1. Causes, Consequences, Comparisons
Depression
Causes, Consequences, Comparisons

2. What led up to the Depression?
Post Civil War economic boom –
Large expansion and investments in railroads – mania (financial and stock market bubble) develops
Banks create large amounts of credit – issue bonds for investment.
Cotton and agricultural exports boom. Farmers prosper.
Rapid technological innovations – steel mills, telegraph.
Rapid expansion of industrial base.
Large inflows of immigrant workers.

3. How did crisis begin in 1873?
Overbuilding in railroads and industrial base
New rail centers unable to repay investment costs
Industry produces more products than can be consumed
Exports fall due to economic downturn in Europe.
Banks overextended cannot pay interest on bonds.
In Fall, 1873 railroad stocks crash, money/credit dries up, bank runs occur.
Cotton prices drop by over 30%
Extensive corruption between corporate executives and politicians
Large wealth disparity between the elite and societry.
Monetary system is antiquated and constricts economy
No Federal Reserve System
Not on gold standard

4. Societal Consequences
Unemployment grows to > 30%, no safety net.
Freedman in South blamed for hard times – Reconstruction era ends.
Immigrants blamed in the North
Public anger and oppression develops against the unfortunate
In 1877, railroads cut pay by 10% and increase stockholder dividends by 10%
Riots, arson, nation-wide strikes followed.
Tens of thousands of families in NYC alone were on relief.
By the 1880’s workers began forming unions.

5. What led to recovery from crisis?
Currency reform – by 1879 the U.S. returned to a gold standard for its money.
Government regulations increased on railroads.
Taxes were increased on foreign capital.
“Village reform” – smaller funded investments locally to employ the local idle workers.
Population growth – increased overall consumer demand.
Exports improved – increased foreign demand for cotton and other U.S. goods.

6. Comparisons to future crises
2008-now
Banks create excessive credit
Yes
Yes – for last 20 years
Corruption
yes
Banks, Madoff, lobbyists
Excessive industrial capacity
China vastly overbuilt
Rapid technological development
Tech bubble, real estate bubble, social media bubble
Scapegoats found
Mexicans
Mexicans, Muslims