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Therecession of 1953 was a period of economic downturn in theUnited States that began in the second quarter of 1953 and lasted until the first quarter of 1954. The totalrecession cost roughly $56 billion. It has been described by James L. Sundquist, a staff member of theBureau of the Budget and speechwriter for PresidentHarry S. Truman, as "relatively mild and brief."[1] The 1953 recession is an example of aV-shaped recession, with a sharp three quarter decline that is followed by a sharp recovery.
The recession occurred because of a combination of events during the earliest parts of the 1950s. In 1951, there was a post-Korean War inflationary period and later in the year more funds were transferred intonational security. Furtherinflation was expected into 1952 and the Federal Reserve set in motion restrictivemonetary policy.
The expected inflation never happened, but the policy was still implemented. During this time, the Treasury also lengthened the maturity of the national debt and pursued flexible interest rate policies. Alongside these policies, the Treasury also began to dodebt refunding, which only increased interest rates further and subsequently issued a low percentage bond. The Federal Reserve recognized the increasing interest rates and decided to allow more reserves to be available. This worked, but interest rates plummeted sending the U.S. into ademand-driven recession of output and employment. GDP declined because of government spending and investment.