The Panic of 1873
The Panic of 1873 marked the beginning of The Long Depression. Although most of us today think of The Great Depression as the canonical American Depression, The Long Depression was a big deal in its own right, and has worldwide effects. It lasted twenty-three years, and according to Wikipedia, "The primary cause of the depression was a shortage of available money to facilitate trade." Sound familiar?
Today New York Times writer Jennifer 8. Lee (yes, her middle initial is a number) looks at the circumstances leading up to the Panic of 1873 and the following depression. It's great reading, and particularly instructive in today's situation. Here's a tidbit:
While the 1929 stock market collapse is widely perceived by economists to have played a role in the economic contraction, the stock market collapse in 1873 — much like the one now — came after a building boom created by easily obtainable mortgages and an ensuing banking crisis, said Prof. Scott Reynolds Nelson, whose piece in The Chronicle of Higher Education has been widely translated into Korean, Spanish, Italian and Russian (and noted in our sister blog, Economix).
"Most people don't know a lot about it, but people who do know a lot about it are really creeped out," Professor Nelson said of the 1873 crisis, which resulted in a near total collapse of the financial system.
Read the rest for a great overview (including tons of primary sources) of a financial crisis most of us have never heard of.