become afraid at the same time?

KNOOP: You may not have, but you've watched the news. And you hear stories about people losing money in pets.com. So whether or not you own shares of pets.com, when you see other people losing money on pets.com, you begin to wonder if maybe General Motors is vulnerable in the same way.

SMITH: You know, Kenny, I think here, in 2001, we're starting to learn an important rule about recessions.

MALONE: Maybe the last rule?

SMITH: Sure. In old school economic theory, everyone in the marketplace has perfect information. But, of course, that's not always true. Bubbles happen. And if you build a lot of value on bad information, that value can disappear in an instant.

MALONE: It really is like a kind of shock, like, a reality shock in this case, you know, all of these fanciful dot-com companies going up in vapor.

SMITH: Which we should have known about if you just look at the list of their names, a list of shame...

MALONE: Yeah - www.etoys.com...

SMITH: www.geocities.com...

MALONE: That's a bad one - www.recessionrecessionrecession.com.


MALONE: Robert. Robert.

SMITH: What?

MALONE: You were yelling in the library. Somebody threw a book and hit you in the head. You've been passed out for the last 15 minutes.

SMITH: Oh, my God. I had, like, the craziest dream.

MALONE: Yeah, no, come on. We have a - we got a phone call scheduled.

SMITH: (Laughter).


KNOOP: Hello.

SMITH: Todd, can you hear me?

KNOOP: Yeah, I can hear you.

MALONE: Now, sometimes, on Halloween, a podcast might make some things up. However, professor Knoop, you are in fact a real professor at Cornell College.


SMITH: Professor, a hundred years of recessions, of these monsters that have scared us that have gotten us in the past - you've got your bank runs, your stock market crashes...

MALONE: Exogenous shocks...

SMITH: ...Your exogenous shocks, you know, your mortgage crisis in 2008.

MALONE: Yeah, what is going to get us next? If I were going to dress up this Halloween for the next scary thing, what would it be?

KNOOP: You're dressing up - let me think here. You're dressing up as a trade war.


KNOOP: Because if you think about the recession of 1973, which was a broad-based increase in the cost of doing business, what's something like that that could happen today? A trade war.

MALONE: Trade war - could be scary, could be the thing five years from now we point to when, you know, we say recession, recession...

SMITH: Whoa, whoa, whoa - bad luck even saying a thing like that.


MALONE: PLANET MONEY is looking for our next intern. If you are interested, the application process is open until November 4. You can just go to npr.org/money. And it's a couple clicks away from there.

SMITH: Or we'll remind you about it on our Twitter and our Facebook and Instagram. That's @planetmoney.

MALONE: Today's episode was produced by Nick Fountain. Bryant Urstadt edits our show. And Alex Ghoulmark (ph) is our supervising producer.

SMITH: I'm Robert Smith.

MALONE: I'm Kenny Malone. This is NPR. Thanks for listening.

You want to read that...

SMITH: (Imitating demon, speaking Latin).

MALONE: A demon that barely knows Latin.

SMITH: (Laughter).

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