Those most disastrous have usually followed general
injudicious speculation in lands or inflated securities.
The crisis of 1816-1819 in the United States, it is
claimed was due to the speculation and disorder
following the War of 1812. The next occurred in 1825. A
very memorable panic was that of 1837.
The few years preceding had been marked by extraordinary
speculation, carried on with an unsound banking system.
Jackson's "specie circular" caused many banks to
suspend, and credit was generally impaired throughout
the country. Governmental aid was invoked by many
financial institutions, but without avail, as Van Buren,
who had succeeded to the Presidency, insisted upon
individuals righting their own affairs. In 1857 another
period of inflation was followed by another panic. Again
in 1873 there was a severe monetary crisis. Just 20
years later occurred the last panic from which the
country has suffered. (See also Black Friday).
Massive collapse of the economy that normally follows a
period of prosperity. A depression is usually
accompanied by a financial panic or a crash of the stock
market as investors lose confidence and refuse to buy
stocks or make loans. A staggering level of unemployment
is the most immediate and debilitating result. Not all
crashes reach the level of national depression, however.
If the down turn in the economy is short lived and
relatively mild, it is called a "recession." Three major
depressions, so defined because of the depth and
duration of the collapse have occurred in American
history: 1837, 1893, and 1929. Some historians add to
the list the downturns in 1857, 1873, and 1907. There is
a lot of dispute among economic historians and
economists as to the causes of economic depressions.
A term employed by economic writers somewhat loosely to
designate either the acute phase or the whole course of
the disturbances in economic life which have
characterized the last century, and which have recurred
with such frequency as to make them appear inevitable
results of the modern industrial order. The phenomena
involved are so complex that they must be described
rather than defined.
The salient fact in the economic history of recent times
is the alternation of prosperity and depression, of good
times and bad. A period of prosperity with expanding
business, great activity in production and commerce, is
brought suddenly to a close, generally by the failure of
a prominent banking house, bringing with it the fall of
other financial and mercantile concerns.
Business is paralyzed, creditors demand the payment of
claims, and debtors find it next to impossible to secure
the means of payment. Panic rules, and for a time the
whole mercantile structure threatens to collapse. From
such a shock business recovers but slowly, its activity
is reduced to the lowest ebb, and some time elapses
before the restoration of confidence takes place.
This period of depression is much more prolonged than
the acuter phase which precedes it. After a time
business revives and begins to expand. Prices rise and
activity becomes greater. A wave of prosperity again
appears which seems to carry everything before it until
it, in turn, is checked suddenly, and a new "crisis" is
at hand. Lord Overstone, in an oft-quoted passage,
describes these successive phases as follows: "State of
quiescence, improvement, growing confidence, prosperity,
excitement, overtrading, convulsions, pressure,
stagnation, distress ending again in quiescence."
In the absence of any general term to designate this
related sequence of phenomena, the term crisis has
frequently been used to embrace them all. Strictly
speaking, it should doubtless be confined to the acute
stage when the collapse which has been slowly preparing
actually takes place. In like manner, the term panic
applies to the same movement, but expresses it more
subjectively, emphasizing how men feel and act rather
than the conditions which give birth to those feelings
and actions. But as we cannot well break the sequence
and discuss in isolated fashion one of its members, it
will not be deemed inappropriate to discuss in this
article crises, their antecedents, and their
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