Lead Up
The Black Friday panic was caused by the attempt of Jay Gould and Jim Fisk to corner the gold market in 1869. They were prevented from doing so by the decision of the administration of President Ulysses S. Grant to release government gold for sale. The drive culminated in a day of panic when thousands were ruined - Friday, September 24, 1869, popularly called Black Friday.
The
Coinage Act of 1873 changed the United States policy with respect to silver. Before the Act, the United States had backed its currency with both gold and silver, and it minted both types of coins. The Act moved the United States to the gold standard, which meant it would no longer buy silver or mint silver coins.
In September 1873, Jay Cooke & Company, a major component of the country’s banking establishment, found itself unable to market several million dollars in Northern Pacific Railway bonds. Cooke's firm, like many others, was invested heavily in the railroads. At a time when investment banks were anxious for more capital for their enterprises,
President Ulysses S. Grant's monetary policy of contracting the money supply made matters worse. While businesses were expanding, the money they needed to finance that growth was becoming more scarce.
Cooke and other entrepreneurs had planned to build the nation's second transcontinental railroad, called the Northern Pacific Railway. Cooke's firm provided the financing, and ground was broken for the line on February 15, 1870. But just as Cooke was about to receive a $300 million government loan in September 1873, false reports circulated that his firm's credit had become nearly worthless. On September 18, the firm declared bankruptcy.
Problem
In Vienna and Berlin, Paris and London, St. Petersburg and New York, the business cycle had run its course. The failure of the Jay Cooke bank, followed quickly by that of Henry Clews, set off a chain reaction of bank failures and temporarily closed the New York stock market. Factories began to lay off workers as the United States slipped into depression. The effects of the panic were quickly felt in New York, more slowly in Chicago, Virginia City and San Francisco.
The New York Stock Exchange closed for ten days starting September 20. Of the country's 364 railroads, 89 went bankrupt. A total of 18,000 businesses failed between 1873 and 1875. Unemployment reached 14% by 1876, during a time which became known as the Long Depression. Construction work lagged, wages were cut, real estate values fell and corporate profits vanished.
Resolution
This financial panic resolved itself after 6 years. Wages dropped, but prices did more during this period also creating continued efficiencies in the overall economy. Unemployment reached 14%. No reserve, no federal bail out.
Lead Up
The crisis occurred after an attempt by Otto Heinze to corner the market in United Copper, a company that had collapsed that October. When the bid failed, banks that had loaned money for the scheme experienced a number of runs which in time spread to affiliated banks and trusts, leading a week later to the downfall of the Knickerbocker Trust Company. With the collapse of New York's third largest trust company fear spread throughout the city's trusts and across the country as regional banks pulled deposits from New York and as nationwide people withdrew deposits from their regional banks.
Problem
The Panic of 1907, also known as the 1907 Bankers' Panic, was a financial crisis which occurred in the United States when the stock market fell close to 50% from its peak in the previous year. At the time the economy was in recession and there were numerous runs on banks and trust companies. The panic's primary cause was a retraction of loans by a number of banks in New York City, and the sentiment quickly spread across the nation leading to the closures of both state and local banks and businesses.
Resolution
The panic may have been worse if not for the intervention of J.P. Morgan, who convinced other bankers in the city to provide a backstop for the crisis.
This financial panic resolved itself after a short period, about a month. Wages and prices did not fluctuate drastically. Unemployment did not get out of control. No reserve, no federal bail out.
Lead Up
The Clayton Antitrust Act of 1914, (October 15, 1914, ch. 323, 38 Stat. 730, codified at 15 U.S.C. § 12–27, 29 U.S.C. § 52–53), was enacted in the United States to add further substance to the U.S. antitrust law regime by seeking to prevent anticompetitive practices in their incipiency. That regime started with the Sherman Antitrust Act of 1890, the first Federal law outlawing practices considered harmful to consumers (monopolies and cartels). The Clayton act specified particular prohibited conduct, the three-level enforcement scheme, exemptions, and remedial measures. This act is what actually gave the Sherman Act actual capability to act upon. Before the Sherman Act was so vague that much legal discourse over how to actually take action limited its usefulness
Federal Reserve Created.
Created in 1913 by the enactment of the Federal Reserve Act, it is a
quasi-public (government entity with private components) banking system
composed of the presidentially appointed Board of Governors of the
Federal Reserve System in Washington, D.C.
...this enabled one of the major causes...
Debt - A major problem with our current economy - is seen as one of the causes of the Great Depression, particularly in the United States. Macroeconomists including Ben Bernanke, the current chairman of the U.S. Federal Reserve Bank, have revived the debt-deflation view[citation needed] of the Great Depression originated by Arthur Cecil Pigou and Irving Fisher:[citation needed] in the 1920s, American consumers and businesses relied on cheap credit, the former to purchase consumer goods such as automobiles and furniture, and the latter for capital investment to increase production. This fueled strong short-term growth but created consumer and commercial debt.
Problem
The Great Depression was a worldwide economic downturn starting in most places in 1929 and ending at different times in the 1930s or early 1940s for different countries. It was the largest and most important economic depression in modern history, and is used in the 21st century as a benchmark on how far the world's economy can fall.
Extending the Problem
The Smoot-Hawley Tariff Act (sometimes known as the Hawley-Smoot Tariff Act) was an act signed into law on June 17, 1930, that raised U.S. tariffs on over 20,000 imported goods to record levels. In the United States 1,028 economists signed a petition against this legislation, and after it was passed, many countries retaliated with their own increased tariffs on U.S. goods, and American exports and imports plunged by more than half. In the opinion of most economists, the Smoot-Hawley act was partially responsible for the severity of the Great Depression. Once again, another bad example of Government intrusion doing more harm than good.
Short Summary:
In all these cases, the most severe of financial issues occurred, and took longest to recover, when there was much more extensive Government involvement from the Federal Reserve, to the Anti-Trust Acts, to the reinforcement of those, to price controls. In the most severe economic failure listed a distinct and large involvement by the Federal Government could easily be pointed to as part of the problem, if not at least extending the problem further along than otherwise would have occurred.
Government oversight is ok sometimes, but rarely does it truly help the situation. I fear we might be heading that same direction with the bail out being pushed for today. I fear we haven't really learned from the past and are ill-prepared to face this problem now.
Ben Benanke, being no idiot, but also not having much to work with is definitely in a tight position. The Republican and Democratic leaders of the nation are also just spinning their wheels figuring out how to add more oversight, more regulation, and even more Govenrment beauracracy to the whole problem. Adding band aids, is not going to stop a major arterial from bleeding out. In the end, band aids still leave us dead.
I'd prefer the economy come alive again, do we have any leaders, who would possibly get a clue about what to do? It doesn't appear so at this juncture, but I haven't written the country off yet.