Good stuff...thanks..
Panic of 1873"The American Civil War was followed by a boom in railroad construction. Thirty-five thousand miles (56,000 km) of new track was laid across the country between 1866 and 1873. Much of the craze in railroad investment was driven by government land grants and subsides to the railroads. At that time, the railroad industry was the nation's largest employer outside of agriculture, and it involved large amounts of money and risk. A large infusion of cash from speculators caused abnormal growth in the industry as well as overbuilding of docks, factories and ancillary facilities. At the same time, too much capital was involved in projects offering no immediate or early returns.[1]
And even as the Union Pacific and Central Pacific railroads were being joined together in May 1869 at Promontory Summit, Utah, hence connecting the east coast to the west coast, the first tremors of over speculation were manifesting themselves in an incident that became known as The Black Friday panic. It was caused by the attempt of Jay Gould and Jim Fisk to corner the gold market in 1869. They were prevented from doing so by the decision of the administration of President Ulysses S. Grant to release government gold for sale. The collapse of gold premiums culminated in a day of panic when thousands of overleveraged speculators were ruined - Friday, September 24, 1869, popularly called Black Friday. There was great indignation against the perpetrators
The Coinage Act of 1873 changed the United States policy with respect to silver. Before the Act, the United States had backed its currency with both gold and silver, and it minted both types of coins. The Act moved the United States to a 'de facto' gold standard, which meant it would no longer buy silver at a statutory price or convert silver from the public into silver coins (though it would still mint silver dollars in the form of Trade Dollars)
The Act had the immediate effect of depressing silver prices. This hurt Western mining interests, who labeled the Act "The Crime of '73." Its effect was offset somewhat by the introduction of a silver trade dollar for use in the Orient, and by the discovery of new silver deposits at Virginia City, Nevada, resulting in new investment in mining activity.[2] But the coinage law also reduced the domestic money supply, which hurt farmers and anyone else who carried heavy debt loads. The resulting outcry raised serious questions about how long the new policy would last.[3] This perception of instability in United States monetary policy caused investors to shy away from long-term obligations, particularly long-term bonds. The problem was compounded by the railroad boom, which was in its later stages at the time.
In September 1873, the American economy entered a crisis. This followed a period of post Civil War economic overexpansion that arose from the Northern railroad boom. It came at the end of a series of economic setbacks: the Black Friday panic of 1869, the Chicago fire of 1871, the outbreak of equine influenza in 1872, and demonetization of silver in 1873...."
Just a coincidence that Warren Buffet bought a RR? I think not...
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