 Okay, so I think we'll get started. Thank everyone for coming to this presentation. So my name is Patrick Newman, and I'll be talking about panics and depressions in early America. So the basic gist about this presentation is we'll be talking about business cycles before the Federal Reserve. So the Federal Reserve was founded in 1913. And since the financial crisis of 2008, you've had a lot of discussion about central bank monetary policy, and just in general, counter-psychological policy, expansionary fiscal or monetary policy. And some of this debate or some of this discussion has centered around, you know, can we survive without the Federal Reserve or just the country in general? Can it survive without the central bank? There's been a lot of blame placed on central banks for causing the financial crisis and a weak recovery. And usually when those attacks are sort of levied against the central bank, the response is, well, we still have to have one. It's better than the alternative, right? And because the alternative is almost always described as well before the Federal Reserve, as I'll explain, we had very severe business cycles, they were very frequent. And it was only when we had a central bank, this was the third central bank that we had basically, that we were able to basically iron out those business cycles. So that's just sort of the general motivation. And what I'll be going through is sort of a brief overview of business cycles and panics in the 19th century. And then I'll be going through one case study in particular, the Panic of 1873, as well as the Depression of 1873 to 1879, okay, in depth, all right? So the ensuing depression. What makes this depression significant is that actually according to modern recession dating, it's the longest recession on record. So the Great Depression, even though we all know it started in 1929, ended due to World War II, right? That's what we're taught here. Ended after World War II. The actual recession phase at the beginning was at least only the Great Contraction of 1929 to 1933. So this recession or this depression, excuse me, actually beats it in terms of length, at least the way it's traditionally defined, okay? So the general myths that you hear about when you discuss life before the Fed was that America suffered from frequent and severe business cycles in banking crises, okay? So you had these periodic business cycles, they reared their ugly head and you had these very long, prolonged recessions. It took the depressions, it took the long time for the economy to recover and then almost always intertwined with these recessions were these very harsh banking crises. So we discussed like a banking panic. A panic just sounds awful. You know, you have a panic, everyone's in pandemonium. You know, they're trying to get money from a fraction reserve bank, they don't have enough money, the banks have to close, the contagion spreads, et cetera. All right? And what's the way it's almost always described is to say, oh, these severe business cycles in these banking crises were due to the unregulated financial sector, supposedly, as well as general laissez-faire macroeconomic policy. So the idea is that, well, before we had governments step in to sort of clean up the financial sector and the mess, you had all these problems. And it's a very similar narrative to whenever you hear about the financial crisis, say, oh, well, before the financial crisis, the federal reserve and all sorts of regulators, they turned a blind eye and you had all this deregulation and you had this commercial investment banks that were allowed to join forces once again. Bernie Sanders sometimes rails against that and then you had this whole financial crisis and then you had to have Dodd-Frank and all sorts of other stuff to really fix it up. So this might come as a surprise, lecture for me is you, but I'm gonna argue that both are wrong, okay? In fact, the financial sector was too heavily regulated and it was actually, in a sense, sometimes not laissez-faire macroeconomic policies, right? And also the business cycles were not nearly as frequent or severe as there have been commonly portrayed, okay? At least modern research has shown this, though modern researchers still somewhat refuse to somewhat grapple with the new data. So we talk about business cycles and panics in the 19th century, older analysts, both contemporaries, so someone in the 1870s, as I'll describe, as well as someone, let's say in the 1950s or 1960s, looking back on the period, they relied on faulty economic data, right? So one of the things that, if you take it a macroeconomics course, you know, there's statistics like GDP, unemployment, inflation, various production indices and so on, those haven't been around forever. Basically, people had better things to do before they started to collect this data, particularly in the 1920s and the 1930s. So when you look back, you know, in older periods, you have to use basically less reliable data, as well as contemporaries during those periods when they're trying to find some sort of measures of the economy, they might be saying, all right, let's look at the stock market or let's look at prices. Consumer prices are falling, wages are falling. Okay, that must mean that real wages or real prices, you know, are falling. People are getting poor or, oh, okay, the financial sector is contracting, et cetera. As we'll see, it was generally relying on faulty economic data and they often confused deflation with actual economic growth, all right? And so the NBER chronology, which is the National Bureau of Economic Research, they're basically the organization that is in charge of dating expansions and recessions in the American economy. They still sort of use this old faulty data. They have not revised their business cycles from the past, even though much more improved data, statistical methods, et cetera, has come out recently that has actually shown that a lot of these depressions were nearly as severe as we thought they were. So here's just a sample of some of the papers and the research that's come out. And notice that again, these are in mainstream professional journals, journal of economic history, journal of macroeconomics. If you don't have access to these articles, you know, just the great place you can go is measuringworth.com, all right? So it's very easy to look at. It has a continuous GDP series. You'll get things like real prices, wages, all sorts of things, even comparing it to different countries. It's a great website. And these sources really show that actually it's not as bad as we thought they were, all right? So there's the old saying. It's that a picture is worth a thousand words. And I'll explain this and there's another slide that will show it much more blown up. So the top part of the picture is the annual NBER recessions sort of from expansion to recession. In the black bars, you can't really see the numbers at the bottom, but it starts at 1790 and it goes to 2000. And the teal right there, that is the 1870s that we'll be talking about and it's also down here. So those black bars represent recessions, all right? So the Federal Reserve was created right around here. So just notice looking at the old NBR data. Look how many more recessions, how much more severe they were, et cetera, with now, right? So there's a lot less, the black bars are much less frequent and they're also much thinner, okay? So that's the old NBER recessions, you know, they're dating. And when you look at it, you say, well, the actual, the evidence is pretty convincing then, at least it did seem like business cycles were much more severe. However, here is the alternative recessions dating created by Joseph Davis. He was one of the people on the PowerPoint slide before. He created a new continuous industrial production series from about 1792 right before the Federal Reserve and used it to basically date recessions. So for how long did the economy contract, okay? Before it started to recover. And just look at the enormous difference. And I mean, look, it looked like it was a giant depression and now it's gone, right? And then you can even see elsewhere. So this has remained the same, but this has not, okay? It looks much different, all right? And you can, in fact, so this is just the pre-Federal Reserve, it just shows it, you know, a little bit bigger. You can see that, okay, again, in the 1870s, you know, the NBER said it was from 1873 to 1879. Well, Joseph Davis, as well as we'll be talking about later, said that the depression lasted from only 1873 to 1875. And there's many more examples. Even the period are in the 1820s. Again, that's just drastically gone. And sometimes there's entire, you know, periods that, okay, there's actually no overall macroeconomic recessions, et cetera. And then just to at least go back briefly, this paper right here, the New History of Banking Panics in the United States has done a similar thing. So from 1825 to 1929, right before the Great Depression, developed a, you know, trying to study basically whether or not what was considered banking panics back then really qualifies what we called banking panics. And he found, this paper found, you know, similar results that were a lot of banking panics were not actually banking panics, okay? So even banking panics and recessions were both less severe and less frequent than we thought, okay? And this is now, instead of relying on older, faulty economic data, basically relying on new methods, at least GDP series, et cetera, to show that this was not the case. All right, so we got that. And all right, so when we talk, at least now we'll go into a little bit more of the theory instead of just the data. This is me as university after all. We talk about business cycles. I'm not, hopefully I'm not surprising anyone here when I say business cycles in bank crises are due to government intervention. And of course the general framework that we all know and love is Austrian business cycle theory. So what causes a depression, all right? Or what's now called a recession, as we say, well, it's due to some sort of expansionary monetary policy from a central bank, okay? Or from some other sort of government entity, all right? That allows fractured reserve banks to engage in credit expansion. This artificially lowers interest rates, sets in motion an unsustainable boom, all right? Then if it continues, you're either going to have hyperinflation or you're gonna have some sort of contractionary monetary policy, okay, either caused by the gold standard or something deliberate, put the brakes on the credit expansion and then you have the bust, okay? And that in general, that just naturally puts pressure on the banking system, okay? Why would it put pressure on the banking system? Well, as we know from Austrian business cycle theory, when the bust occurs, the unprofitability of the higher orders are revealed. So you have all these malinvestments in these sectors of the economy, these industries have generally been borrowing money so they can't pay back their loans. So that means banks now have to write off these loans, right? So they have to take a cut on their equity and they can teeter more towards insolvency so you could have a prominent bank that might fail, just in general from a business cycle and that in turn could cause other banks to fail, could put pressure on the banking system, et cetera. However, in many cases, banking banks can be at least in the free market, they can be quite resilient. What adds to this is it was particularly acute in the United States and what's made these bank failures and bank panics so frequent was that you had a whole plethora basically of government intervention on top of the expansionary monetary policy that basically made the banking system very fragile, okay? So on one hand, you had various branch banking restrictions, okay? So a branch banking restriction, basically a bank could normally open up a branch across state lines or even sometimes in another, in the existing state. Instead, and this is strategically lobbied for by banks, is that they blocked out competition from other states or sometimes from other regions of a state. So instead of a branch banking system, which is what we have now, you can go to a Bank of America, not just in California, but also in New Jersey, Florida, et cetera. You often had a unit banking system, which basically meant that the banks were poorly diversified. They didn't make loans in other areas of the country. They generally stayed local. So for example, if a crop harvest went bad, you had a lot of small banks that basically they didn't diversify their loans and they were really hurt by this. This made a basically a bunch of very inefficient banks. Imagine if retail stores could not open chains across states. You'd have a lot of inefficient companies, basically. On top of this, you had various laws that incentivized banks to hold part of their fractional reserves in the form of deposits at other banks, okay? So as we'll be talking about, there was something known as the national banking system back in the day, where you had a system of country banks holding part of the reserves in reserve city banks and these reserve city banks were holding part of the reserves in central reserve city banks. So you actually had, instead of each fractional reserve bank pyramid and credit on top of its own reserves, they were all pyramid and credit on top of sort of centralized reserves, somewhat similar to the Federal Reserve now, okay? So what this meant is that if people in one region of the economy wanted to withdraw money from the banks, the pressure would spread to other regions, to other banks, because if country banks are facing withdrawals, they're gonna draw down on their reserves in the reserve city banks, excuse me, and then those banks are gonna face pressure and they're gonna withdraw the reserves and so on and so forth, okay? And we'll talk about this. And then lastly, or at least this is not really the last restriction, it's just the one I'm gonna talk about here, is that many banks were basically forced if they wanted to issue notes, before the day the Federal Reserve issued actual handheld currency, banks used to issue bank notes, then that meant that if they wanted to issue notes, they would have to invest some of their money in government bonds. And the idea was that, oh, government bonds, if the bank fails, they'll be able to sell these credit worthy, these strong instruments, these are solid investments, they were not, particularly at the state level, in that many of these banks were fragile because of that, but if the public wanted to hold less deposits in more notes, many of the banks, they say, well, we have to buy more bonds, we can't buy any more bonds now, so you'll have to actually take our reserves right now in terms of our species, such as gold and silver. And so that put pressure on the banking system, made them closer to becoming illiquid, all right? So all of these factors, and many of these were really unique to the United States, or at least they were unique in their, in how often they were practiced, really made our banking system quite fragile, all right? So there were other banking systems that were not pure free market systems, but they behaved much more efficiently during this time period. They still suffered from problems, but they performed much better, such as Scotland or Canada, even though again they had problems, they were much better than the United States, and they suffered from far fewer banking crises. So basically the general outline for a business cycle back in the pre-federal reserve era was you had some sort of expansionary monetary policy caused by the government. This creates the Austrian business cycle theory we all know and love. And then on top of a fragile banking system, this would cause a bank panic, okay? So if anyone's seen one of the old episodes of The Simpsons, I always love this episode where Mr. Burns, he's very sick and he goes to the doctor, he tries to check on his health, and the doctor basically explains that he has so many diseases that they're all blocked through the door. And if one of them were to get through, they would all basically be able to go through. And what Burns says is, oh, that means what you're saying is I'm indestructible, right? And the doctor says, oh, no, no, no, I'm saying even in fact a slight breeze, and then Mr. Burns just walks out of these, indestructible basically, you know. He just sort of walks out, you know, like he cares about nothing. Now it's really the banking system where all it would take is just one minor thing and the whole thing tumbling down, but people just said, oh, well, just, you know, everything would have to happen in a certain way. So, you know, it's just never gonna happen. And it would frequently happen. Mr. Burns is being like, oh, indestructible, kind of. And that's just how I've always imagined this as well. Okay, so I have actually done some of my earlier work. I've done a lot of work on American business cycles and banking regulations. I would tell you it's the least favorite part of my talk, but I would be lying. So here is some of my work on the depression of the 1870s, which we'll be talking about. The depression of the early 1920s, as well as the origins of the national banking system. So sort of going through the special interest motivation behind what actually caused the national banking system that later led to the depression of 1873. So I'll be going through basically both of these right here and I highly encourage you to read them. If you're up at night and you can't go to sleep, just print one of these out. You'll knock you out by page three. So it's the tried and true method, I swear. So anyway, okay. So we go to, now we'll look at a case study in depth. So I've gone through saying, all right, the actual business cycles were not caused by laissez-faire. They were not nearly as severe or as frequent as we've all been told. So now let's actually look at one in depth. Okay, so to really prove to you I'm not lying. All right. So the general outline, I've said of the 1870s business cycle was that in the early 1870s you had a boom, particularly in railroads. So railroads was a new sort of transportation back then. It was a higher order lengthening the production structure. Okay, it allowed people to travel distances much faster but more importantly, goods and services linking the West to the East and so on. In this boom in railroads during this time period was primarily due to credit expansion following the national banking system. So as we'll talk about the national banking system was created in the midst of the civil war, some sort of massive government overhaul as we all know, wartime crises always make for great opportunities for passing legislation. And that was true then, it's true now, it was true then. And as we'll talk about the system, much like the Federal Reserve was due to special interests in private bankers. So for those who have read Murray Rothbard's work on the origins of the Federal Reserve, he sort of goes through how bankers, trying to organize a cartel, they met at Jekyll Isle and then they pushed through a bank bill through Congress, et cetera. This is in a sense fairly similar, okay, as we'll see. The panic of 1873 was due to basically the inevitable slowdown in credit expansion combined with the fragile banking system. And then the contemporary, excuse me, both contemporary and as well as many present accounts say that, all right, it lasted until 1879. This very long six year depression. But in fact, as I'll show, there's really just a mild recession that lasted only until about 1875. Then there was recovery. So the panic of 1873 often ushers in something that's known as the long depression. So from 1873 to 1896, you say, oh, there was this terrible period of deflation and bankruptcies and you're bringing the robber barons, you got inequality and you got monopolies and you got the whole stew, you got everything involved. Of course, that's not true. Basically the long depression was really a myth. It was just deflation. There were banking crises punctuated during that, but it wasn't some continuous depression, okay. All right, so let's go into a little bit more in depth. Okay, so we're at the Civil War. So the year, it's no longer 1784, it's 1861. Remember it like it was yesterday. So 1861 to 1865, you had various Civil War interventions. So in late 1861, the United States, and bear in mind, I'm concentrating on the union here, the Northern and Western States, suspended species payments. So there were various reasons for their pressure on the banking system. The government was basically trying to borrow too much from them. So then the government and the banks suspended species payments, so they were no longer, we were on a gold standard back then, but now they were no longer honoring their liabilities and converting them into gold and silver, okay. So we're really on, as you could say, a fiat system, or more particularly, known as credit money, because they knew we would resume species payments in the future. It actually took us nearly 20 years to do so. Then beginning in 1862, we started to print, the US government started to actually print their own handheld paper money until about 1864, and they were known as green backs. And the green tent, that's where we actually get the, you think of the actual dollars you hold now in your wallets, it had that green came from the green backs of your, all right. They were bigger sized though, but that's a whole different story. All right, so then in 1863 and 1864, we'll go through the motivations behind this in more depth later, but you had the national banking acts, all right. So the United States, if for those of you who remember your American history, you know, under Alexander Hamilton, we had a first bank of the United States, or we had the Bank of the United States, it's charter, got vetoed, excuse me, it chartered in pass, then we had the second bank of the United States and Andrew Jackson famously vetoed that bank. And so beginning at the Civil War, we did not have a central bank, all right. But now that during the wartime emergency, wartime crisis, we basically try again and we'd push for a quasi central banking system. All right, so we did get that and we got the national banking acts. And this created federally chartered national banks. So instead of a system of state banking, you now had federal banking where banks had to apply for charters from the federal government. And if they wanted to issue bank notes, which was basically the lifeblood if you wanted to be a bank, you had to, they had to be backed by federal bonds, right. State banks could still exist, but it also just so happened that if you wanted to issue state bank notes, you had to pay a 10% annual tax on those, which basically totally removed, there are no state bank note currency anymore. State banks still survive due to deposits, but that's a whole different thing. It also created a credit pyramid that's three tiered structure that I spoke about before. You had country banks holding part of their reserves in reserve city banks. Then you had reserve city banks holding part of their reserves in central reserve city banks. And at the very beginning, the only central reserve city bank was the center of civilization on the earth. That was New York city, at least in my opinion right there. So New York city basically acted, a lot of the banks in there acted as a, in a sense, central banks. You had the comptroller of the currency, which we still have today, and they had to institute capital and reserve requirements. And these capital requirements in particular, where you had to hold a certain amount of equity, made it very hard for smaller banks to operate. Because if you have to meet a minimum amount of capital if you wanna operate in a certain city or certain region, if you're a smaller bank, you don't have that, you basically have to go out of business, okay. And then quite crucially, it basically perpetuated in a sense, accentuated the unit banking system, where it was hard for banks to branch. Where basically by the turn of the century, you had like 11,000 banks, but there was like less than 100 branches, in terms of commercial banks. So any fish in banks, banking system. Okay, why is this, oh, here we go, why that was there? All right, slight panic, slight banking panic just hit me right there. So all right, so we talked about the special interest behind this legislation. So you have an investment banker, Jay Cook, and secretary of the treasury, Salman P. Chase. So Jay Cook is a prominent investment banker in Philadelphia. He was the forerunner, he was the country's most prominent banker until J.P. Morgan in the 1870s. So Jay Cook was located in Philadelphia at that time, Philadelphia was a very prominent financial center of the country. So there was a various connection between Jay Cook and his brother, Henry Cook, and they lobbied to make Salman Chase Treasury Secretary at the beginning of President Abraham Lincoln's term. All right, so they spent a lot of money beforehand in the 1850s elevating his candidacy. He was governor of Ohio and all sorts of other stuff. And then they basically lobbied to make him secretary of the treasury. And then, what would you know? It just so happens that Chase was later impressed by Cook and Co's ability to market, sell government bonds and he grants Cook and Co, the investment bank, the monopoly on selling bonds, okay? So selling federal bonds, the U.S. government, they had to sell their debt to basically prospective buyers. And Cook and Co would basically, you know, buy the debt, then sell it and sort of pocket a commission, okay, from the government. So then Cook supports Chase's subsequent plan for a national banking system. And this was to, you know, why would Cook do that? Well, if Chase's plan for a national banking system involved banks, if they wanna issue bank notes, they have to buy federal bonds, all right? You know, who are they gonna buy federal bonds from? Well, it was these guys right there. So they realized, okay, this is a way of making, basically my life easier. So, you know, that was one of the main reasons why they supported it. And you go through the record and we'll sort of go through a quote. They really engage in a lot of newspaper propaganda. They talk to senators. They really try and persuade them, et cetera. And then what do you know? Cook sets up his own national banks including in New York City. So by 1870, Jay Cook had actually, you know, transformed himself from a relatively, you could say renegade investment banker to really the most prominent banker in the country. And there was something known as the House of Cook. So much like you have the House of Morgan and so on. You know, later on you'd have the House of Cook. So for example, the fourth national bank of New York was really Cook's Bank and it just so happened to be the largest bank. It was the first largest bank in terms of assets. And then the second largest bank in terms of bankers balances. So acting as that sort of quasi central bank at Central Reserve City Bank. Okay. And then he had many other banks, et cetera. So he was in a sense, he helped set up this system and then he was directly profiting from it. Okay. So here's an interesting quote. So this is part of the paper that I wrote. So this is February 12th, 1863. So this is right around when they're trying to lobby the national banking system. So Henry Cook writes to his brother. He says, it'll be a great triumph Jay one to which we have contributed more than any other living men. The bank bill had been repudiated by the house and it was not sponsored in the Senate. And was this virtually dead and buried when I induced Senator John Sherman to take hold of it. And when we went to work with the newspaper. So I have that bolded. So he goes, I induced. All right. So like, what do you, what do you, you know, how do you, like, yeah. All right. There's some sort of advantage there for Sherman. And then we went to work with the newspaper. So he said, all right, we're going to spread the gospel of the national banking system. And then he says, I'm very sure that Chase appreciates our efforts and knows that he can never fully know the value and efficiency of our services services. And there's many other letters between them around this time period. They're basically saying like, hey, we were crucial in making, in shepherding this bank bill through Congress and really getting everyone to support it due to the crisis of wartime emergency. And in fact, John Sherman, when he was talking about this bank bill in the Senate, he was saying, well, if we had a national bank banking system before 1861, there would have been no civil war. I was just a little bit of a stretch, but you know, again, he wants to argue for something. He's free to do so, I guess. So, okay, in 1870 to 1873, after the civil war, there was some slight contractionary monetary policy. And overall the money supply was roughly constant. Then from 1867 to about 1870, there was very limited credit expansion, which basically meant that the money supply was increasing by less than 3% yearly, which is not a lot. It's not perfect, but it's not, not a lot, okay? Then from 1870 to about 1873, there was much stronger credit expansion. And this was basically due to the national banking system maturing. Banks were slowly pyramiding their credit and basically this crucial year, 1870, where enough of them did so, it was a lot easier for them to engage in credit expansion. And you just look at the jump, the money supply increased from about 3% yearly to about 10%, okay? So a much significant increase in credit expansion, okay? So this boom was created during after the national banking system, took a couple of years, but they got the job done, all right? In a sense, almost similar to the Federal Reserve, we think about in 1913, it was created, then it kind of couldn't work its magic, at least in terms of an Austrian business cycle theory because of World War I, but then right after it did and you had the Depression of 1920 to 21, okay? So somewhat similar analysis here. All right, so now looking at some more statistics in particular, there are major malinvestments in railroads and sort of higher related, in sort of related higher order goods, excuse me. So you had things like metals, fuels, machinery, and so on, all right? So we listen to Austrian business cycle theory, we say the lower interest rates increase the present value of long-term production processes in various higher orders the most. So businesses are going to be incentivized to embark on those, okay? So we look at a money supply figure. So again, just notice the difference yearly, about 3% increase to then about 10%. Notice the pickup in GDP from about 3.2% annual growth to about 7.2%. The CPI, so we'll talk about that in a second. So wholesale price indices in the Joseph Davis production index shows the relative movements really explainable by Austrian business cycle theory. So we know Austrian business cycle theory is that the relative prices of the higher orders are increasing as compared to the lower orders. And on top of this, basically the relative prices of the lower orders and consumer goods are increasing compared they were to before, all right? So we know from sustainable growth that consumption declines, all right? Lower order prices of lower orders fall and then the higher orders rise, so sort of that fulcrum. In this case, consumption is not declining. The public hasn't saved anymore and said it's just credit, okay? And you can see this at least through the CPI, so even though prices are still falling, they're still deflation, it's falling by less, okay? So it signals that basically there isn't actually savings going on, at least there's one quick way of looking at it and the economy. And then you look at a production index for machinery that's just one we'll look at. So in the paper, I have a whole list of basically comparing lower orders and higher orders, et cetera. You look at the jump from about 6% growth during this time period to 11%. And in this component, the major component of machinery was railroad locomotives. So this is really a proxy for railroads, okay? All right. So then you have the panic in recession. So by late 1872, 1873, there's the end of the boom and then there started to be investor uncertainty. So there was a slowdown in credit expansion. All right, this led to a decrease in railroad profitability. This led to a decrease in the value of railroad bonds. Then this led to an increase in the losses of banks. So around this time period, the US government were no longer in the Civil War. They're no longer running deficits. So Jay Cook and Co, they don't need to sell as many government bonds. So what do they do? Well, they switched to selling railroad bonds, okay? So they were invested heavily. If you remember your three transcontinental railroads around this time period, you had the Union Pacific, the Central Pacific and the Northern Pacific. Jay Cook and Co, they decided to flex their muscles, get involved in selling Northern Pacific bonds. Just so happened that they had way too many of them. It was a huge loss for them. Again, so they were really hoisted by their own patard in a sense that they were, they had to fail because the banking system they helped create later caused a business cycle that ruined them. All right, particularly Jay Cook. So the investment bank Jay Cook and Co fails in September 1873 and a panic begins. Okay, so it was around September 20th. The stock market closed for 10 days and cash payment was suspended until October 1873, all right? And what this actually does is aggravated uncertainty. Some of you will hear about how suspending species payments allows banks to sort of shore up their balances and so on. But it made it harder actually for people to buy goods and services because they couldn't get money from the banks. And it actually just led to, oh, if banks are gonna suspend, this bank's going to suspend, et cetera. And then the contagion sort of spread. And so you look at comparing 1870 to 1873, the money supply still actually increased because the government tried to print some greenbacks to shore up the situation, but it wasn't really successful. GDP drastically declined where, it didn't actually decline in absolute terms, but it was still inching along, eking out at existence. The CPI fell, okay? So this is just from the decline in nominal spending, sort of the uncertainty that accompanies a business cycle. And then look at machinery, railroads fell off a cliff where instead of rising 11% each year, they fell by nearly 18% in both years. So not just 18% in total, it's 18% each year of this. So it's a huge decline. So railroads, the classic higher order good that was hit hard. And what's important is if you actually look at the other series, the higher order goods were hit the hardest in the lower orders, not so much. So some of them actually increased. And this shows, this is the relative price movements. Not everything gets hit the hardest, excuse me, not everything gets hit equally is bad. So like the housing sector was hurt much more than other sectors of the economy. That's sort of that structure of production analysis of our stream business cycle theory. So then we go to the long depression. So 1875 to 1878, this sort of period to quote the long depression, you can go to 1879, but in 1879 growth actually increased. So significantly regardless of what series you use. So just to be charitable, just just look at 1878. So it makes it look like I'm not artificially trying to inflate my numbers. So when you actually look at the series, the recovery began in 1875, although prices continued to fall and there was actually monetary contraction. So now enough banks fell, whereas we'll see that there were bank failures and the money supply declined. And there was a laissez faire counter cyclical policy, which meant that there was basically no counter cyclical policy. There was no expansionary monetary policy and there was no expansionary fiscal policy. Now, what happened is you had this nominal illusion from deflation. So as I mentioned before, prices were falling, prices of stocks were falling, wages were falling, incomes were falling, profits, interest rates, et cetera, in this fooled contemporaries. Because people were only concentrating basically on their output prices. So they didn't realize input prices fell or if they were a worker, they didn't realize that consumer prices fell. So if your income falls by 5% a year, you might say, oh, I'm getting 5% poorer, but if the prices of good you buy also falls by 5% or even more, then you're actually getting, you're actually better off. You can buy more goods now. But this is sort of harder to realize. Instead the nominal illusion, so to speak, generally affects deflation because people like to see things go up, not go down. So a historian, and this was even back in the 50s and he admitted as much, he said, contemporary appraisals of the intensity of the depression tended to be more, the more alarming by their very vagueness and contributed to the prevailing pessimism. So everyone was just like, oh, we have this really bad depression. As we'll see, they were sort of had these faulty economic statistics. People didn't really know what was going on. So they just sort of exaggerated the problem and this made it seem very bad. So if you look at just the example statistics, this organization estimated that New York unemployment 1873 was 25%, right? Which is astronomical unemployment. The issue though is that they calculated in a way that we would totally find faulty and that they just looked at the amount of people going to a relief organization each month. They said all of them were unemployed, like a charity relief organization and they just added up each of them. So like if 10,000 people went in January, 10,000 people went in February, 12,000 people went in March and so on and they had the total amount, then they divided it by the workforce in New York City and they said that was the unemployment rate. Well, of course, what they don't realize is that they're assuming that each 10,000 people are completely new. Like if it's just the exact same 10,000 people, then the unemployment rate is not 10,000 plus 10,000 plus 10, it's just 10,000 or whatever it is, okay? The Chronicle newspaper, prominent newspaper at the time, they said that the amount of people who were unemployed in the construction industry was actually, they said it was this large amount and what estimates later showed is that it was actually more than the total amount of people employed in construction, which is a little bit impossible, basically. They said more people are unemployed than even what existed in the construction industry. More people are unemployed in construction than in that industry, so it makes no sense. So there are no doubt that people were mad and many workers in the railroad industries did have it very tough during this time period, but again, that was just due to the reallocation of resources from the railroad industry, but just in general, this was sort of part of the beginning of an enormous change. You had the development of large-scale farms, department stores, inequality, so the rise of these very rich entrepreneurs, et cetera, during the 1870s, and people are mad at that and so they don't really know what they're mad at, they're just mad at it, and they're starting to channel their anger and they say, well, it's the depression, okay? So when in doubt, you basically blame it on the depression, okay? So again, looking at the 1870s, so the money supply each year declined by nearly 3% during this time period, but then look at, okay, GDP was less than growing at less than 1% each year, and now it's growing at about 4% each year, so 4% GDP growth, remember you hear now, obviously things are different, but President Trump's like, oh, I can get to 3%, okay? So, well, we got to 4%, we weren't even trying, basically, you know, the government wasn't even trying at this time period, and then this was actually fairly comparable to other, you know, the overall average GDP or per capita GDP growth during this time period, you know, in the 1800s. So prices continued to fall, there was some weak growth in railroads, but other industries caught up, and that's what Austrian business cycle theory basically teaches us, right? You have to let these unprofitable industries continue to contract. If not, you're just sort of going to prolong the economic stagnation, and there was no economy-wide depression, okay? Then a sequel, sort of if you want to go on, you say in 1879, we finally resumed species payments, there was a large gold inflow that led to credit expansion in the panic of 1884. Murray Rothbard in his History of Money in Bank in the United States talks about this briefly. So this is, you know, again, just sort of the general kind of narrative of that, right? So in conclusion, the severity and the frequency of business cycles and banking panics in the 19th century, they've been exaggerated due to faulty economic statistics. They were not due to laissez-faire, but instead due to misguided government regulations, okay? So you frequently hear the narrative, it's that, oh, these business cycles, they were due to life without the Federal Reserve, and if only we had the Federal Reserve, everything would have been great. In fact, again, they were due to very many perverse banking regulations that made the banking system more fragile, as well as government monetary policy that made it susceptible to these periods of excessive credit expansion in then these busts. In the panic of 1873, in the depression of 1873 to 1874 is a classic example of this, so good case study, and you should tell all of your friends about it as well as my paper. All right, so thank you very much. Thank you.