Thursday, March 12, 2009

Did You Say Panic?

The economic news is grim. Open any newspaper. Watch any TV newscast. You can be sure your unease will climb, if not quite to nauseous panic, at least to unsettling concern. I’ve heard people say it’s the worst financial panic ever. I’ve heard others say it’s not quite the “Great Depression” but getting closer. I’ve heard the stimulus packages called “socialism.” I’ve heard others say the stimulus is not enough and government should do more. For a cultural historian who does well to remember how to log in to her on-line bill pay, all the commentary is a bit nerve wracking. How panicked should I really be? Surely this is not the first time all this has happened?

From a historic standpoint, it really isn’t the first time. A quick look into history will provide plenty of other panics for comparison. A short list will bring up the panics of 1807, 1819, 1837, 1857, 1873, 1893, and 1901—and that’s with a fairly narrow definition of panic. And more interestingly, even a cursory read of these past panics brings out some pretty darn familiar buzzwords and situations. In 1837, for instance, land speculation was one of the culprits. Banks printed banknotes to assist in buying real estate—can you say unsound credit? In 1836, President Jackson attempted to contract this paper money supply, tying it more specifically to gold and silver. By 1837, deflation ensued, along with a chain reaction of economic crisis. President Martin Van Buren who inherited the mess, was grilled by constituents for not involving the government more in recovery.

In 1857, a combination of changing world markets, a bank failure due to embezzlement, and lack of confidence in money supply brought about bank closings and unemployment. Historian Miriam Medina claims that 1857 “is notable for the role that telecommunications plays. When a branch of the Ohio Life Insurance and Trust Company fails, news that would formerly have taken weeks to crisscross the nation, its impact diminishing with time, is known within hours, thanks to the telegraph. The news induces one of the first waves of panic selling in the stock market.” Sounds a little bit like the news tickers/commentators and their often panic inducing comments.

In 1873, a major American investment firm, Jay Cooke and Company, became over extended in railroad speculation. The company closed its doors, triggering panic amongst other investors. Combined with the other usual economic issues of deflation and over-production, the country slid into a general panic. One or two large companies made bad decisions, closed their doors and, inadvertently, sent the little companies into panic. Familiar ring to it, isn’t it?

Just knowing others have really lived through similar economic down turns can have a certain comforting effect in these modern times. The fact that many of these previous panics were resolved thanks to wars, famines and riots is perhaps not so comforting. But, if you are tired of talk about the present crisis or just want to throw some new examples into your own economic editorials, check out this on-line article at www.thehistorybox.com, “Panics, Depressions and Economic Crisis Prior to 1930”. The article has excellent primary sources—period quotes from people in the past who have also been through that proverbial economic wringer!

http://thehistorybox.com/ny_city/panics/panics_article1a.htm

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