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Crisis Chronicles: The Long Depression and the Panic of 1873

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Abstract

It always seemed to come down to railroads in the 1800s. Railroads fueled much of the economic growth in the United States at that time, but they required that a great deal of upfront capital be devoted to risky projects. The panics of 1837 and 1857 can both be pinned on railroad investments that went awry, creating enough doubt about the banking system to cause pervasive bank runs. The fatal spark for the Panic of 1873 was also tied to railroad investments—a major bank financing a railroad venture announced that it would suspend withdrawals. As other banks started failing, consumers and businesses pulled back and America entered what is recorded as the country’s longest depression.

Suggested Citation

  • Thomas Klitgaard & James Narron, 2016. "Crisis Chronicles: The Long Depression and the Panic of 1873," Liberty Street Economics 20160205, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:87095
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    Keywords

    financial panic; crisis; long Depression; Jay Cook; 1873; inflation bill;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • N2 - Economic History - - Financial Markets and Institutions

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