Within a week, similar protests had erupted in Maryland, New York, Pennsylvania, Illinois, and Missouri. The Panic of 1873 was an economic depression for six years. Up until the year 1873, all the dollars in the world were more or less the same value until the international devaluation of silver in 1873. Despite this, Britain did not experience the scale of financial mayhem seen in America and Central Europe, perhaps forestalled by an expectation that the liquidity-constraining provisions of the Bank Charter Act of 1844 would be suspended as they had been in the crises of 1847, 1857 and 1866. Initial protests broke out in Martinsburg, West Virginia, after the Baltimore and Ohio Railroad (B&O) cut workers' pay for the third time in a year. A liberalized incorporation law in Germany gave impetus to the foundation of new enterprises, such as the Deutsche Bank, and the incorporation of established ones. The discovery of large quantities of silver in the United States and several European colonies caused the panic of 1873 and thus a decline in the value of silver relative to gold, devaluing India's standard currency. ; It Was Then the Era of Paper Money, So That the Great Credits Which Were Created Had no Definite Currency Basis. [17][18], In July 1877, the market for lumber crashed, leading several Michigan lumber companies to go bankrupt. (2010). The Northern Pacific Railroad was fueled by massive federal land grants, with over 60 million acres being signed over to Cooke’s firm, which was then used as collateral to take out loans and sell stocks. With the depression, ambitious railroad building programs crashed across the South, leaving most states deep in debt and burdened with heavy taxes. following the ramifications of the 1873 panic, this article proposes an explanation of how an economic crisis transformed into a pivotal political event. Factories began to lay off workers as the country slipped into depression. The Panic of 1873 and the subsequent depression had several underlying causes for which economic historians debate the relative importance. A similar process of overexpansion took place in Germany and Austria-Hungary, where the period from German unification in 1870 and 1871 to the crash in 1873 came to be called the Gründerjahre ("Founders' Years"). [4] The railroad industry was the largest employer outside agriculture in the US and involved large amounts of money and risk. Similarly one may ask, what caused the panic of 1893? Recovery from the crash occurred much more quickly in Europe than in the United States. The economic development of the American nation, p. 356, Reginald Charles McGrane, Ginn & Co., Boston 1950. Alan Behrens is an experienced writer and our editor-in-chief.PNI's goal is to publish high-quality, educational content covering everything from history to current events. United States had just recovered from the Civil War and the country was now busy in constructing railroads. In 1877, steep wage cuts led American railroad workers to launch the Great Railroad Strike. Paul Kleppner, "The Greenback and Prohibition Parties," in Arthur M. Schlesinger (ed.). At 65 months, it is the longest-lasting contraction identified by the NBER, eclipsing the Great Depression's 43 months of contraction. A significant side-effect of this was reduced efforts of Reconstruction, the steps to reincorporate the rebellious southern states and their former slaves turned citizens. The effects of the panic were quickly felt in New York and more slowly in Chicago; Virginia City, Nevada, where silver mining was active; and San Francisco. [46] The U.S., still in the period after the Civil War, continued to be very protectionist.[47][48]. Currency in the nineteenth century was based on specie. Before going into the causes and its impact in details, let us see a summary so that you have an idea as to what it actually was. The resulting outcry raised serious questions about how long the new policy would last. These bonds were incredibly speculative and not very well regulated. [9], Many US insurance companies went out of business, as the deteriorating financial conditions created solvency problems for life insurers. After the 1873 depression, agricultural and industrial groups lobbied for protective tariffs. Foreign Relations in the Gilded Age: A British Free-Trade Conspiracy? Historické štúdie, Volume 1–2, p.239, Slovenská akadémia vied, Historický ústav SAV., Československá akademie věd, Vyd-vo Slovenskej akadémie vied, Bratislava 1955. The panic of 1873-on september 18, 1873 when cooke's firm banking went bankrupt and set off a series of failures. [21] In the immediate aftermath of his victory against France, Bismarck began the process of silver demonetization. The panic and depression hit all of the industrial nations. [38] However there was heavy unemployment in the basic industries of coal, iron and steel, engineering, and shipbuilding, especially in 1873, 1886 and 1893. One of the more famous private individuals who went bankrupt in 1873 was Stephan Keglevich of Vienna, a relative of Gábor Keglevich, who had been the master of the royal treasury (1842–1848) and in 1845 had cofounded a financial association to fund the expansion of Hungarian industry and to protect the loan repayments, similar to the 1870 Kreditschutzverband, an Austrian association for the protection of creditors and the interests of its members in cases of bankruptcy. [39], From 1873 to 1896, a period sometimes referred to as the Long Depression, most European countries experienced a drastic fall in prices. [7] The Act also reduced the domestic money supply, raising interest rates and hurting farmers and others who normally carried heavy debt loads. I was only aware about the Panic of 1893, which as you mentioned was probably just a continuation of the 1873 depression that never ended. Choose from 2 different sets of panic of 1873 flashcards on Quizlet. [19] Within a year, the effects of this second business slump reached all the way to California.[20]. The Act moved the United States to a de facto gold standard, which meant it would no longer buy silver at a statutory price or convert silver from the public into silver coins, but it would still mint silver dollars for export in the form of trade dollars.[6]. Richter (1962), pp. The Jay Cooke & Company promise to build the second transcontinental railroad – soon leading them to declare bankruptcy caused a drastic economic disadvantage for the average citizen. Businesses were expanding, but the money they needed to finance that growth was becoming scarcer. In 1873, a paralyzing panic broke out, the Panic of 1873, caused by too many railroads and factories being formed than existing markets could bear and the … In 1873, a paralyzing panic broke out, the Panic of 1873, caused by too many railroads and factories being formed than existing markets could bear and the …
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