- Jan 3, 2019
You are discussing the climax without discussing the antecedence first; which you are attributing the entire link you posted to the entire causation of the crash of 1873, and that's totally a rookie error.No, The postwar boom was charged by the issuing of bonds to build railroads and other projects the overcapacity cause many bonds to be defaulted on... if had read my link you would know... giving us the Panic of 1873... Now, I think you forgot about the 1928 stock market crash which ushered in the Great Depression. The items you mention were just gasoline being added to the fire. Note: Hoovers' desire to stay on the gold standard cause tight money supply so there was no money for the banks... Note: Smoot Hawley was the death nail to the economy in the early 1930's... I would not have to correct your miss interpretation of history if you would read my post and links...
Here's what exactly caused the Depression of 1873:
Preface #1: The Germans had won the Franco-Prussian War, which France was forced to pay Prussia 5 billion in Francs in war indemnities. Therefore, German investors invested a lot of that money in American railroads which were over speculated to begin with but grew out of control once the Germans started to invest.
Economics 101: investors overestimated the profitability of the railroads by investing money in railroads that would not return great rewards. Therefore, the railroad industry was in a bubble, ripe for collapse.
Preface #2: Germany's stopped using silver as monetary metal. The United States used gold and silver as redeemable to give more value to the currency and keep inflation low.
Economics 101: if $1 is fixed to an oz. of gold, that would prevent the dollar from losing value because it is pegged to gold because it is stable. When Germany stopped redeeming silver, it meant there was less of incentive to hold silver and demand for silver dropped and it devalued silver. Because the US and other countries fixed their exchange rates to silver, when the value of silver dropped so did the value of its currency causing inflation. The US and other nations decided to demonetize silver and adhere to the gold standard, which meant less precious metals could redeem currency sharply contracted the money supply and reducing the amount credit available, which lowered investment and circulation.
Preface #3: it Compounded when Germany opened up their economy, increasing German investment, decreasing foreign investment in the United States. Many US railroads relied on foreign investment, so it was bad news. Insert that the railroads in the US were corrupt which made the Europeans reluctant to invest. Insert a housing bubble in Europe which forced Europe in a recession diminishing investment in the US.
Preface #4: Insert Credit Mobilier overcharged the government in conjunction with the recession in Europe from the housing bubble caused investment to diminish.
Now we can insert your link: https://cityroom.blogs.nytimes.com/2008/10/14/learning-lessons-from-the-panic-of-1873/
Can you understand that there was a great build up in monetary, finance and investment problems abroad that culminated that eventually pressurized Jay Cooke to falter, then Pandora's Box was opened and banks collapsed and then the depression s
You automatically posted a link that attributed the depression in 1873 to faltered bonds that were over speculated, but did not realize or were aware of that other variables were the main contributors to the why railroads bonds devalued, and then the subsequent bank failures. All the link you posted explained is how the government tried to buy those defaulted bonds to no avail, but it omitted the immense precursors that were the real culprits, and that's what I was trying to explain to you in post #7...