Within a day, other financial houses began to fail, including Fisk and Hatch, believed to be “one of the richest and soundest in New York.” The names of 18 other companies unable to stand by their contracts were read off, leading to greater panic, a scene where “jobbers squared off at each other and screamed and yelled violently, flinging their arms around and producing a scene which bedlam itself could not equal.” The market down in the Exchange, and prices were declining frightfully. The members of the firms who were surprised by this announcement had no time to deliberate. Over one another in general confusion and reached their offices in race horse time. The brokers surged out of the Exchange, stumbling pell mell The brokers stood perfectly thunderstruck for a moment, and then there was a general run to notify the different houses of Wall Street of the failure. The announcement hit Wall Street with the force of a thunderbolt from a clear sky. 18, when the prominent house that had essentially financed the Civil War, Jay Cooke & Company, had a cash crunch - in part because of the collapse of the ill-conceived Northern Pacific Railroad - and said it would suspend payments on the notes it had issued - akin to declaring bankruptcy. The panic here started on a Thursday, Sept. Yet, there were already financial problems in Europe. Prices of commodities were in high, demand pretty Streets and shops were crowded and everywhere new buildings going up. Manufacturers were busy workmen in demand. Prosperity was written all over the face of things. Credit was easy, and new financial instruments were created, including new types of railroad bonds whose values no one could be sure of.Īmerican securities were traded worldwide and about two-thirds of those bonds were held overseas, according to Professor Nelson.Īs one historian, James Ford Rhodes, who lived through the period, observed “Can you imagine how bizarre it would be for a 19th-century historian to write about the lessons of the day?” he said.Ī visit to Google Books and The Times’s archives helps trace the arc of the 1873 crash.īefore the panic, railroad and real estate speculation had been rampant - and values had multiplied To write a financial column for the Motley Fool, which he found amusing. Since his article was published, Professor Nelson, who specializes in 19th-century history, has gotten many calls from Wall Street observers asking about how the 1873 crisis played out. “Most people don’t know a lot about it, but people who do know a lot about it are really creeped out,” Professor Nelson said of the 1873 crisis, which resulted in a near total collapse of the financial Scott Reynolds Nelson, whose piece in The Chronicle of Higher Education has been widely translated into Korean, Spanish, Italian and Russian (and noted in our sister blog, Economix). much like the one now - came after a building boom created by easily obtainable mortgages and an ensuing banking crisis, said Prof. While the 1929 stock market collapse is widely perceived by economists to have played a role in the economic contraction, the stock market collapse in 1873 In trying to make sense of recent events, a historian at the College of William and Mary has argued the crisis is not unlike the Panic of 1873, when rampant real estate speculation culminated in a credit crunch, andīanking failures that led to broad panic in the stock markets. Despite a big rally on Monday after countries around the world vowed to inject new capital into banks, anxieties linger about the long-term effects, particularly in New York, where the city’s economic fate is so closely intertwined with Published in “The United States in Our Own Time,” by Elisha Benjamin Andrews)Ĭomparisons to the stock market crash of 1929 were tossed around last week as the Dow Jones industrial average had its worst week in at least 75 years. (Photo: Originally painted by Howard Pyle. 18, 1873, after the announcement of the failure of the prominent financial house, Jay Cooke & Company, sparked what would become the panic of 1873. Investors running from Wall Street on Sept.
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