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.
The 1873 panic was the moment the United States moved from being primarily an agricultural economy to one whose stock market mattered to ordinary households. Railroad shares had become the country's first mass speculation. The crash made the term 'depression' part of the financial vocabulary — coined as a euphemism for the older word 'panic,' which had become too frightening for genteel use.
03 · American Panics
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.
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