Dow's account of United States Crises

Continued from...Dow and Stock Market Panic Dates

Dow on Our Own Crises

Here is Dow's account of our own crises:

"The first crisis in the United States during the nineteenth century came in 1814, and was precipitated by the capture of Washington by the British on the 24th of August in that year. The Philadelphia and New York banks suspended payments, and for a time the crisis was acute. The difficulties leading up to this period were the great falling off in foreign trade caused by the embargo and non-intercourse acts of 1808, the excess of public expenditures over public receipts, and the creation of a large number of state banks taking the place of the old United States Bank. Many of these state banks lacked capital and issued currency without sufficient security."

1819, 1825, and 1837.

"There was a near approach to a crisis in 1819 as the result of a tremendous contraction of bank circulation. The previous increase of bank issues had prompted speculation, the contraction caused a serious fall in the prices of commodities and real estate. This, however was purely a money panic as far as its causes were concerned.

The European crisis in 1825 caused a diminished demand for American products and led to lower prices and some money stringency in 1826. The situation, however, did not become very serious and was more in the nature of an interruption to progress than a reversal of conditions.

The year 1837 brought a great commercial panic, for which there was abundant cause. There had been rapid industrial and commercial growth, with a multitude of enterprises established ahead of the time. Crops were deficient, and breadstuffs were imported. The refusal of the government to extend the charter of the United States Bank had caused a radical change in the banking business of the country, while the withdrawal of public deposits and their lodgment with state banks had given the foundation for abnormal speculation."

1847. 1857. and 1866

"The panic in Europe in 1847 exerted but little influence in this country, although there was a serious loss in specie, and the Mexican war had some effect in checking enterprises. These effects, however, were neutralized somewhat by large exports of breadstuffs and later by the discovery of gold in 1848-9.

There was a panic of the first magnitude in 1857, following the failure of the Ohio Life Insurance and Trust Company in August. This panic came unexpectedly, although prices had been falling for some months. There had been very large railroad building, and the proportion of specie held by banks was very small in proportion to their loans and deposits. One of the features of this period was the great number of failures. The banks generally suspended payments in October.

The London panic in 1866, precipitated by the failure of Overend, Gurney & Co., was followed by heavy fall in prices In the Stock Exchange here. In April there had been a corner in Michigan Southern and rampant speculation generally, from which the relapse was rather more than normal."

1873, 1884, and 1893

"The panic of September, 1873, was a commercial as well as a Stock Exchange panic. It was the outcome of an enormous conversion of floating into fixed capital. Business had been expanded on an enormous scale, and the supply of money became insufficient for the demands made upon it. Credit collapsed, and the depression was extremely serious.

The year 1884 brought a Stock Exchange smash but not a commercial crisis. The failure of the Marine Bank, Metropolitan Bank and Grant & Ward in May was accompanied by a large fall in prices and a general check which was felt throughout the year. The Trunk Line war, which had lasted for several years, was one of the factors in this period.

The panic of 1893 was the outcome of a number of causes - uncertainty in regard to the currency situation, the withdrawal of foreign investments and the fear of radical tariff legislation. The anxiety in regard to the maintenance of the gold standard was undoubtedly the chief factor, as it bore upon many others."

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From The Stock Market Barometer by William P. Hamilton, published in 1922