(edit title) The Debate over the 1873-1897 Long Depression Options

[Joemath]

Historians and others continue to debate whether or not
the economic discontinuity from 1873-1897 was a depression.Years of government-promoted speculative credit created an overexpansion of the nation’s railroads. The failure of the Jay Cooke bank set off more bank failures and temporarily closed the markets. Factories laid off workers as the USA
economy slowed significantly.

The New York Stock Exchange closed temporarily. 89 of 364 railroads went bankrupt. A total of 18,000 businesses failed between 1873 and 1875. Unemployment hovered around 14% circa the mid-1870s.

Wage cuts and poor working conditions among railroad workers resulted in the Great Railroad Strike of 1877. President Rutherford B. Hayes sent in federal troops in an attempt to stop the strikes. The tension between workers and the leaders of banking and manufacturing lingered on well after the depression lifted in the spring of 1879. The end of the crisis coincided with the beginning of the great wave of immigration into the United States which lasted well into the 20th century.

The causes of the depression are unclear. The most immediate cause was the collapse of the Vienna Stock Exchange in May , 1873. Some say that the depression was rooted in the Franco-Prussian War that hurt the French economy and forced the payment of large reparations to Germany. Monetarists believe that the depression was caused by a world shortage of gold that undermined the gold standard. The Second Industrial Revolution was causing large shifts in the world economy and the transition costs may have contributed to
a worsening of the economic environment.

The Long Depression was not particularly chronic , unlike the 1929 market crash. The period saw both growth and contraction. Throughout the period prices fell and production grew more slowly.

The Long Depression saw many nations of the world resort to protectionism to shore up failing enterprises. Both Germany and France abandoned free trade. Some say that the long depression contributed to the revival of colonialism in the later nineteenth century as the western powers sought new markets for goods
and services.

Governments at the time did not manage the economy. The laissez-faire
policy of non-intervention prevailed generally. In addition, social welfare
programs were not at today's levels so that the government did not have
large fixed monetary obligations.

The Depression ended by 1897. Thereafter, the global economy saw impressive levels of growth until the advent of World War I.

The parallels today are found in the variable rate mortgage write-offs ,
the large expenditures for the Iraq War, perceived uncertainties over
the constancy of oil deliveries at an affordable price and random Acts of G-d.
i.e. hurricanes, tsunami, volcanic activity and earthquakes

Today's counterbalancing aspects are the possibilities of oil deposits in the
Bakken Oil formation of the Dakotas, alternative energy sources,
the internet superhighway, the personal wealth and equitable position of
the World War II generation, a strong and ever-growing professional
core of workers and the existence of significant standards in the
financial markets. i.e. the Securities Exchange Commission, FDIC and global
standards in Accountancy, the Actuarial Sciences etc. China has an
historic number of power plants coming on board.

What are your reactions on the above?

Joseph S. Maresca

[Fishtank]

Joe, you did it.

I am depressed now. :evil: :evil: :evil: :evil: :evil: :evil:

[Joemath]

I don't think we should be depressed because there are
significant rational strategies to apply in order to
avert any significant downturn. The major USA depressions
were circa:

o 1837
o 1873-1897
o 1929

Importantly, these depressions have been further removed in
time due to the corrective measures implemented in the
capitalist system itself. The monitoring institutions could have
worked better and at an earlier stage. I believe that the
fixation over the war in Iraq impeded progress on other
fronts.

Joseph S. Maresca

[Uncle Fred]

Why is it only in the US this happens, are they incompetent.

[Joemath]

The depressions are a reflection of greed, as well as a lack
of due diligence on the part political institutions.
The USA has had a better experience over the last decades
due to the existence of the Securities and Exchange Commission,
the FDIC and the independent Accountancy profession.

The Federal Reserve has been helpful in monitoring key
economic indicators. Nonetheless, the White House can
derail these institutions by exceeding spending in places
like the Pentagon budget. Seemingly, our banking examiners
knew of the overexpansion of credit. The political
infrastructure did little to remedy the situation until a
crisis loomed. Over the long term, real estate will boom
because the world population is getting larger. Something
substantial must be done to achieve cheaper energy via
alternative sources, judicious exploration, the Artificial Sun
project, potentially more nuclear power plants,
high energy efficient cars , solar and wind mill energy.

Government planners do not understand the difference
between unnecessary regulation and the constant need
for operational auditing and honest financial reporting
to the investing public. Dr. Milton Friedman could have
developed this more in his works. Our economists tend
to overemphasize free markets and laissez faire; however
the Accounting profession provides badly needed financial
reporting which tends to be marginalized by the various
levels of government. Financial reporting provides the
warning signals to the investment public. We need to
develop better strategies to respond to exigencies while
they are in an early developmental stage.

Joseph S. Maresca

[Swedeofile]

It is strange that governments are often highly responsible for worsening economic down turns. I guess it is the result of politicians trying to look like they are hero's saving the country etc.

If you look at the 1929 depression Herbert Hoover has been painted as a laizze-fare politician just his record in office was full of terrible government regulations. Some of the banking regulations such as banks being restricted in the areas they operated in such as only the farm sector, actually caused US banks to fail and the economy to suffer much more then Canada did.

I am just reading about the strikes in the 1870's through the 1890s. It is a shock how labour unions armed the strikers and their families including children to shoot at the managers and owners of companies. Also the bosses were quite hard in complete lockouts.No wonder the National Guar was called in so often.

Henry Frick of Frick Coke and Carnegie Steel was an un-song hero of that age in my opinion . He managed to settle strikes without the hard agitators winning and getting better conditions and pay for his work-force. Not many like him about today!

If anyone thinks the US was bad, they best check how Sweden suffered in the depressions and in fact Europe as a whole. Why do people think europeansd emigrated en-mass to the US years ago it wasn't on a whime.

[Joemath]

In the previous century, women got the right to vote.
Ford Motor Company actually produced an affordable car.
The Wright Brothers took off in a workable airplane.
Industry started booming after 1897.

The Stock Market Crash of 1929 was due to a number
of factors. Speculation and greed were prominent.
Nevertheless, the country's financial institutions were
just beginning to bloom. The Securities Exchange Commission
was chartered. In addition, more rigorous financial reporting
was demanded by investors and the government itself.

Joseph S. Maresca