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).

Depression
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.

Economic Crisis
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 consequences. 

 Crises are designated as financial, commercial, and Industrial. These qualifying phrases mark the places in the economic organism where the disturbance is felt. In a purely financial crisis the stock market is the storm-centre, the disturbance affecting but slightly commercial or productive enterprises. A commercial crisis is of wider area, and embraces the trading classes, while an industrial crisis extends its baneful influence to producers in all lines of agriculture, manufactures, and the like. These expressions do not designate so much different classes of crises as crises of different degrees of intensity, inasmuch as an industrial disturbance will market, though a financial panic does not necessarily imply the others.

While crisis and depression are usually associated, this is not always the case. Panic and crises may occur, and after a brief interval affairs may prosper as before. This is particularly true of the purely financial crises, which are not deep-rooted enough to affect wider areas. The crisis in its larger sense, however, is invariably followed by hard times. On the other hand, depression may occur without a panic. It is hardly correct to say that it is ushered in without a crisis, for the phenomena of such a period can usually be observed even if they lack the spectacular elements which so frequently accompany them. It should be observed, moreover, that crises may be local or general, and while they have many points in common, it is particularly the latter with which we have to deal.

General crises affecting the economic situation of an entire country, and extending themselves to other countries which have trade relations with the former, are peculiarly a mark of the modern organization of business. A century ago bad harvest or other calamities might cause local distress, or speculation such as was exhibited in the days of the South Sea Bubble and the Mississippi Scheme might cause a panic, but such occurrences did not show the pertinacity and wide-reaching effects which characterize the modern industrial disturbances. That such crises are inevitable consequences of modern methods of doing business and inseparable from the economic activities of our times, seems to be well established by their frequent recurrence and by their greater severity in the most advanced nations.

Crises more or less pronounced occurred in England in the years 1815, 1825-26, 1836,37, 1847, 1857, 1866, 1873, and 1890, while in the United States like disturbances were felt in 1814, 1818-1819, 1837, 1857, 1873, 1884, and 1893. The periodicity of these occurrences is marked, and certain writers have gone so far as to establish a normal interval of ten or twelve years between crises. The facts as far as we know them do not warrant us in fixing any absolute rule, though the history of these crises reveals many common features.

It will further be observed that the dates given for Great Britain and our own country coincide in several instances, and if space permitted us to draw upon the history of Belgium, Holland, France, and Germany further coincidences would be obvious. Certain crises, notably that of 1873, were felt quite generally. The Actual crash did not occur in the same month, or even in the same year, in all the countries involved, but it is a frequent occurrence that local circumstances may hasten or postpone an event for which the general conditions are preparing.

The concrete manifestations of a crisis can best be studied in an historical instance, and none is better adapted for this purpose than the crisis of 1873 in the United States. With the close of the Civil War an extraordinary activity in all lines of enterprise was manifested. The public lands had been thrown open to settlement, and large tracts had been granted to the Pacific railroads. This, together with the return of the army to the pursuits of peace, and an enormous increase in immigration was the condition for an era of speculative development in the Western States. The impulse which had been given to manufactures, not only by the highly protective duties which marked the war tariffs, but also by the depreciation of the currency, which acted as a check upon foreign competition, caused a similar activity in the manufacturing States of the East. 

Business prospered; prices and profits were high. The census of 1870 showed in every branch of industry a great advance over that of 1860, and the greater part of this advance was in the latter half of the decade. Nowhere was this confidence in the future shown more than in railroad building and in the iron industry. In 1867 there were 2249 miles of railway constructed ; in 1869, 4615 ; in 1871,7379. A like expansion of railways had marked the approach of the panic of 1857. In like manner, the outlay for constructing railways rose from $271,310,000 in 1864-68 to $841,260,000 in 1869-73. 

The consumption of pig-iron, which had been 1,416,000 tons in 1868, rose to 2,810,000 tons in 1873. High prices ruled. The maximum prices in the period following 1860 were, it is true, attained in 1866, but if they fell in the years 1867 and 1868 it was only to rise again to a point nearly equal to that of 1866 in 1871 and 1872. The activity in the commercial centers is reflected in the rise of clearings in the New York Clearing House from twenty-eight billions of dollars in 1868 to thirty-five billions in 1873. The foreign trade of the United States showed a like activity, the aggregate of exports and imports rising from $609,000,000 in the fiscal year 1868 to $1,164,000,000 in 1873.

But even more significant of the expansion of activity in the United States was the fact of increased importations from abroad. In 1870 the imports exceeded the exports by $43,000,000, built in 1872 this excess had become $182,000,000, and in 1873 $119,000,000.The crisis of 1873 is usually dated from the failure of Jay Cooke & Co., September 18. The Stock Exchange of New York was closed on the 20th and was not reopened until the end of the month. Clearing House loan certificates were issued in large quantities. There had been certain premonitory symptoms of the approaching collapse. 

Railroad-building reached its highest point in 1871, pig-iron its highest price in September 1872. The crisis lasted a few months only, the last Clearing House loan certificates being redeemed January 14, 1874. But there followed a long period of depression, which reached its lowest point three years later. The activities which had marked the previous era were not entirely stopped, enterprises begun had to be finished to save what was already invested, the daily needs of the people must be met, but all enterprise was timid and cautious.

The buoyancy of the previous years was gone, and new enterprises were not undertaken. Railroad construction fell off, and in 1875 reached a minimum of 1711 miles, while in the period 1874-78 the outlay for construction was only $357,000,000. Prices fell until 1879, to rise thereafter until 1882. The consumption of pig-iron declined until it reached 1,900,000 tons in 1876. Clearings in New York City fell off from $35,000,000,000 in 1873 to $23,000,000,000 in 1874, and reached their lowest point since 1863 at $22,000,000,000 in 1876. In foreign trade the excess of imports disappeared in 1874.

As the year 1873 marks the outbreak of the crisis, so the year 1876 serves to mark the lowest point in the subsequent depression. The whole story of the crisis, its antecedents and results, is succinctly told in the statistics of business failures, as reported by R.G. Dun & Co., as follows:

Year: 1869 Number: 2,799 Liabilities: 75,054,054
Year: 1870 Number: 3,546 Liabilities: 88,242,000
Year: 1871 Number: 2,915 Liabilities: 85,252,000
Year: 1872 Number: 4,069 Liabilities: 121,056,000
Year: 1873 Number: 5,183 Liabilities: 228,499,900
Year: 1874 Number: 5,830 Liabilities: 155,239,000
Year: 1875 Number: 7,740 Liabilities: 201,000,000
Year: 1876 Number: 9,094 Liabilities: 191,117,786
Year: 1881 Number: 4,735 Liabilities: 65,752,000
Year: 1882 Number: 6,738 Liabilities: 101,547,564
Year: 1883 Number: 9,184 Liabilities: 172,874,172
Year: 1884 Number: 10,968 Liabilities: 226,343,427
Year: 1885 Number: 10,637 Liabilities: 124,220,321

Every crisis, panic, and depression is marked by analogous characteristics. Whatever data are appropriate to show expanding conditions and an inflated condition of business at any particular time and place will exhibit a similar showing. In the United States, particularly since 1840, railroad construction has been a favorite index of conditions, but before the crisis of 1837 similar activity was shown in canal construction. Before the panic of 1825, in England, there were large investments in manufacturing establishments, while the panic of 1893 was preceded by reckless investments in foreign countries.  A period of depression cuts down the existing stock of goods, and the retrenchment of production, coupled with the constant increase of population, creates a void in the market. To fill this there is a renewed activity; as prices begin to rise, existing plants find it difficult to meet the demand. Plants are remodeled and extended. Preparation for future production on a large scale takes place. Large investments of fixed, capital are made in buildings, machinery and the like, and those branches of industry which chiefly serve the purposes of construction, such as the iron industry, make extraordinary advances. Mills and railroads are built to supply an anticipated demand. This is usually overdone, and the facilities of production increase more rapidly than the effective demand for products.  Credit is unduly expanded, and it is natural that the money markets feel the first shock when the inevitable readjustment takes place.

While the phenomena of a crisis and its attendant consequences are generally recognized, the widest variety of opinion exists as to the causes of such economic disturbances. Writers are prone to lay stress upon local or temporary conditions, and to generalize from them. In truth, the phenomena of a crisis are so complex, and the conditions which may aggravate it so numerous, that it is not surprising to see the latter considered as primary causes. Thus, speculation, the currency, the tariff, bad harvests, have all been made responsible for crises. These are frequently concomitant forces impelling a crisis, but crises are so numerous that there must be some deeper underlying cause. 

It has already been noted that panics are most severe in the most advanced and most rapidly developing countries. They are apparently an incident of a changing economic organization. Stationary nations do not feel them. A change in the economic organization of a nation is not the result of plan, but the resultant of individual initiation in trade and industry. The adoption of new machinery, of new motive power, and new means of communication displaces the old, and renders some portions of capital useless. This waste of capital, and its absorption in enterprises not immediately remunerative, disturbs the normal relations of capital to employment and causes crises.

We come, in short, to the conclusion that crises are caused by a lack of coincidence in the laws of growth, of production, and consumption. Changes in the former are rapid, those of the latter slow and gradual. Production is always prone to advance more rapidly than consumption. This proposition seems at variance with accepted theories of political economy, but in reality it harmonizes with them. The struggle for existence which lies at the root of economic life is a contest between Nature's limitations and potential consumption, which is unlimited. But concrete consumption and potential consumption are two different things.

Indeed, we seem to be drawing near the familiar proposition that crises are caused by overproduction. This proposition has been vigorously opposed by those who have taken it in an absolute sense, and have revolted at the idea that production could ever outstrip man's needs, as implying man's incapacity for further development. But if we understand overproduction as a false distribution of products over a series of years in comparison with man's actual consumption, and a false choice of objects of production in comparison with man's potential consumption, we need not revolt at the statement that overproduction---along certain lines---is the cause of crises. Such a statement of the causes of crises seems to lack the precision which characterizes the attribution of crises to definite phenomena, but it must be remembered that the more complex the phenomena to be accounted for, the more general must, of necessity, be the cause to which they are ascribed.

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