Era 03 · 1837 — 1907

American Panics

Peak to trough

Repeating cycle, ~20-year cadence

Pulse cycle

4.5s

Between Andrew Jackson and J.P. Morgan, the United States went through six major financial panics. They are often left out of the popular crash canon because no single one of them produced the institutional changes that the 1929 crash later did. But they were each, in their time, severe — and the pattern they established (credit boom, opaque institutions, sudden refusal to pay, contagion via the new communication infrastructure of the era) is the same pattern every later crash has run.

Events in this era

May 10, 1837

Panic of 1837

On May 10, 1837, banks in New York suspended specie payments — they would no longer redeem paper notes for gold or silver. The trigger was the Specie Circular of 1836, an executive order from Andrew Jackson requiring federal land purchases be paid in hard money, which collapsed the credit-fueled western land boom. Within weeks, banks across the country had suspended payment. Cotton prices fell by half. Roughly 40 percent of US banks failed over the next five years. The recovery did not begin until 1843.

~40% of US banks failed; 6-year depression

Sep 18, 1873

Panic of 1873

On September 18, 1873, the investment bank Jay Cooke and Company failed. Cooke had been the leading underwriter of the Northern Pacific Railroad, and the bank's collapse exposed the speculative excess of post-Civil War railroad construction. The New York Stock Exchange closed for ten days for the first time in its history. Roughly 100 banks and 18,000 businesses failed over the next two years. Unemployment reached 14 percent. The depression that followed lasted until 1879 and was the longest in US history until 1929.

NYSE closed 10 days; 6-year depression

May 5, 1893

Panic of 1893

The Reading Railroad failed on February 23, 1893. By May, the National Cordage Company had collapsed in turn, taking the bank that financed it. A run on gold reserves at the US Treasury began in April; by the end of June the country was on the edge of going off the gold standard entirely. Over 500 banks and 15,000 businesses failed. Unemployment reached 18 percent at peak. President Grover Cleveland borrowed $65 million in gold from a syndicate led by J.P. Morgan to keep the Treasury solvent — a dress rehearsal for 1907.

~500 banks failed; ~18% unemployment

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