the panic of 1873 (11. 011)

The period of economic stagnation originally referred to as the Great or Long Depression before the interwar slump set new standards for the definition and though caused by a range of contributing factors including the opening of the Suez Canal that was disruptive for entrepôt trade (also controlled by the British Empire, goods from the Far East were formerly warehoused in South Africa with the previous sea route around the Cape of Good Hope and the traditional sailing ships could not be adapted to navigate the new short-cut as the prevailing Mediterranean winds pushed them back into the Red Sea), devastating fires in Chicago and Boston and Germany going off the bimetallic standard—precipitating a fall in silver prices, the financial crisis with global implications was chiefly attributed to rampant speculation by investors in railroads and boom in their construction particularly in the United States following the Civil War. The panic began on this day in 1873 with the collapse of the Jay Cooke & Company, an innovative banking institution and brokerage house that pioneered the use of “wire” transfers and confirming transactions over telegraph lines, overextended and unable to sell on millions in bonds it had secured to build a second transcontinental line. With the railroad company and the bank indebted, bankruptcy soon followed with contagion spreading to other financial institutions and the insurance industry, prompting the closure of the New York Stock Exchange for ten days with immediate redundancies in the manufacturing sector. Railroad workers went on strike in protest of reduced wages, further exacerbating the crisis and knock-on effects overseas which led to a wave in immigration to the States that coincided with the easing of the turmoil by 1879.