AHC: Prevent Panic of 1873 and the Long Depression

Like it says in the title try to prevent the Panic of 1873 and the Long Depression that followed it and lasted until 1896(1879 in the USA). Also explain what butterflies would be produced without these events and when other depressions might be likely to occur and why.
 
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MAlexMatt

Banned
That there was something like the 'Long Depression' is a mildly contentious issue in economic history circles. That period was one of rapidly advancing indicators matched by something that we usually don't associate with good economic times today: Deflation. However, the host of other good indicators easily brings into question the whole idea.

The Panic of 1873 itself is heavily tied into the monetary troubles brought on by the American Civil War and the events surrounding the Prussian unification of Germany, as well as other, somewhat more minor monetary events of the period. Preventing the Panic of 1873 itself isn't difficult -- you can move financial events around almost at will because of the great uncertainty that surrounds their occurrence -- preventing a panic and depression in the 1870's is much, much more difficult.
 
1873 is one of those constant financial bubbles where overoptimistic speculators and investors wildly overestimate when a new industry will be profitable, rogues use that to build personal empires, and financiers cheat everyone in sight.

In 1873 it was building the western railroads (Richard White's new economic history of the Western Railroads' chicanery, "Railroaded" is highly recommended) and along with their construction there was vast real estate speculation assuming the new towns would be instantly viable and land prices would go up and up (as opposed to taking decades to develop which many didn't and to develop sufficient traffic/loads to make the railroads viable.)

It's a replay of the English South Seas Bubble and French Mississippian Bubble both assuming remote territories would in a year or two turn into thriving cities/trade empires...we did it most recently in the dot.com and fiber optic network bust of 1999-2001 or the housing bubble just now.

Part of the reason it's a worldwide hit is so much of European capital was funding the Western railroads and related development (the Northern Pacific Railroad for example drew mostly on German and Serbian investors) who lost that investment completely in most cases. Whenever a bubble is wiping out painfully and long accumulated investment capital and debt capacity for no productive purpose (but enriching scoundrels), it takes time to recover and many never do. Investing in the development of new territories, overseas colonies, new technologies, etc. always pays off far slower than anticipated with a huge amount of capital completely destroyed along the way, in the same way gamblers brag about their wins and downplay their comparative losses.

The POD would probably be Jay Cooke, the Philadelphia bond financier, dies about the end of the Civil War (which he'd been key in helping the Union finance with creative bond issues) along with a couple of other key fools, different people/firms win the contracts to build the western railroads with much more effective oversight/far less Congressional corruption, and the development out West is tied more to economic realities (so it works better and earlier) than deeply ignorant speculation. It's not even easy to say, hellish to do as you'd need many simultaneous POD's for the thread.
More like herding cats than a single decision going the other way.
 
I wonder how economic development during the period would have differed if the world had been on a silver standard instead of a gold one?
 
I wonder how economic development during the period would have differed if the world had been on a silver standard instead of a gold one?

It would have helped avoid the Depression of the 1890s. America would also be richer due to its vast silver resources just being exploited
 

MAlexMatt

Banned
1873 is one of those constant financial bubbles where overoptimistic speculators and investors wildly overestimate when a new industry will be profitable, rogues use that to build personal empires, and financiers cheat everyone in sight.

In 1873 it was building the western railroads (Richard White's new economic history of the Western Railroads' chicanery, "Railroaded" is highly recommended) and along with their construction there was vast real estate speculation assuming the new towns would be instantly viable and land prices would go up and up (as opposed to taking decades to develop which many didn't and to develop sufficient traffic/loads to make the railroads viable.)

It's a replay of the English South Seas Bubble and French Mississippian Bubble both assuming remote territories would in a year or two turn into thriving cities/trade empires...we did it most recently in the dot.com and fiber optic network bust of 1999-2001 or the housing bubble just now.

Part of the reason it's a worldwide hit is so much of European capital was funding the Western railroads and related development (the Northern Pacific Railroad for example drew mostly on German and Serbian investors) who lost that investment completely in most cases. Whenever a bubble is wiping out painfully and long accumulated investment capital and debt capacity for no productive purpose (but enriching scoundrels), it takes time to recover and many never do. Investing in the development of new territories, overseas colonies, new technologies, etc. always pays off far slower than anticipated with a huge amount of capital completely destroyed along the way, in the same way gamblers brag about their wins and downplay their comparative losses.

The POD would probably be Jay Cooke, the Philadelphia bond financier, dies about the end of the Civil War (which he'd been key in helping the Union finance with creative bond issues) along with a couple of other key fools, different people/firms win the contracts to build the western railroads with much more effective oversight/far less Congressional corruption, and the development out West is tied more to economic realities (so it works better and earlier) than deeply ignorant speculation. It's not even easy to say, hellish to do as you'd need many simultaneous POD's for the thread.
More like herding cats than a single decision going the other way.

Removing any one person, or any one group of people, isn't going to accomplish much. The issues were structural, institutional if you will. Once you get the monetary profligacy of the American Civil War and the Founding Era in Central Europe, financial markets will be out of wack, and they will distort the whole of the emerging global economy with them.
 
In the interest of discussion how might any of the following effect the depression?
  • A CSA victory in the ACW
  • A French victory in Mexico leaving an intact 2nd Empire
  • No Franco-Prussian war
 
The Long Depression also hit most of the Empire as well and I think NZ for one was deemed (perhaps later) to have been affected between 1878 and 1895. It seems, from my recollection, that historians in NZ often used date the starting point of that recession to be the collapse of the City Bank of Glasgow in late 1878, although now that I look at it again, many state that it began further, with the end of the Land Wars

http://en.wikipedia.org/wiki/City_of_Glasgow_Bank
 
In the interest of discussion how might any of the following effect the depression?
  • A CSA victory in the ACW
  • A French victory in Mexico leaving an intact 2nd Empire
  • No Franco-Prussian war

A CSA victory is hard to tell. It depends how this shapes the West and would Republicans still favor the silver industry. The Democrats could always change their platform to be more favorable to Westerners which could mean both parties embracing silver or greenback thus possibly still causing the long depression
 
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