Long depression of 1873 - part II

After the completion of the transcontinental Union Pacific Railroad in 1869, the public almost immediately requested another, called the Northern Pacific. Jay Cooke banking house needed to raise money for this project, but weakened economic conditions proved the Northern Pacific less attractive to investors. Since railroads were overbuilt, the competition was intense. Meanwhile speculation dominated in railroad securities, as well as in market in general. When the project failed, the connected companies fell as well. Panic started on the New York Stock Exchange forcing the bankers to close trading for ten days. The financial problems returned to Europe, causing a second panic in Vienna and numerous failures in continental Europe before receding. The Long Depression brought instability to the European countries, making international relations worse. For the next two decades, ripple effect from the crisis shook the economies. In the United States recovery began slowly in 1878, after many hardships endured. Read more about the consequences of Long Depression...

Long depression of 1873

The Long depression was the first worldwide economic crisis, which happened in 1873. It began with a building boom in Europe, with massive construction levels taking place in Vienna, Paris and Berlin. In the United States the economy was also over-expanded, particularly in railroad construction. But after the Civil War the country needed rebuilding, therefore housing and construction levels grew quickly. Railroads were built at a record rate and everybody considered that this era of prosperity will never end. The idea of growth was destroyed in 1873, with stock market crash which started the Long Depression. The weak link turned out to be Jay Cooke and Company, a large and respected banking house. Cooke had played a large role in financing the Union war effort by marketing federal bonds to farmers and workers. After the war, the company had become the government's agent in financing railroad construction. However, one wrong decision regarding Northern Pacific Railway caused the demise of the banking house and started a nationwide depression. Read more about the Long Depression here...