The Long Depression
The Long Depression was a good example of a serious economic recession where the contraction in economic variables was felt internationally. Many economic historians have strong feelings about the Long Depression, often claiming that it was not a depression at all, due to the strict formal definition of a recession which requires distinctly shrinking gross domestic product, a factor missing for much of this period.
Historically, however, citizens of this time period certainly referred to the period as a depression. In fact, until the Great Depression in 1929 (coming up next!) took over, the Long Depression was referred to as the Great Depression.
As GDP was clearly growing during this period, this was not a recession or contraction of production; production was still growing. However, prices mark this as a clear contraction; a tight monetary policy in the United States (as part of the effort to return to the gold standard level maintained prior to the speculative economy that grew out of the Civil War (1861-1865)) and the collapse of the Austria-based Vienna Stock Exchange, the world’s oldest stock exchange, and at the time most important, caused a limited availability of funds to facilitate trade.
Rampant fraud and speculation growing in the railroad industry, particularly in the failed construction of the Union Pacific Railway caused a speculative bubble to pop in this market along side of the collapse of the Exchange, and all the other factors building up in 1873.
Editor’s note, prior to the comment below, this article did say “1837″ due to a typo in the draft that got carried forward to future revisions. Our sincerest apologies for this mistake.