This Day in History – September 18th, 1873

A bank run on the Fourth National Bank, No. 20 Nassau Street, New York City, from Frank Leslie's Illustrated Newspaper, 4 October 1873

A bank run on the Fourth National Bank, No. 20 Nassau Street, New York City, from Frank Leslie’s Illustrated Newspaper, 4 October 1873

On this day in 1873, the U.S. bank Jay Cooke & Company declared bankruptcy, triggering a series of bank failures known as the Panic of 1873. The financial crisis triggered a depression in Europe and North America that lasted from 1873 until 1879, and even longer in some countries. In Britain it started two decades of stagnation known as the “Long Depression” that weakened the country’s economic leadership. The Panic was known as the “Great Depression” until the events in the early 1930s took precedence.

The Panic of 1873 and the subsequent depression had several underlying causes, of which economic historians debate the relative importance. Post-war inflation, rampant speculative investments (overwhelmingly in railroads), a large trade deficit, ripples from economic dislocation in Europe resulting from the Franco-Prussian War (1870-1871), property losses in the Chicago (1871) and Boston (1872) fires, and other factors put a massive strain on bank reserves, which plummeted in New York City during September and October 1873 from $50 million to $17 million.

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