2008: The Ghost of 1873

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The meltdown of Wall St. is bringing up dates like 1929. As the historian's see things, the parallels are much closer to the "Long Depression" (1873-1896). This period saw much more pain than the '29 downturn. Let's look at the striking similarities.

In Europe, about 1870, Germany becomes a single nation state, leaving behind its cluster of tribes. Paris joins Vienna and Berlin in creating new lending outfits easy mortgages for construction. Life looks good.

And the looks are not what they seem. There is a new disruptive force that is about to show up. Part of that money was loaned to build railroads in the United States, which is just pulling itself together from its own Civil War.

The new railroad system becomes the perfect low-cost (yet profitable) way for the mid-west farmers to become yesterday's China. With the steam ship able to take huge volumes of everything from grain to kerosene and other goods, made at a very low cost because of the new technologies that connected from the fields all the way to the buyers in Europe.

The American Commercial Invasion really kicks Europe's money markets, hard, in May 1873, when the Vienna Stock Exchange crashed. Europe was soon joined by the US when its most prominent bank, Jay Cooke and Co. (Which had lots of money in Northern Pacific), closed. Cook was not alone. 37 other banks and a couple brokerages houses, all went down on 18 September.

Within two days, The New York Stock Exchange closes for 10 days. Less than 3 weeks later, the Great Chicago Fire, kills hundreds and wipes out more than 2,000 Acres (8 KM squared) of downtown Chicago.

During the confusion, the remaining Banks do the only thing they know to do, stop lending. This cascades over to the USA a few months later. The rapidly expanding (and capital intensive) railroads were suffering a melt down because of the 1872 equine influenza outbreak. (It was so bad the US Army Cavalry was so in name only.

Neither the Army or the American Indians they are fighting with have healthy horses.)

Adding to the mess was the Coinage Act of 1873, which removed silver as an option, leaving it with only a gold standard. This lowered silver prices and reduced the domestic money supply. The leveraged railroads took a hit from the economic change along with a sudden oversupply of transportation, due to the massive influenza outbreak.

Germany's Bethel Henry Strousberg railway joins the US Northern Pacific in the race to failure.

Within a few months, 89 railroads (about 1 in 4) in the US are in bankruptcy. Europe pulls out after a couple years, however the US experiences the "Long Depression". This brings the Great Railroad Strike of 1877, and the clash of the Molly Maguires with the coal mining companies.

While some historians claim there never was "any organization in Pennsylvania known as the Molly Maguires, my own grandfather told me of his hiding in the coal piles, as a young boy, listening to meetings.

While the US economy on average takes a beating every 17 or so years, it isn't clear how modern instant and cheap world-wide communications will or will not affect this cycle.

While I don't have any clear answers, I'm guided by a thought from Abraham Lincoln. I understand he said something like,

"When everyone is running north in a panic, its time to head south to see what they left behind."

Tcat Houser is a trainer in Information Technology as well as assisting people understand the most complex computer all, the human brain. This necessitates his being a professional Road warrior.

As A Certified Technical Trainer and Subject Matter Expert (SME) @ TRCB.com it can be difficult to figure out what Tcat is currently researching.

See my lastest work at TRCBVideos.com - Convert Articles, Reviews into Videos Automagically.

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