Panic of 1873

And in the meantime, because he wasn't able to sell enough bonds, he had to basically start financing it all with his own balance sheet, his own money, and through Jay Cook & Co., which was his bank headquartered in New York and Philadelphia at the time.

So because of his big exposure to that investment and he keeps kind of throwing good money after bad, eventually his bank closes and it starts this process where dominoes fall and we have what's called the Panic of 1873, which I believe was called the Great Depression at the time.

It was the biggest downturn the country had had.

So tell us more about how that contagion happened and what did it do to the U.S. economy?

We've alluded to this throughout the conversation that even when there are these big booms and busts at the end, society can really benefit.

So the the cable infrastructure was important for the Internet after the dotcom bubble.

And we have these railroads that provided the infrastructure in the US and so many other parts of the world, even if there was that panic of 1873.

So to close things out.

A l- some of this stuff is a little bit repetitive for a while, but it...

I, I don't wanna skip over too much, just because it really is a really good episode, but I did wanna throw, do you think that this panic of 1873 is kinda like in line with this? Would this be 1873-ish?

Yeah, this is 1873.

Okay.

And it was during this meeting that they made a conscious decision to not enforce the laws keeping prospectors out of the Black Hills.

The country really was not doing good at this point, on account of the Panic of 1873, and there were a lot of people who thought that all that gold up in the Black Hills could save them.

For historian James Donovan, in his book A Terrible Glory, quote, some people in the government began to consider another option, buy the Black Hills from their owners.

After all, jobs were scarce, other western fields had cooled, and an infusion of gold would be good for the precarious economy.

The Panic of 1873 had ushered in a depression, and bankruptcies were frequent, crime rates up, and farm prices down, in no small part due to one of the most severe grasshopper plagues to ever hit the Midwest.

Hundreds of thousands of out-of-work men, many of them Civil War veterans, were desperate for employment.

There was a clamor for both the public and many in the press to open the Black Hills, as unrestrained newspaper accounts embellished and trumpeted potential fortunes, even going so far as to claim that the Black Hills gold could pay off the national debt.

For a while, Cooke was the richest man in America.

But in 1873, months after a stock market collapse in Vienna, Cooke's empire went under, triggering the Panic of 1873 and one of the worst depressions in American history.

Hundreds of railroad companies went belly up, and so did the economies of the United States and much of Europe.

Some of this might sound familiar.

So by the end of the year, we get at least 100 railroads who've defaulted within the, over the next three years, half the railroads in the country go under.

So in the US, you have this massive wave of railroad defaults, and I believe the term that was often used at the time was railroad depression.

Railroads were so integral to the growth of the economy in the 1850s and 1860s that when, in the Panic of 1873 as it was later known, uh, when, when it, when it happened, we said, "Oh, this is a railroad depression." It's a depression that starts with and is, is significantly caused by, um, this implosion of railroad investment.

But railroads aren't the only thing that brings down the global economy in the 1870s.

Indeed, across the industrializing world, the masses were crying for reform.

They had gone from the Panic of 1873, to the Long Depression, to the Panic of 1893, and now they had had enough.

At the close of the 19th century, the public demanded a greater say in the workings of government, a curb on the power of corporations.

more economic stability, and more opportunities for upward mobility.

That was immediately followed by a sequence of financial crises.

In May, the Vienna Stock Exchange crashed, the Gründerkrach.

In September, the US railroad bubble burst, sparking a US banking panic.

In October, the Berlin market collapsed, spreading panic across Europe.

It's a biography of John D. Rockefeller Sr., who created the famous Standard Oil Company.

And this example from the book is talking about the Panic of 1873.

This is after the Civil War and after people were going nuts and on a mad dash to get riches.

And it all came to an end and it ended in six long years of a small depression.

And everything is pointing to him being successful at it during this time while other companies faltered.

And for many reasons, I'm sure, but one of the reasons could be that they had high debt or just less of a reputation and access to cash.

or even if they didn't have debt maybe they just had a very small cash buffer so let's turn this to what we can do in these situations if we do start to experience interest rates climbing we can start to experience on a less dramatic scale right i'm not saying that we're going to have a repeat of the panic of 1873 in the next few months but on a much smaller scale We can see, we may be able to see asset prices, prices of stocks slowly stall here and there if corporate debt starts to become more expensive.

We can see our savings account interest start to go up and say, oh, well, that's a nice perk.

By the early 1880s, he was the most prominent English-speaking anarchist in the country, editing the alarm and helping lead the IWPA's Chicago Wing alongside Auguste Spies.

Auguste was a German immigrant who worked as an upholsterer and got radicalized by the Panic of 1873 and the Railroad Strike of 77.

He joined the Socialist Labor Party and left in the early 1880s over the question of electoral politics.

He, like Parsons, had concluded that elections were just not going to do it.

The panic triggered a stretch of economic contraction that lasted 65 straight months.

It's known as the Panic of 1873, and that is still the longest collapse in US history.

And how do they get ahold of you, Chuck?

503-8306 or email cjohnson@guardianplanners.com.