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Old April 16th, 2012, 06:16 PM   #1

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Panic of 1857


Flipping through a book about the Civil War I own, I was surprised to come across a detail I seem to have missed up until now - an economic depression known as the 'Panic of 1857'.

What caused it, what were its consequences, and what role might it have played in the Civil War?
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Old April 17th, 2012, 06:33 AM   #2
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Not positive if this was this depression but as I recall there was a huge fire that brought down half of Chicago and I believe another city in a different state(New York?). That may have been a later depression, though.
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Old April 17th, 2012, 06:36 AM   #3
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After a quick search that may have been a different time period, sorry about that.
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Old April 17th, 2012, 07:03 AM   #4

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Wouldn't it be the traditional reason for a depression? people sell their stocks in fear of the company being nationalised or they are afraid for the collapse of the state?
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Old April 17th, 2012, 07:43 AM   #5

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Quote:
Originally Posted by Salah View Post
What caused it, what were its consequences,
I'm a little fuzzy when it comes to economic panics, national or global, but
I'll give it a try.

Following the Mexican-American War, there was a period of expansion &
growth for the US.
-The Ohio Life Insurance & Trust Co. suddenly failed,
-the British pulled out huge amounts of their money from US banks,
-construction stopped,
-factories began closing
-US railroads began laying off hundreds.
-low demand for US exports.
-even a ship wreck carrying a huge amount of gold, sinking set off
tremors.

Naturally international factors played a cause in the depression.


Quote:
...and what role might it have played in the Civil War?
A fairly large log in the eye of events.
The North seemed to be hit the hardest since it was so heavily
industrialized and tied so closely to banking. The Deep South was
spared the damage to its economy that was suffered by the North.

"King Cotton" as James Hammond, South Carolina, called it in 1858,
saw prices only slightly drop, but, a profit was still made.
It saved the planter class. Did it prove the slave system was more profitable and stable? Could be.
The boom years before the depression allowed for the planter
class to invest very heavily into the production of cotton & they
became extremely wealthy. And with wealth, comes power &
influence.

Sectional politics became heated as Republicans blamed the Southern-dominated Democrats
for their calling for low import tariffs. The North felt
foreign competition ruined its economy while favoring the South.
South Carolina Senator Hammond would retort back to these Northern
charges that Southerners were "unquestionably the most prosperous
people on earth, realizing ten to twenty percent on their capital with
every prospect of doing well for a long time to come."
and that only cotton
had "saved you (North) from destruction."

It is very easy to see how the defense of slavery was so paramount
to the very heart and soul of the planter class. With the rise of the
Republican Party and its unyielding stance of stopping & containing
slavery, it is clear to see that the planter class saw its way of making
a living as deathly threatened. Let this continued push and shove
between the parties, and the nation, simmer for three years and
the lid was blown off in 1860.
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Old April 17th, 2012, 08:30 AM   #6

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^^ Very true. The Panic of 1857 promoted a belief among the planter class that the slave labor system was not only superior, but invincible (as long as it wasn't interfered with). The result can be seen in the Mississippi Declaration of Causes of Secession:

Quote:
Our position is thoroughly identified with the institution of slavery-- the greatest material interest of the world. Its labor supplies the product which constitutes by far the largest and most important portions of commerce of the earth. These products are peculiar to the climate verging on the tropical regions, and by an imperious law of nature, none but the black race can bear exposure to the tropical sun. These products have become necessities of the world, and a blow at slavery is a blow at commerce and civilization.

Source: Declaration of Causes of Secession
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Old April 17th, 2012, 08:37 AM   #7

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Quote:
Originally Posted by bartieboy View Post
Wouldn't it be the traditional reason for a depression? people sell their stocks in fear of the company being nationalised or they are afraid for the collapse of the state?
I don't think the Panic of 1857 was a full-blown depression though. I think it was really just a cyclical recession. Recovery was pretty quick, and the effects were fairly minor compared to many recessions, and certainly compared to the Great Depression. I think the fears in 1857 were the garden variety economic fears. At that point in time few Americans were anticipating collapse of the state or civil war.
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Old April 17th, 2012, 07:29 PM   #8

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It certainly fed Southern delusions about the importance of cotton.
Here is Senator Hammond's more famous quote: (The full speech is quite remarkable)
Quote:
But if there were no other reason why we should never have war, would any sane nation make war on cotton? Without firing a gun, without drawing a sword, should they make war on us we could bring the whole world to our feet. The South is perfectly competent to go on, one, two, or three years without planting a seed of cotton. I believe that if she was to plant but half her cotton, for three years to come, it would be an immense advantage to her. I am not so sure but that after three years' entire abstinence she would come out stronger than ever she was before, and better prepared to enter afresh upon her great career of enterprise. What would happen if no cotton was furnished for three years? I will not stop to depict what every one can imagine, but this is certain: England would topple headlong and carry the whole civilized world with her, save the South. No, you dare not make war on cotton. No power on earth dares to make war upon it. Cotton is king. Until lately the Bank of England was king; but she tried to put her screws as usual, the fall before last, upon the cotton crop, and was utterly vanquished. The last power has been conquered. Who can doubt, that has looked at recent events, that cotton is supreme?
James Henry Hammond, "Cotton is King"

The Confederacy actually embargoed her own crop at the start of the war. Cotton stayed on the wharves while the Confederates waited for Britain to intervene in order to save herself from revolution from laid off mill workers. In fact Britain had a huge surplus of cotton. The South increased production exponentially every year, fully expecting that 20-70% growth could be expected indefinitely. It was a dangerous delusion.
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Old April 18th, 2012, 02:22 AM   #9

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James McPherson includes a good description of the Panic of 1857 on pages 189-191 of Battle Cry of Freedom. Basically it sounds like a run of the mill boom-bust cycle to me. Here's how it ended (page 191):

Quote:
The depression of 1857-1858 turned out to be milder and shorter than expected. California gold came east in large quantities during the fall and winter. Banks in New York resumed specie payments by December 1857, and those elsewhere followed suit during the next few months. The stock market rebounded in the spring of 1858. Factories reopened, railroad construction resumed its rapid pace, and unemployment declined. By early 1859 recovery was almost complete.

Source: Battle Cry of Freedom: The Civil War Era - James M. McPherson - Google Books
Wish we could say the same for our current recession! Anyway, it would appear to me that the only significant role the Panic of 1857 had in the buildup to the Civil War was its reinforcement of the belief among many planters that they could go it alone, and be better off economically as a result.
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Old April 18th, 2012, 11:11 AM   #10
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Quote:
Originally Posted by bartieboy View Post
Wouldn't it be the traditional reason for a depression? people sell their stocks in fear of the company being nationalised or they are afraid for the collapse of the state?
What? People MOSTLY sell their stock for reasons of limiting their losses.
The STATE has little or nothing to do with it.

The recent wall street collapse occurred without ANY threat from the GOP administration of 'nationalizing' corporations, nor for any fear of the collapse of the State...

rather the opposite... it was the collapse of a manipulated market that created those fears as the RESULT of the collapse.
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