The Panic of 1873 was a financial crisis that triggered a severe international [economic](https://doctorparadox.net/category/economics/) depression in both Europe and the United States. It started with the collapse of the Vienna Stock Exchange in Austria in May 1873 and quickly spread to the rest of Europe and then to America. The immediate cause of the panic in the U.S. was the failure of Jay Cooke & Company, a major bank heavily invested in railroad bonds, which declared [[bankruptcy]] on September 18, 1873. This event set off a chain reaction of bank failures and was exacerbated by the overexpansion of the U.S. railroad industry. This period of economic turmoil became known as the Long Depression in Europe and lasted until the late 1870s or early 1880s. The economic implications of the Panic of 1873 were far-reaching. In the United States, the crisis led to a severe economic depression marked by [[deflation]], unemployment, and a slump in agricultural and industrial activity. Banks and businesses closed, leading to widespread bankruptcies. The railroad industry, which had been a major driver of economic growth, suffered particularly hard. The depression also had political ramifications, contributing to the end of the [[Reconstruction]] era in the South. In Europe, the economic downturn led to widespread unemployment and social unrest, particularly in industrial cities. The Panic of 1873 and the subsequent depression marked a significant shift in economic thought and policy. In the U.S., it led to debates over monetary policy, specifically the question of [[bimetallism]] versus the [[gold standard]]. The U.S. had recently returned to the gold standard, which limited the amount of [[money supply]] and investment capacity to lift the country out of its long slump. This period also saw the beginning of more active government involvement in the economy, a trend that would continue in subsequent decades. In Europe, the crisis contributed to the growth of trade unions and socialist movements as workers sought protection against the vagaries of the market. Overall, the Panic of 1873 was a crucial event in the history of economic thought and policy, signaling the complexities of a rapidly industrializing and globalizing world economy.