Comments on: The Panic of 1873 http://www.mentalfloss.com/blogs/archives/19258 Feel Smart Again Mon, 13 Feb 2012 10:01:32 +0000 hourly 1 http://wordpress.org/?v=3.0.5 By: John http://www.mentalfloss.com/blogs/archives/19258/comment-page-1#comment-461356 John Thu, 06 Oct 2011 09:06:01 +0000 http://www.mentalfloss.com/blogs/archives/19258#comment-461356 The period from 1873-1892 actually saw the fastest productivity and goods production growth in US history. To call it a period of depression is highly misleading as you could also argue that it was the height of American growth and the time when industrial America came into being. The only reason some economists, usually of a Keynesian left-leaning persuasion, choose to call it a depression is the fact that prices fell. However, prices fell due to rapid goods production and the stable quantity of money provided by the gold standard rather than monetary deflation or recession. China experienced a similar phenomenon about 10 years ago. The period from 1873-1892 actually saw the fastest productivity and goods production growth in US history. To call it a period of depression is highly misleading as you could also argue that it was the height of American growth and the time when industrial America came into being. The only reason some economists, usually of a Keynesian left-leaning persuasion, choose to call it a depression is the fact that prices fell. However, prices fell due to rapid goods production and the stable quantity of money provided by the gold standard rather than monetary deflation or recession. China experienced a similar phenomenon about 10 years ago.

]]> By: V http://www.mentalfloss.com/blogs/archives/19258/comment-page-1#comment-101806 V Wed, 15 Oct 2008 14:30:00 +0000 http://www.mentalfloss.com/blogs/archives/19258#comment-101806 The Panic of 1873 was actually a result of the inflated greenback. It was not backed by a commodity (gold), and the government printed up lots of them to pay for the war. Instead of allowing a return to sound monetary policy, the government kept inflating and paid off debt with more greenbacks which distorted the economy even further. This bubble eventually burst. It is rather absurd to believe that these booms and busts are triggered by lack of money! Loose credit is created by central banks who have no limits on their power to print new money (like you find when a currency can be redeemed in gold or silver). The cheap money leads to malinvestments (the boom) that are eventually reigned in (the bust). Austrian Business Cycle Theory FTW! The Panic of 1873 was actually a result of the inflated greenback. It was not backed by a commodity (gold), and the government printed up lots of them to pay for the war. Instead of allowing a return to sound monetary policy, the government kept inflating and paid off debt with more greenbacks which distorted the economy even further. This bubble eventually burst.

It is rather absurd to believe that these booms and busts are triggered by lack of money! Loose credit is created by central banks who have no limits on their power to print new money (like you find when a currency can be redeemed in gold or silver). The cheap money leads to malinvestments (the boom) that are eventually reigned in (the bust).

Austrian Business Cycle Theory FTW!

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