is their a book that explains about the depression of the 1870’s and 1890’s?
I need to read about them so I can argue against my economics professor and embarass him
infront of the class for blaming the free market for these depressions.
The reason why I only asked the 1870’s-90’s depression is because
I can’t really explain what caused them to happen. I can explain how the 1920-30
depression happened but not so much about the 1870’-90’s.
thanks!
I haven’t done any research on the topic, but I’m going to bet that the ABCT applies to those depressions just as with the other depressions and recessions.
Quick point for you, though: the 19th century covers 1801-1900.
I don’t have time to go into details so all I’ll say for now is “Wikipedia is your friend.”
I know the governemnt is the cause of the depressions but how did they do it in the 1870’s-90’s?
We can’t blame the central bank because there wasn’t any around when that happened.
I think your best bet would be to read the first chapter of Rothbard’s A History of Money and Banking in the United States, which is online here.
I meant what I said.
From wikipedia:
The causes of the Depression are debated. The primary cause of the depression was a shortage of available money to facilitate trade. The most immediate cause, and the date that is often used as the start of the Depression, was the collapse of the Vienna Stock Exchange on May 9, 1873. Others have argued the depression was rooted in the 1870 Franco-Prussian War that hurt the French economy and, under the Treaty of Frankfurt (1871), forced that country to make large war reparations payments to Germany. 5 milliard (billion) francs in gold, or £200 million, “financed mainly through London” (Clapham,[[Citation Required]] p.286). Germany went on to gold and the price of silver started to fall causing considerable losses of asset values.
In America the speculative nature of financing due to both the greenback which was specie issued to pay for the US Civil War and rampant fraud in the building of the Union Pacific Railway up to 1869 culimnated in the Credit Mobilier panic. Railway overbuilding and weak markets collapsed the bubble in 1873. Both the Union Pacific and the Northern Pacific lines were centre in the collapse; another railway bubble was the UK railway mania. (the modern dotcom bubble of 2001 is very similar).
Because of the Panic of 1873, governments depegged their currencies, to save money. The demonetization of silver by European and North American governments in the early 1870s was certainly a contributing factor. The Coinage Act of 1873 in America was met with great opposition by farmers and miners, as silver was seen as more of a monetary benefit to rural areas than to banks in big cities. In addition, there were Americans who advocated the continuance of government-issued fiat money (United States Notes) to avoid deflation and promote trade. The western US states were outraged–Nevada, Colorado, and Idaho were huge silver producers with productive mines and for a few years mining abated. The resumption of the US government buying silver was enacted in 1890 with the Sherman Silver Purchase Act.
Monetarists believe that the 1873 depression was caused by shortages of gold that undermined the gold standard, and that the 1848 California Gold Rush, 1886 Witwatersrand Gold Rush in South Africa and the 1898-99 Klondike Gold Rush helped alleviate such crises. Other analyses have pointed to developmental surges (see Kondratiev wave), theorizing that the Second Industrial Revolution was causing large shifts in the economies of many states, imposing transition costs, which may also have played a role in causing the depression.
Also:
In 1873, the American economy entered a crisis. This followed a period of post Civil War economic expansion that arose from the Northern railroad boom and the outbreak of equine influenza in 1872.
Called the “Great Epizootic”, the whole street railway industry ground to a halt. Every aspect of American transportation was affected. Locomotives came to a halt as coal could not be delivered to power them while fires in many major cities raged unchecked. One fire in Boston destroyed over 700 buildings. Even the United States Army Cavalry was reduced to fighting the Apaches on foot, who likewise found their mounts too sick to do battle. The outbreak forced men to pull wagons by hand, while trains and ships full of cargo sat unloaded, tram cars stood idle and deliveries of basic community essentials were no longer being made. The affect this disease had on the US economy should not be understated.[1]
The Coinage Act of 1873 changed the United States policy with respect to silver. Before the Act, the United States had backed its currency with both gold and silver, and it minted both types of coins. The Act moved the United States to the gold standard, which meant it would no longer buy silver or mint silver coins.
The Act had the immediate effect of depressing silver prices. That hurt Western mining interests, who labeled the Act “The Crime of '73.” But it also reduced the money supply, which hurt farmers and anyone else who carried heavy debt loads. The resulting outcry raised serious questions about how long the new policy would last. This perception of instability in United States monetary policy caused investors to shy away from long-term obligations, particularly long-term bonds. The problem was compounded by the railroad boom, which was in its later stages at the time.
At the end of the Civil War, there was a boom in railroad construction, with 35,000 miles (56,000 km) of new track laid across the country between 1866 and 1873. The railroad industry, at the time the nation’s largest employer outside of agriculture, involved large amounts of money and risk. A large infusion of cash from speculators caused abnormal growth in the industry.
In September 1873, Jay Cooke and Company, a major component of the country’s banking establishment, found itself unable to market several million dollars in Northern Pacific Railway bonds. Cooke’s firm, like many others, was invested heavily in the railroads. President Ulysses S. Grant’s monetary policy of contracting the money supply made matters worse. While businesses were expanding, the money they needed to finance it was becoming scarcer. Cooke and other entrepreneurs had planned to build a second transcontinental railroad, called the Northern Pacific Railway. Cooke’s firm provided the financing. But on September 18, the firm realized it had become overextended and declared bankruptcy.
And:
The 1880s had seen a period of remarkable economic expansion in the United States. In time, the expansion became driven by speculation, much like the “tech bubble” of the late 1990s, except that the preferred industry was railroads. Railroads were vastly over-built, and many companies tried to take over many others, seriously endangering their own stability so to do. In addition, many mines were opened (frequently with rail connections), and their products, especially silver, began to flood the market. One of the first signs of trouble was the bankruptcy of the Philadelphia and Reading Railroad, which had greatly over-extended itself, on February 23, 1893.[2]
As concern of the state of the economy worsened, people rushed and caused bank runs. The credit crunch rippled through the economy. Smart European investors only took payment in gold, weakening the US gold reserve, which further dropped the US dollar’s value. People attempted to redeem silver notes for gold; ultimately the statutory limit for the minimum amount of gold in federal reserves was reached and U.S. notes could no longer be successfully redeemed for gold. The investments during the time of the Panic were heavily financed through bond issues with high interest payments. The National Cordage Company (the most actively traded stock at the time) went into receivership as a result of its bankers calling their loans in response to rumors regarding the NCC’s financial distress. As the demand for Silver and Silver notes fell, its price and value dropped. Holders worried about a loss of face value of bonds, and many became worthless.
A series of bank failures followed, and the price of silver fell. The Northern Pacific Railway, the Union Pacific Railroad and the Atchison, Topeka & Santa Fe Railroad all failed. This was followed by the bankruptcy of many other companies; in total over 15,000 companies and 500 banks failed (many in the west). About 17%-19% of the workforce was unemployed at the Panic’s peak. The huge spike in unemployment, combined with the loss of life savings by failed banks, meant that a once secure middle class could not meet their mortgage obligations. As a result, many walked away from recently built homes. From this, the sight of the vacant Victorian (haunted) house entered the American mindset.[3]
Just by reading wikipedia you can understand the causes: monetary contraction, fractional reserve banking, monetary expansion (greenbacks), disease, and war.
thanks! I just bought the book so I can take it with me in class, LOL.
For the 1870s, think about the economics effects of the War for Southern Independence and reconstruction, as well as the other government public works schemes (such as all the railroads).
I stumbled upon this thread while looking for information about the Long Depression. After reading the relevant part in Rothbard’s History of Money and Banking in the USA I am in doubt as to whether or not there was a depression. The data on the wikipedia page shows positive GNP growth every dacade (in Europe) from 1870 to 1900. The discussion page for the article says:
From Rothbard’s book, p.155
So was there a depression in the USA or not?? [*-)]