Panic of 1884

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A newspaper illustration from Harper's Weekly, depicting the scene on Wall Street on the morning of May 14, 1884.

The Panic of 1884 was an economic panic during the Depression of 1882-85.[1] It was notably unusual since it began at the end instead of the beginning of the recession. The panic created a final credit shortage that lead to a significant economic decline in the United States leading to a depression from a recession.[2]

Background[edit]

The gold reserves of Europe were depleted and as it demand rose, more than $150 million in gold was exported out of the United States from 1882 to 1884.[2] Beginning in 1882, the U.S. economy contracted with major available indexes such as railway revenue, coal production, imports, and domestic cotton production declined by more than 25 percent. The New York City national banks, with tacit approval of the United States Treasury Department, halted investments in the rest of the United States and called in outstanding loans.[1] A larger crisis was averted when New York Clearing House bailed out banks in risk of failure. Nevertheless, the investment firms Grant & Ward, Marine Bank of New York, and Penn Bank of Pittsburgh failed along with more than 10,000 small firms.

Causes[edit]

The immediate cause of the Panic of 1884 was the failure of Grant and Ward and Marine National Bank of New York City. These two firms were joined closely together as James D. Fish was a partner in both. When these two major firms collapsed, it had a ripple effect across Wall Street, causing many firms to fail. Another major cause was the Panic of 1873, which involved practices such as speculative bonds and overextension of credit to fund the construction of infrastructure. In addition, this failure undermined the confidence people had in Wall Street as it rebuilt after the events of 1873, especially after it became known that James C. Eno embezzled over $3 million and fled to Canada. Even though the bank replenished the missing amount and avoided failure, the news was still a huge blow to any remaining good will and confidence Wall Street had and furthered the panic. Overall, the panic was mostly contained to New York but acted as a foreshadow to the Great Depression.

Other accounts also blamed the New York Clearinghouse's decision to stop publishing bank-specific information along with other actions since it is viewed to have alleviated the need for a suspension of convertibility.[3] It is argued that this is evidenced in the way the panic was largely confined to New York.[3]

See also[edit]

References[edit]

  • Fels, Rendigs (1952). "The American Business Cycle of 1879-85". Journal of Political Economy. 60 (1): 60–75. doi:10.1086/257151.
  • Sobel, Robert (1968). Panic on Wall Street: A History of America's Financial Disasters. New York: Macmillan. Chapter 6. ISBN 1-893122-46-8.
  • Sangkyun, Park (2012). Contagion of Bank Failures. New York, New York: Routledge. ISBN 978-0415751698.
  • Kane, Thomas (1981). The Romance & Tragedy of Banking: Problems & Incidents of Government Supervision of National Banks. Anro Communications. ISBN 978-0405136597.
  1. ^ a b Sherlock, Thomas J. (2013-04-15). Colorado's Healthcare Heritage: A Chronology of the Nineteenth and Twentieth Centuries Volume One — 1800-1899. Bloomington, IN: iUniverse. p. 287. ISBN 9781475980257.
  2. ^ a b Quentin, Skrabec (2015). The 100 Most Important American Financial Crises: An Encyclopedia of the Lowest Points in American Economic History. Santa Barbara, CA: ABC-CLIO. p. 103. ISBN 9781440830112.
  3. ^ a b Gorton, Gary B.; Tallman, Ellis W. (2018). Fighting Financial Crises: Learning from the Past. Chicago: University of Chicago Press. p. 51. ISBN 9780226479514.