with London, the leading loan market of Europe, have been such that every crisis in either England or America has extended its effects to the other country. But the disturb ances are so modified by the particular conditions (of crops, politics, and speculation) that the phenomena never corres spond exactly in time of occurrence, in duration, or in in tensity. The first notable crisis in America occurred about 1817 in the very violent readjustment of trade after the re sumption of commerce with Europe in 1816.$ In 1837-39 came in quick succession two crises, not quite distinct from each other, the second similar to the relapse of a fever patient. The conditions were rapid westward expansion, over speculation in lands, reckless state internal improvements, great issues of state bank-notes, and the financial measures of Andrew Jackson, which included the dissolution of the Second Bank of the United States in The crisis of 1857 followed a period of great prosperity marked by rising gold production and prices and a great increase in foreign trade. The crisis of 1873, possibly the severest in our his tory, followed great speculation, especially in the direction of railroad-building on an unexampled scale after the war. The blow, when it fell, was intensified by the relative con traction of currency then in progress, leading to the return to a specie basis and lower The crisis of 1884, a com paratively slight one, occasioned (rather than caused) by the discussion of the money question, was followed by some years of noticeable depression. The years 1889 to 1892 witnessed prosperity, only slightly interrupted in 1890, that culminated in a crisis in May, 1893 (likewise generally explained as due to the unsettled state of our monetary system), followed by a period of great depression lasting until 1897. A rapid growth of business in America was checked but little in 1900, when a crisis was occurring in Europe, especially severe in • See ch. 14, $ 6, on the tariff legislation at this time.
4 See ch. 8, $ 1.
• See ch. 5, $ 8.
Germany. In November, 1902, began in America what has been called the "rich man's panic" of 1903, in which for a year many securities were sold by holders probably because European creditors were recalling their loans. Although building operations were somewhat checked, American busi ness slackened but little. General prices, which had been moving upward since 1897, remained almost unchanged in 1903 and 1904, and then continued upward until 1907. In the period from September to November of that year occurred a severe crisis both in Europe and in America. The indus trial depression following this was marked in 1908, slowly growing less. The crisis at the outbreak of the war in August, 1914, was quite exceptional, being due to the sudden demand of Europe upon New York for funds. Within a couple of months it was over, and soon prices were again rising as the result of large exports of merchandise followed by gold imports.
The rise in war prices, slightly checked at the beginning of 1919, reached its peak in America, as we have seen," in May, 1920, and within about a month of the same time in most of the leading countries. The average fall of whole sale prices in the next year (from 272 to 151) was the most rapid that has ever been experienced in America.
§ 6. A business cycle. Let us now sketch in broad out line a business cycle bearing in mind that this series of changes does not repeat itself with unvarying regularity, but that it is fairly typical in the modern business world. The period leading up to a crisis is one of relative prosperity ; then occurs a crisis in which prices fall, at first rapidly, and afterward for a while going slowly lower. When prices are at the lowest point many factories are closed and much labor is unemployed. Let us start at that point. Conditions are worse in some industries than in others. General econ omy and great caution prevail ; few enterprises are under See ch. 6, § 9; ch. 9, § 13.