Economists make a distinction between panics, crises, and depressions. An industrial or financial crisis reaches its peak in a PANIC, when commodity and security prices fall sharply. The panic is usually followed by a period of depressed activity and readjustment, until confidence is restored and business again reaches a normal level. Almost invariably a crisis is preceded by a period of abnormally high activity, when prosperity is accompanied by inflated prices of commodities, of securities, and of real estate. The earlier crises or panics were mostly the result of European difficulties, and were not so severe or widespread in the U.S. In 1793 the unexpected declaration of war between France and England was followed by troubles for American shipping, and caused a period of decline. Again, after 1802, the peace of Amiens was followed by maritime prosperity, to be ended abruptly by the Embargo and Non-Importation troubles in 1807 and 1808. The War of 1812 brought industry in the U.S. to a low point, from which it recovered rapidly, for several years, only to suffer a slump in the years 1819-22. The first major panic and crisis came in 1837.
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1837 - the era of internal improvements, of building canals, railroads and roads involved excessive extension of credits by banks and unwarranted borrowings by the state governments. A crisis was precipitated by the refusal of Congress to renew the charter of the Bank of the U.S. This was the signal for an outburst of fear; many banks closed, business firms failed, and industry was paralyzed. Some of the states repudiated bonds issued for the payment of improvements and the depression continued for seven or eight years . . . 1844-45.
1857 - after the Mexican War and the discovery of gold in California, the U.S. went through a period of deflation, during which interest rates declined and speculation increased. Railroads were built on a scale far beyond the country's immediate need. The came PANIC! Several large life insurance companies failed, and depression continued, with a short interruption during the war years, until the new industrial development in the late 1860's and early 1870's.
1869 - the MONEY PANIC of this year reached its climax on September 24. Black Friday, the attempt of Jay Gould and Jim Fisk to corner the gold supply of the U.S. At the peak, $1.63 in greenbacks was required to buy $1.00 in gold. The effects were limited to the financial centers, and there were not general disturbances throughout the country. At the same time, however, European markets were disrupted by the opening of the Suez Canal.
1873 - a new period of inflation began about 1868. In the next five years 30,000 miles railroad were built. Joint stock companies were taking the place of old-fashioned partnerships. Industrial expansion was going on at a feverish rate. In Europe during the same years, following the Franco-Prussian War, there was great expansion in Germany and Austria culminating in the "Vienna Crash" of 1873. The break in the U.S. was begun by the failure of Jay Cooke & Company. General business and financial deflation was followed by the worst depression the U.S. had yet seen. This low period continued for about six years, until a new burst of activity which followed the resumption of specie payments in 1879.
The PANIC of 1884 was a money and bankers' panic, precipitated by the failure (May 8) of the firm of Grant and Ward, of which Gen. Ulysses Grant was a partner. The resulting depression was not severe and lasted only about two years - 1886.
1890 - this was another bankers' PANIC, brought on by the failure of Baring Brothers, the great London firm of international bankers, with very close connections in New York City and Boston. Baring Brothers failed November 10. The Bank of England and a strong private banking firm came to their rescue, and the effects of the crises were slight.
1893 - the PANIC or crisis of 1893 was caused by agricultural depression, by unsound railroad financing and perhaps even more by uncertainty about the financial stability of the U.S. The operation of the Sherman Silver Purchase Act was obviously endangering the gold reserves of the treasury. Many banks failed, 20,000 miles of railroad went into receivership, and the following economic depression was prolonged and severe including grave labor disturbances in the East and Midwest. One of the consequences of this crisis was the formal adoption of the gold standard by the U.S.
1901 - stock market PANIC, culminating May 9, as the result of a struggle between the Harriman-Kuhn-Loeb interests and the Morgan-James J. Hill group for the control of the Northern Pacific Railroad. The stock of this railroad was cornered and the collapse of the corner was followed by a general collapse in security prices.
1907 - the PANIC of this year was a money PANIC, sometimes called the Knickerbocker Trust PANIC, because the failure of that company (October 22) precipitated it. The financial difficulties of that company and of others which failed were caused chiefly by the efforts of the Heinze group to combine control of various banks, copper companies and other interests.
1914 - the outbreak of World War I was followed immediately by PANIC in all the financial centers of the world. Stock and grain exchanges were closed in New York, Chicago and other cities. Clearinghouse certificates were used between banks in settling balances and the treasury immediately made available, under the Aldrich-Vreeland Act of 1908 an ample supply of emergency bank notes, thus enabling the banks to meet the demand for cash while at the same time husbanding their gold reserves. Unlike most PANICS, this one was followed by a sharp expansion in business activity, made necessary by the Allied demand for supplies and munitions. This activity was greatly increased when the U.S. entered the war.
1921 - a new crisis and the beginning of the "primary postwar depression." The end of the war found the U.S. with overexpanded facilities for production and with an accumulation of food and material of all kinds which Europe could not use. One result of the situation was a sharp break in wholesale commodity prices, notably sugar. Readjustment and depression on a minor scale continued for several years until the turn which came with the "Coolidge prosperity" and reached its peak in the "bull market" of 1929.
1929 - the years of the Coolidge administrations witnessed expansion and inflation on a scale hitherto unknown in any country in the world. Inflation n wages, real-estate values, and stock prices seemed to bring prosperity to everyone. While financial activity continued at an unprecedented rate through the summer of 1929, industrial activity was already slowing down. The collapse of the speculative mania in the stock market was slowly followed by a realization that in the U.S. as well as in other parts of the world many grave economic and financial problems had not been faced. These were now to cause the most serious disarrangement of economic structure which the world had yet known. Agricultural depression, the result of falling prices for farm products and for land, cost thousands of farmers their homes through foreclosures. Unemployment and bank failures were greater than ever before in American history. The domestic factors were complicated by foreign affairs, such as reparations and the questions of inter-Allied debts.
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