North Carolina - Antebellum Key Events - The Panic of 1857

The Panic of 1857 was a sudden downturn in the economy of the United States that occurred that year. The downturn was brief and the recovery strong, so that the impact was fairly small. Over 5,000 businesses failed within a year. Unemployment was accompanied by protest meetings in urban areas.

The Panic of 1857 introduced the United States, at least in a small way, to the intricate dealings of the worldwide economy.

On the same day that the Central America was shipwrecked, Cincinnati's Ohio Life Insurance & Trust Company ceased operation - thanks to embezzlement. News of the twin disasters spread quickly, in part because of the telegraph then becoming common. Investors, including British investors, began to withdraw money from Wall Street in massive numbers. Bank failures increased, mostly in the industrial Northeast and New England states, while the West and South, still more dependent on agriculture, seemed to weather the storm better.

There were many underlying causes for the Panic of 1857, and by the time the twin disasters occurred the United States was well on its way into the economic downturn. For three years the Crimean War had involved European and Asian countries, which increased foreign dependence on American agriculture. The return of the men and land to agricultural production meant an abundance of crops in 1857, which led to falling prices for farm goods nationwide.

Land speculation, too, had become rampant throughout the United States. This led to an unsustainable expansion of the railroads. As investment money dried up, the land speculation collapsed, as did many of the railroads shortly thereafter.

Attempts were made by the federal government to remedy the situation. A bank holiday was declared in October of 1857, and Secretary of the Treasury Howell Cobb recommended that the government sell revenue bonds and reduce the tariff (Tariff of 1857). By 1859, the country was slowly pulling out of the downturn, but the effect lasted until the opening shots of the American Civil War.

The state of North Carolina was not seriously affected by the Panic of 1857, even with respect to its railroads, both operational and under contruction.


 


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