After the end of the Civil Wolves in 1865, the United States began a period of economic boom. The government and companies invested heavily in railways and shipping, and there was enough income to invest. There was no indication that there was one of the greatest economic crises of the 19th century and one of the first global depressions.
The American economy was recovering rapidly, mainly due to innovations in production within the kind of industries of the revolution. The United States was set to become the world’s leading industrial country. The high economic growth was accompanied by a well-known level of speculative investment in the then modern and rapidly developing industries: especially iron and ship transport or the production of steamships.
For investors, did they choose these branches first? It offered them a commercial and investment opportunity. It was necessary to speed up transport on the table with the growing country of the United States, to effectively trade the entrance and exit times, and thanks to the developing iron industry, to enter the entrance made by goods to consumers in the farthest corners of the country.
Levn pjky rozvjely bankovnictv
In addition to private investment, the massive construction of the railway was supported by the government, which provides both land and subsidies (material support or assistance from public funds). Iron transport has simply provided enormous potential for every investor, manufacturer, trader, consumer, worker. Widespread optimism, high profits and infinite growth in the future have led to the construction of tens of kilometers of new railway lines every year.
Investments in railways were part of the risks. They turned it into a project with a long-term, often debatable, return. The companies needed huge financial resources, which they received in the form of loans. These were relatively available and cheap at the time of the boom. Thus, the banking sector flourished and many of the iron companies entered the American stock exchange.
Among the joint-stock companies, there were also bags that were established with the idea of obtaining as much income as possible for the purchase of the event, without ever carrying out their business changes. As the heat on the railways rose, it increased according to fraudulent companies. Over time, the prices of the event grew to abrade reality. Overinvestment, a source of growing domestic and foreign capital involvement, has resulted in a swelling price bubble.
The crisis started with the collapse of major banks
In 1873, at the height of the Iron Age, the United States was forced to abandon bimetallism, the cover of the house with gold and silver, and inclined to cover only with gold. This caused a decline in domestic pension supply and an increase in annual rates. At the same time, the boom was successful, and investors were willing to invest their pensions in long-term bonds or in long-term companies such as the first railway.
It so happened that, for example, one of the prominent investment banks Jay Cooke & Company was unable to secure debt financing for the construction of its type of continental railway, the Northern Pacific Railway. In 1873, this large financial company declared bankruptcy. This event had a domino effect. Jay Cooke & Company was also followed by other financial corporations and banks.
Although the economic problems did not fully manifest themselves in the USA, the first signs of financial hardship were evident in Austria-Hungary, when the stock exchange in Vienna went bankrupt in May 1873. This was followed by the crisis in the banking system. In the same way, many investors have soared from the so-called companies, when, as in the USA, stock companies have been nicely established without realistic business plans.
Even in Europe, branches such as railways and shipping did not escape investment. The collapse of stock indexes and bank failures in Europe for the United States meant an outflow of capital to European countries, where foreign investors lost their pensions. Zahranin and domc sources vr dried up very quickly. The inability to complete the start of projects and the unavailability of funds resulted in investment and business pessimism and, ultimately, in the correction of overvalued share prices.
Pouen pro pt? Not by any chance
As a result of the turmoil in the financial sector and the stock market, trading on the New York Stock Exchange was stopped for ten days. By the end of June, the plates of iron companies unable to secure their banks had gone bankrupt. Within a year, there were a hundred of them. You should not be discouraged that the construction of new railways has dropped dramatically.
Other logical consequences of the crisis were falling wages, rising unemployment, falling real estate prices (especially around railways) and the loss of profit in industry and the financial sector. Three years after the crisis broke out, it was the largest railway on American railways. The debtors did not agree with the widespread redundancies and sharp declines in wages. The long crisis lasted six years and until the spring of 1879.
But the US financial sector has not benefited from this pain episode. The newly launched prosperity of the gilded age in the eighties of the 19th century was Peru’s deep economic and financial crisis beginning in 1893 and with a mechanism not unlike twenty years ago.
The invitation as a result of the speculation of the heat also proves that the period of 1873 and 1879 was called the Great Depression at the time, not the same notion of villas for a sharp economic decline in the late years of the 20th century.