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Exploring Lessons from Past Recessions

In light of today’s economic turbulence, business leaders are wondering: what can we learn from past periods of economic downturn that may help us today? Continue reading to find out.

“The past can hurt. But the way I see it, you can either run from it, or learn from it.” - Walt Disney

COVID-19 Pandemic Induced Recession, 2020

The COVID-19 Recession (sometimes referred to as the Great Lockdown) was a global economic recession caused by the COVID-19 Pandemic. The recession began in most countries in February-March 2020. As a 100-year plague type event, the global economy itself was generally in good shape when this external threat impacted the market. The rapid closure of markets and movement of people and goods stunted the economy and caused a rapid drop in economic activity. In the US, the underlying economy was generally healthy, so it was not the usual circmstances for a recession or central bank intervention.

When it became evident that COVID-19 would become a world-wide pandemic, the US economy was shut down due to this 100-year plague. At that time, the Federal Reserve Bank intervened again, stimulating the economy, providing ‘helicopter’ money to rescue industries, businesses, and consumers from the consequence of the sudden stop in forward movement of the economy. In hindsight, the targeted action by the Federal Reserve and Government to put money into the hands of consumers, protect key industries, and launch the PPP program is seen as the vital immediate infusion of capital that helped consumers, small businesses, and impacted industries stay afloat until the economy turned around. Since the underlying economy was healthy prior to the crisis, this recession lasted only a few months, and the economy rebounded.

In hindsight, in its response to the COVID-19 pandemic, the Federal Government implemented more quantitative easing, lowering borrowing rates, using the tools honed during the Great Recession of 2007-2009 saying that they “would keep rates near zero” until they were “confident that the economy” had weathered COVID-19 and was back “on track to achieve its maximum employment and price stability goals” (Milstein and Wessel, 2021).

According to the Federal Reserve Bank of Richmond, at the start of the COVID-19 pandemic, there was also an increase in C&I or “loans to business enterprises”. However, unlike the Great Recession, this trend did not continue in other sectors such as consumer loans. (Ennis & Jarque, 2021). Unfortunately, as we were coming out of this short-lived recession, the Federal Reserve and the Government kept adding new money, assistance, and programs to the economy ‘over juicing’ the economy leading to rampant speculation and ultimately seeding the economy crisis of today. The Federal Reserve Bank continued purchasing Mortgage Backed Securities through February 2022, and this artificially kept housing mortgage rates low, fueling rampant inflation, housing price increases, and speculation.

When the history books are written, they will observe that the Federal Reserve kept historically low interest rates in place providing excess capital long after the economy had turned around, causing speculation to rise, and fueling employment demand well beyond healthy levels, causing unemployment to drop to 3.5%, well below what economists view as typical ‘full employment levels’ of 4%. This caused decreases in productivity and wage inflation as companies could no longer find talent to hire, and began to steal-away employees using greater compensation as a luring factor.

The low interest rates and widely available liquidity also spurred inflationary pressures on assets such as residential housing (largely viewed as a hedge against inflation), where some homeowners saw 40% increases in value in only a few years. This rapid rise in price appreciation fueled additional speculation in the housing market causing prices to rise.

The recent economic expansion, speculation, and asset bubbles are unwinding now, and may result in a recession within the next 12 months. What follows in this article are historical narratives of three prior recessions and the government’s responses to turning them around, as well as insight that may help business owners and consumers understand the actions that might be taken next.

The Great Recession, 2007-2009

The Great Recession occurred immediately after the decade-long expansion in US housing market activity that peaked in 2006, when residential construction began declining. From December 2007 to June 2009, the US housing market collapsed due to over speculation and housing purchases that were stimulated by low interest rates, access to easy credit (with such instruments such as ‘no-doc loans’ and, in some cases, highly predatory lending practices), insufficient regulation of the financial industry and the creation of highly complex and leveraged financial instruments, and toxic subprime mortgages.

The terms Mortgage Backed Securities (MBO) and Collateralized Debt Obligations (CDO) amplified speculation, increased leverage, and risk taking in this era. These practices led to high unemployment and the collapse of the housing market as a result. In 2007, losses on mortgage-related financial assets began to cause strains in global financial markets, and in December 2007, the US economy entered a recession.

That year several large financial firms experienced financial distress, and many financial markets experienced significant turbulence. In response, the Federal Reserve provided liquidity and support through a range of programs motivated by a desire to improve the functioning of financial markets and institutions, and thereby limit the harm to the US economy. The Federal Reserve Bank also intervened in ways seldom seen such as over-the-weekend forced ‘marriages’ of weak banks to stronger banks, large transfer of risks, Federal Reserve-led infusions of capital, and direct market manipulations to curb rampant speculation and periodically stun or kill-off those shorting the market. In the fall of 2008, the economic contraction worsened, ultimately becoming deep enough and protracted enough to acquire the label “The Great Recession."


Low interest rates, speculation, failure of government to regulate the financial industry, specifically in terms of mortgage lending. Consumers, lenders, and financial firms took on too much risk via shadow banking systems and credit loaning. Consumers, corporations, and lawmakers participated in “excessive borrowing” which increased housing prices and created “asset bubbles” (Investopedia, 2022). Fligstein and Goldstein (Princeton, 2014) researched and wrote a valuable research paper on the history of this period where banks created and purchased risky mortgage-backed securities (MBOs) and collateralized debt obligations (CDOs), that allowed easy access to capital for residential borrowers, and also allowed extreme leverage to be applied by banks.

Similarities between today and The Great Recession

During The Great Recession, the Federal Reserve lowered interest rates “to the lowest levels seen up to that time… to maintain economic stability” (Investopedia, 2022), and these low rates, along with loose lending practices and regulations allowed rampant speculation. Thankfully, today, the banking industry is much healthier and stronger, with guard rails, regulation, and capitalization that make a banking crisis much less likely today from Mortgage Backed Securities. However, what should not be lost, is that the economy coming out of the great recession was weak, and the Federal Reserve bolstered liquidity in the market through a process called Quantitative Easing (QE), making liquidity availability in the market—otherwise seen as creating the environment for approximate 2% GDP growth rate being achieved on an annual basis for about 8 years following The Great Recession.

What can we learn from The Great Recession?

  • From the Federal Reserve Bank of St. Louis

    • “High levels of debt, uncertain ability of borrowers to repay debt and an expectation that housing prices will always increase (among other factors) created a comfort level that was misguided.”

    • “Risk needs to be understood across all parts of the financial system”

    • “Choices made in the short-run may have long-run consequences that need to be carefully considered.” (2011)

  • From “Winning in Turbulence” 2009, by Darrel Rigby

  • From Harvard Business Review

    • Businesses that survived the Great Recession mastered “the delicate balance between cutting costs to survive today and investing to grow tomorrow do well after a recession.” They played the long game while also acknowledging current cash flow and decisions that could be made to protect the future of the business.

    • “The CEOs of pragmatic companies recognize that cost cutting is necessary to survive a recession, that investment is equally essential to spur growth, and that they must manage both at the same time if their companies are to emerge as post recession leaders”

Source: Harvard Business Review, Roaring Out of Recession (2010)


  • The Great Recession was a result of poor lending practices, increased debt, and poor mortgage lending practices.

  • Businesses that thrived during these times played the long game while acknowledging current strategies they can take to protect their cash flow.

  • It is vital to understand and acknowledge areas of risk in all aspects of a business.

  • Short-term decisions have long-term consequences.

Learn from yesterday, live for today, hope for tomorrow. The important thing is not to stop questioning. - Albert Einstein

Dotcom Bubble, 2001-2002


The Dotcom bubble was a result of “speculative or fad-based investing” in “internet-based companies during the bull market in the late 1990s,” an “abundance of venture capital funding for startups,” and “the failure of dotcoms to turn a profit.” Investors invested greatly in internet-based businesses in the hopes of gaining profit as internet use grew. In 2001, “the bubble ultimately burst, leaving many investors facing steep losses and several internet companies going bust” (Hayes, 2019).

Similarities between today and the Dotcom Bubble

Similar to the increased interest in internet-based businesses, there was an increased amount of interest in housing speculation, stock market speculation, and alternate asset speculation including cryptocurrency during the COVID-19 pandemic. Research from 2021 indicates that “the COVID-19 pandemic encourages investing in digital currencies such as Bitcoin” (Béjaoui et al., 2021). However, like the Dotcom bubble, investment in cryptocurrency according to JP Morgan is “highly speculative” and appears to be in a distinct downturn in the post-pandemic economy as seen in the corresponding chart from NASDAQ.

Source: Nasdaq, Bitcoin (2022)

It is likely that the technologies underlying the cryptocurrency revolution (such as blockchain, digital currency, etc.) will remain, though who the actors will be that remain is a question.

What can we learn from the Dotcom Bubble?

  • From USA Today

    • Many of the internet-based businesses in the Dotcom Bubble, “spent fast and relied on a single source of revenue” such as advertising. Businesses like, which spent fast and failed to diversify their income, did not survive the Dotcom boom. However, businesses with diverse income bases like WebMD Health Corp, are still thriving today.

    • Other businesses were made obsolete by innovation. For example, Palm and Kodak were both negatively impacted by other businesses' innovation of the smartphone.

  • From Corporate Finance Institute

    • Many startups failed to “adopt viable business models, such as cash flow generation.”

    • “Investment in new start-ups and similar tech companies should only be considered after carrying out proper due diligence” including an analysis of “long-term potential” and “sound business models.”

    • Do not invest in “expectations.”

  • From the Journal of E-Business

    • “Many companies failed in defining their market scope.”

    • The “first mover advantage” is not a guarantee of success. It is essential to continue to “develop the right strategic resources,” “leverage the mass market opportunities,” “commit the necessary financial resources as the market evolves,” and a variety of other business strategies.

    • “Low prices aren’t enough” to beat the competition.

    • Alliances with other businesses can be a useful tool for business success.

    • It is vital to have a clear brand to communicate to customers.

    • Invest in the customer relationship.


  • Businesses that withstood the Dotcom bubble had diversified streams of income.

  • Strategy is a greater tool than prediction.

  • Low prices do not guarantee success.

  • Branding and customer relations are key to success.

“The only real mistake is the one from which we learn nothing.” - Henry Ford

Oil Embargo Recession 1973-1975


During the 1973 Arab-Israeli War, “Arab members of the Organization of Petroleum Exporting Countries (OPEC) imposed an embargo against the United States in retaliation for the U.S. decisions to re-supply the Israeli military and to gain leverage in the post-war peace negotiations.” This embargo strained the U.S. economy, as it had grown “increasingly dependent on foreign oil.” Ultimately, the price of oil per barrel quadrupled, “imposing skyrocketing costs on consumers and structural challenges to the stability of whole national economies” coinciding with inflation, the “devaluation of the dollar”(

Similarities between today and the Oil Embargo Recession

Just like the Arab-Israeli War’s influence on the oil prices in the U.S., the Ukraine-Russia war has led to significant increases in the cost of gasoline and diesel prices in the U.S., as the U.S. banned Russian crude oil imports on March 8th, 2022. The COVID-19 pandemic also affected gasoline prices in combination with the Ukraine-Russia war (Statista, 2022).

According to the Federal Reserve Bank of San Francisco (2007), “oil price increases are generally thought to increase inflation and reduce economic growth.” This is because “oil prices directly affect the prices of goods made with petroleum products” and “indirectly affect costs such as transportation, manufacturing, and heating.” The government tried many unsuccessful measures to curb inflation including the popular “Whip Inflation Now” program that failed to curb inflation. Central bankers and governments also sought to curb inflation through wage, price, and rent controls, and that were punishing to property owners and businesses during this era.

What can we learn from the Oil Embargo Recession?

  • All businesses function in a global marketplace and do not go unaffected by external and/or international challenges and changes.

  • The price of oil can be used as a signal or warning sign of inflation.

  • The price of oil influences a variety of products, goods, and services both directly and indirectly.

  • Central bankers and governments can be expected to intervene in markets to curb inflation, and sometimes these interventions have their own undesirable and unintended consequences.


  • Business leaders should acknowledge external events such as war, oil prices, international conflict, and others when strategizing and planning the future of their businesses.

The main takeaway

By looking at past seasons of economic turbulence, we can learn strategies and insights for future and current times of economic turbulence. Insights from The Great Recession exemplify the importance of risk analysis, cash flow projections, and understanding that short-term decisions can have long-term impacts. Insights from the Dotcom Bubble indicate the importance of strategy over expectations, diversified streams of income, clear branding, and pricing strategies beyond low prices.

“You do not move ahead by constantly looking in a rear view mirror. The past is a rudder to guide you, not an anchor to drag you. We must learn from the past but not live in the past.” - Warren W. Wiersbe

For more insights related to navigating current economic turbulence, visit:


Béjaoui, A., Mgadmi, N., Moussa, W., & Sadraoui, T. (2021, July). A short-and long-term analysis of the nexus between Bitcoin, social media and Covid-19 outbreak. Heliyon, 7(7), e07539.

Benbya, H., & Belbaly, N. (2002, December). THE “NEW” NEW ECONOMY: LESSONS LEARNED FROM THE BURST OF DOT-COM’S BUBBLE, DISPELLING THE MYTHS OF THE NEW ECONOMY January 2003. Journal of E-Business, 2(2).

Corporate Finance Institute. (2022, January 21). Dotcom Bubble. Retrieved September 28, 2022, from

Ennis, H., & Jarque, A. (2017, February). Bank Lending in the Time of COVID. Federal Reserve Bank of Richmond. Retrieved September 28, 2022, from

Federal Reserve Bank of St. Louis. (2021, October 5). Lessons Learned from the Financial Crisis: About this Lecture. Retrieved September 28, 2022, from

Federal Reserve Bank of St. Louis. (2013, November 22). Great Recession and Its Aftermath. Retrieved October 14, 2022, from

Fligstein, N. & Goldstein, A. (2014). The transformation of mortgage finance and the industrial roots of the mortgage meltdown. IRLE working paper #133-12.

Gulati, R., Nohria, N., & Wohlgezogen, F. (2010, March). Roaring Out of Recession. Harvard Business Review. Retrieved September 28, 2022, from

Huddleston, T. (2020, April 9). How many recessions you’ve actually lived through and what happened in every one. CNBC.

Investopedia. (2019, June 25). What Ever Happened to the Dotcom Bubble? Retrieved September 28, 2022, from

Investopedia. (2022, May 26). 2008 Recession: What the Great Recession Was and What Caused It. Retrieved September 28, 2022, from

Jantzen, R., Pescatrice, D., & Braunstein, A. (2009). Wal-Mart and the US Economy. Eastern Economic Journal, 35(3), 297–308.

JP Morgan. (n.d.). Cryptocurrencies: Bubble, boom or blockchain revolution? J.P. Morgan Asset Management. Retrieved September 28, 2022, from

Kelly-Barton, C. (2013, December 4). USA TODAY. USATODAY. Retrieved September 28, 2022, from

Milstein, E., & Wessel, D. (2019, December 17). What did the Fed do in response to the COVID-19 crisis? Brookings. Retrieved September 28, 2022, from

Rigby, D. (2009, August 24). Winning in Turbulence. Reed Business Education.

Sommer, J. (2022, August 5). Lessons From the ’80s, When Volcker Reigned and Rates Were High. NY Times. Retrieved October 4, 2022, from

Sorensen, S. (2022, September 23). Arete Coach Review: “Winning In Turbulence” by Darrell Rigby. Arete Coach. Retrieved September 28, 2022, from

Ryan, T. (2022, January 7). Recession Proof Businesses: 40+ Companies That Thrived in Recession [2021 Update]. Klint Marketing - Digital Marketing Agency. Retrieved October 7, 2022, from

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