AHC/WI: 1970s or 1980s Global Economic Depression

Delta Force

Banned
The global economic climate in the 1970s was very poor.

The United States decided to float its currency in August 1971, disrupting the Bretton Woods System in the Nixon Shock. In October 1973 the First Energy Crisis occurred, leading to skyrocketing energy prices that impacted every area of the United States economy due to its very high energy consumption (petroleum was even 20% of electricity production). The result was an energy shortage and skyrocketing inflation, and a decade of stagflation. In 1975 New York City almost defaulted on its debt, and in 1979 the even more severe Second Energy Crisis occurred due to the Iranian Revolution.

The 1970s and 1980s also saw deregulation of the financial markets in the United States, which led to the Savings and Loan Crisis and other economic shocks throughout the 1980s, culminating in the infamous Stock Market Crash on October 17, 1987. Although the Dow Jones fell 22.61% that day, the stock markets recovered rather rapidly.

Even the communist countries were suffering from poor economic performance. The 1970s is recognized as the start of the Era of Stagnation (better known as the Brezhnev Stagnation). In fact, many experts claim that if the Soviet Union would have suffered an economic collapse sometime in the late 1970s or early 1980s if it hadn't been able to benefit from petroleum and natural gas sales.

Given the historically poor economic performance between the early 1970s and early 1980s, it seems it wouldn't have been implausible for something worse to happen. What would it have taken for a global economic depression to have occurred, and what might the results have been?
 
The debtor countries of Latin America collectively decide to default on their loans in 1982, rather than undergo IMF-dictated SAPs. The result is widespread banking failure throughout the US.

Add in some monetarist dogmatism (no, we will not increase the money supply, since increased money supply means inflation), and perhaps a crisis in the Middle-East driving up oil prices, and you've got a decent mess.
 

Delta Force

Banned
What about Western exposure to sovereign debt from Romania and Yugoslavia? Didn't they have high debt loads?
 
Top