The Three Years' Depression From 1846 to 1848

The years 1843 and 1844 constituted another period of low prices. The industries commenced to revive in 1844, but did not gain full headway, as they were checked by a sudden and enormous advance in prices in the spring of 1845. The volume of contracts made during the low-priced period helped business moderately for a tune. During the next eighteen months, prices declined steadily. By August, 1846, they had settled back nearly to the low level of two years before, after which contracts for construction revived rapidly, and the latter part of that year and the year 1847 was a period of marked prosperity, surpassing anything ever before experienced. In the latter part of 1847, prices again advanced, contracting for construction was again checked, actual construction fell off in 1849, and did not again revive until stimulated by the low-priced period of 1850 to 1852.

This depression was one of great severity. No financial disturbance of sufficient severity to be designated as a panic occurred during its continuance, yet the depression was much more severe upon the industries than the depression of 1857, which was attended by a panic. The public to-day hardly remembers this depression, simply because it was not accentuated by a panic.

The Three to Four Years Depression From 1855 to 1858 and the Panic of 1857.

The years 1850, 1851, and part of 1852 constituted a third period of low prices, during which all the industries revived. The volume of actual construction during the latter half of 1852 carried the demand for construction materials beyond the capacity of the country to supply, and prices advanced rapidly. Between the summers of 1852 and 1854, No. 1 Foundry pig iron advanced 87 per
cent. in Philadelphia, and 163 per cent. in Cincinnati. Scotch pig iron advanced 123 per cent. in New York.

This period of two years was a remarkable demonstration of how perfectly prices regulated the volume of contracts for construction, and how perfectly the supply of materials regulated prices. As far as the United States was concerned, the famine in the iron supply was most severe in the west. Prices there advanced more rapidly and to a greater degree than in the east, and the check to construction with its resultant depression was much more severe. In Great Britain, the supply of iron was so ample in 1853 that prices declined enormously. The apex of prosperity in the industries was reached in some sections of the United States in 1853, and in others in 1854. The decline in the price of Scotch iron helped business in Great Britain and the eastern States, and in these places the height of prosperity came in 1854. The severity of the depression which followed was, in some places, greatest in 1854, and in others in 1855, which was from two to three years before the panic.

Business revived somewhat in 1856, following the great decline in prices in 1855, but this revival occurred when stocks of iron and other construction materials were almost exhausted, and prices advanced again almost immediately. This again brought a check to construction. The panic of 1857 occurred while the industries were already down to a depression basis. In fact they were at a much lower ebb in 1855 than during or after the panic.

This period of depression has gone down to history as one of the most severe on record. On the contrary, the facts show that it was simply the short-lived panic and its financial results which were so severe. The industries were not as much affected as they were in the two periods of depression, in and about 1847 and in and about 1867, which were not attended by any financial disturbance of sufficient severity to be called a panic.

All of the pronounced features of a typical period of boom and depression, namely, the revival in the volume of business on low prices, the abnormal advance in prices, the decline in the volume of the industries, followed by an accumulation of unsold goods and a fall in prices, had taken place at least two years before the financial panic. This was conclusive evidence that the depression was entirely independent of the panic.

This period is particularly interesting, as it illustrates he hopeless jumble of cause and effect, arrived at and accepted by the public mind, through synthetic reasoning. No matter how separate and distinct may be the conditions of depressions from the conditions of panics, and no matter how much earlier the depression may occur than the panic, yet, in after years, the panic will invariably be accepted as having been the cause of the depression, simply because a panic, being vivid and startling, is the only thing remembered after a few years have elapsed.

This mistake is not peculiar to the United States. It is the same in the other four industrial nations. The depression occurred in England in the latter part of 1854 and in 1855, in Germany and Belgium in 1855, and in France in 1856. In England the panic occurred in 1857, which was two years after the depression commenced, and yet there, as well as here, the public now believe the
panic to have been the cause. In France they had no financial disturbance of sufficient severity to be called a panic, and there, strange to say, they attribute the depression to "the panic in the United States," although the panic in the United States occurred nearly a year later than the depression in France.